South Sea Scheme (often called the South sea bubble), a financial delusion of the early part of the 18th century. In 1711 Robert Har-ley, earl of Oxford, then lord treasurer, pro-posed to fund a floating debt of about £10,000,-000, the interest, about £600,000, to be secured by rendering permanent the duties upon wines, tobacco, wrought silks, etc. Purchasers of this fund were to become also shareholders in the South sea company, a corporation to have the monopoly of trade with Spanish South America, a part of the capital stock of which was to be the new fund. After the peace of Utrecht, however, Spain refused to open her commerce to England, and the privileges of the South sea company became worthless. As many men of wealth were among its shareholders and directors, the corporation continued to flourish as a monetary institution. The bad success of its trading operations was concealed, and accounts of the riches of Chili and Peru, together with false reports of intended concessions by the king of Spain, were skilfully used to increase its credit. The breaking out of the Spanish war in 1718 did not shake the popular confidence in its promises.

The stock of the company was in great request, and the directors determined to enter upon the same career that John Law was then running in France. In April, 1720, parliament by large majorities in both houses accepted their plan for paying the national debt, that of the bank of England being rejected. Walpole "was almost the only eminent man who protested against the measure. The South sea company took upon itself the whole debt of the state, £30,981,712, in consideration of 5 per cent, per annum secured to them for four years, after that to be redeemable by the government, and the interest to be 4 per cent. Hereupon a frenzy of speculation seized the whole nation. Shares of the South sea company, which at the passing of the bill sold at £300, soon began to rise rapidly; and an enormous traffic in them sprung up, in which all classes engaged. By May 29 two thirds of the government annuitants had exchanged the securities of the government for those of the company. Not even the collapse of Law's scheme at the end of May checked the popular infatuation; South sea stock kept on rising until early in August, when it reached its maximum, £1,000. Soon afterward it became known that Sir John Blunt, the chairman, and some others had sold out, and the stock began to fall.

Toward the close of September, in spite of great efforts both of the government and of the bank of England to save its credit, the company stopped payment, and thousands were beggared. An investigation ordered by parliament disclosed much fraud and corruption, in which many prominent persons were implicated. Some of the directors were imprisoned, and all of them were fined to an aggregate amount of over £2,000,000 for the benefit of the stockholders. A great part of the valid assets of the company was also distributed among them, yielding a dividend of about 33 per cent. - See Coxe's "Memoirs of Walpole" (2 vols., 1798), and " Memoirs of Extraordinary Popular Delusions," by Charles Mackay (London, 1850).