Even at this early period of its history the most visionary ideas were formed by the company and the public of the immense riches of the eastern coast of South America. Every body had heard of the gold and silver mines of Peru and Mexico; every one believed them to be inexhaustible, and that it was only necessary to send the manufactures of England to the coast to be repaid a hundred fold in gold and silver ingots by the natives. A report, industriously spread, that Spain was willing to concede four ports on the coasts of Chili and Peru for the purposes of traffic, increased the general confidence, and for many years the South-Sea Company's stock was in high favour.
Philip V. of Spain, however, never had any intention of admitting the English to a free trade in the ports of Spanish America. Negotiations were set on foot, but their only result was the _assiento_ contract, or the privilege of supplying the colonies with negroes for thirty years, and of sending once a year a vessel, limited both as to tonnage and value of cargo, to trade with Mexico, Peru, or Chili. The latter permission was only granted upon the hard condition, that the King of Spain should enjoy one-fourth of the profits, and a tax of five per cent on the remainder. This was a great disappointment to the Earl of Oxford and his party, who were reminded much oftener than they found agreeable of the
"_Parturiunt montes, nascitur ridiculus mus_."
But the public confidence in the South-Sea Company was not shaken. The Earl of Oxford declared that Spain would permit two ships, in addition to the annual ship, to carry out merchandise during the first year; and a list was published, in which all the ports and harbours of these coasts were pompously set forth as open to the trade of Great Britain. The first voyage of the annual ship was not made till the year 1717, and in the following year the trade was suppressed by the rupture with Spain.
The king's speech, at the opening of the session of 1717, made pointed allusion to the state of public credit, and recommended that proper measures should be taken to reduce the national debt. The two great monetary corporations, the South-Sea Company and the Bank of England, made proposals to parliament on the 20th of May ensuing. The South-Sea Company prayed that their capital stock of ten millions might be increased to twelve, by subscription or otherwise, and offered to accept five per cent instead of six upon the whole amount. The bank made proposals equally advantageous. The house debated for some time, and finally three acts were passed, called the South-Sea Act, the Bank Act, and the General Fund Act. By the first, the proposals of the South-Sea Company were accepted, and that body held itself ready to advance the sum of two millions towards discharging the principal and interest of the debt due by the state for the four lottery funds, of the ninth and tenth years of Queen Anne. By the second act, the bank received a lower rate of interest for the sum of 1,775,027l. 15s. due to it by the state, and agreed to deliver up to be cancelled as many exchequer bills as amounted to two millions sterling, and to accept of an annuity of one hundred thousand pounds, being after the rate of five per cent, the whole redeemable at one year's notice. They were further required to be ready to advance, in case of need, a sum not exceeding 2,500,000l. upon the same terms of five per cent interest, redeemable by parliament. The General Fund Act recited the various deficiencies, which were to be made good by the aids derived from the foregoing sources.