“Directors, for ‘tis you I warn,
By long Experience we have found
What Planet rul’d when you were born;
We see you never can be drown’d.
[…]
Oh! May some Western Tempest sweep
These Locusts whom our Fruits have fed,
That Plague, Directors, to the deep,
Driv’n from the South-Sea to the Red!
[…]
But never shall our isle have Rest,
Till those devouring Swine run down,
(The devils leaving the Posses’t)
And headlong in the waters drown.
The Nation then too late will find,
Computing all their Cost and Trouble,
Directors’ Promises but Wind,
South-Sea, at best, a mighty BUBBLE.”
In verses such as those above, the famed satirist Jonathan Swift devoted page after acerbic page to the evils of the South Sea Bubble, but the warning came too late. When the bubble burst, it was a salutary lesson to Melusine that the life of a royal mistress could be far from a quiet one. The old days in Hanover, where she never meddled in politics and happily played the quiet hausfrau for her sullen partner, would soon look more tempting than ever. For now though, with an English peerage under Melusine’s belt, all was well once more. She had money, influence, and the title she had craved. Yet all it would take was one disastrous decision to run a coach and horses through her quiet life.
The year 1720 began as it would go on – disastrously. Things got off to a bad start when Melusine’s youngest half-brother, Baron Friedrich Wilhelm, died at the age of just 37. Friedrich Wilhelm had gone to bed in perfect health and he had been found dead two hours later, apparently the victim of a stroke. He had been a valued member of the king’s household and a close advisor to both George Louis and Melusine, and he was duly honoured with a resting place in the south transept of Westminster Abbey. Melusine sought for something to distract her from her grief and she found it in the act of purchasing an estate in Holstein. Though she would later sell the estate on at a handsome profit, Melusine didn’t have time to enjoy building her portfolio before a bout of illness struck her down. She was so sick that it was reported in the press “that her Life was once thought to be in danger”43, but the episode passed. The Duchess of Kendal recovered her health just in time to enter into one of the most damaging affairs of George Louis’ whole reign. The South Sea Bubble was about to inflate.
In between dealing with her own ill health and mourning her beloved brother, Melusine had been forced to watch whilst Walpole and Townshend began to ascend the political ladder once more. Walpole’s masterstroke was to encourage the reconciliation of Caroline of Ansbach and George Augustus with the king, and to secure it he had wisely enlisted the help of Melusine. Aware of Caroline’s distress at the loss of her children, Walpole suggested that she might find a friend in the king’s mistress. A friend who had influence over George I.
Melusine knew that the children would dearly love to see more of their parents, and she went in to bat for the Waleses. The result, in no small part thanks to Walpole and Melusine’s intervention, was an uneasy truce between the king and the Prince of Wales. This earned Walpole Caroline of Ansbach’s lifelong gratitude and proved once and for all that Melusine could certainly change her partner’s mind no matter how intransigent he might initially have seemed. Walpole also used his political influence and perhaps a little underhand blackmail to hobble Stanhope and Sunderland, who had bettered him not so long before. With the warring parties forced to shake hands in the Commons just as they had in the royal household, peace was breaking out all over. The only casualty was Walpole’s relationship with George Augustus, who regarded him as a schemer. The politician was happy to sacrifice the trust of the prince in exchange for the position of Paymaster of the Forces. He could afford to, after all, for he had Caroline on his side, and would do for as long as she lived.
Regardless of the era, the tempting prospect of getting something for nothing – or very little – has always been difficult to resist. The Georgians were no different in their avarice, and when the South Sea Bubble engulfed the chattering classes with promises of eye-watering wealth and prestige with little to no risk to investors, everyone wanted to be in on it. In the centuries since it almost bankrupted the nation, the story of the South Sea Bubble has become a cautionary tale, a notorious near-legend of a white elephant in which greed and dishonesty combined to create a perfect storm that led people to ruin and, in some cases, an early grave. It also did damage to Melusine’s reputation unlike anything she had known before.
The first roots of the bubble were set down in 1711 when a company by the name of The Governor and Company of the Merchants of Great Britain, trading to the South Seas and other parts of America, and for the encouragement of fishing, was formed in London. It soon became known by the catchier moniker of The South Sea Company, and its fortunes were built on an audacious gamble.
As a new decade approached, the company looked across the Atlantic towards South America, which seemed to promise unbridled wealth. The South Sea Company had been granted a monopoly in 1713 to supply slaves to South America and the company directors envisioned a future in which they could exploit this untapped wealth and take a hefty share of it for themselves. At the time the directors’ plans were taking shape, the War of Spanish Succession made efforts to do business in South America an impossibility, but the war wouldn’t last forever. The South Sea Company saw an opportunity to be the first through the door when peace broke out. When it applied for and was granted exclusive trading rights to the continent as part of the Peace of Utrecht in 1713, it appeared that the company was well on the way to achieving its goals.
By the time George Louis came to the throne, the South Sea Company was thriving and hugely wealthy. He became its governor in 1718, further cementing its status as one of the central finance institutions of the nation. Buoyed by its impressive new patron, the South Sea Company offered to settle Great Britain’s national debt of £30 million, which would offer a much-needed prop to the country’s coffers. In return, the nation would pay the company back at a rate of just five per cent interest over a term of twenty-five years.
Such an offer wasn’t to be easily dismissed but it didn’t come without risks either, although they were small thanks to the government’s excellent rate of interest. Besides, the South Sea Company was happy to grease the palms of some influential figures, from politicians to courtiers, to ensure that the risks were downplayed. Sunderland and Stanhope received £100,000 in stocks between them, whilst Postmaster General James Craggs and Chancellor John Aislabie pocketed £30,000 and £20,000 respectively. These politicians in turn made representations to Melusine, the woman who could work an influence on the king that no other could, and the company handed over a cool £15,000 worth of shares to the Duchess of Kendal to ensure that things went their way. As a further sweetener, George Louis and Melusine’s youngest daughters were each given £5,000 worth of stock too. With so many senior figures holding so much stock, it was in their best interests that the plan was accepted, for the more money the company made, the more handsome the return shareholders would receive. Melusine would have had no qualms about recommending the scheme to George Louis and it was her advice that he listened to, rather than that of the more pragmatic Robert Walpole. The South Sea Bubble was on its way.
Among the court gossips, there was absolutely no doubt as to why George Louis had championed the scheme so wholeheartedly. As Lady Ormond intimated to Jonathan Swift, he had done as his mistress had told him, whether it was wise to do so or not.
“You remember, and so do I, when the South-Sea was said to be my lord Oxford’s brat, and must be starved at nurse. Now the king has adopted it, and calls it his beloved child; tho’, perhaps, you may say, if he loves it no better than his son, it may not be saying much: but he loves it as well as he does the duchess of [Kendal] and that is saying a good deal.”44
Whatever Walpole and Lady Ormond might think of the idea, people flocked to invest in the South Sea Company and its value went through the roof, increasing by a whopping tenfold. Demand for shares was out of control and everyone wanted a piece of the action, from the wealthiest to the most humble. It was a chance to get rich – or a whole lot richer – very quickly, with a scheme endorsed by the king himself. Who could resist? Not the conmen of Georgian England, that was for sure. As George Louis and Melusine headed off to Hanover, patting themselves on the back for a job well done, the country they left behind exploded with more and more crazy get rich quick schemes. The South Sea Bubble had intoxicated the nation, but it wouldn’t stay buoyant for long.
Melusine knew that success in this particular venture might provide her with the nest egg she would surely need should her partner die before her, and she moved fast to ensure the best return on her investment. All too aware of the vagaries of the stock market, she told the chancellor, Aislabie, that he should turn her shares into cash at the earliest and most favourable opportunity. Melusine instructed him “to sell or buy as you would think it the most Profitable and Convenient, for it cannot be pretended that at such a distance as we are [during visits to Hanover] a good and positive Resolution could be taken in the Right time, since those Matters are every moment subject to great alterations.”45 When he failed to do so and the stock began to sink, the usually placid Melusine was furious.
By the autumn of 1720, things had started to go wrong. The company’s stock price was plummeting, dropping from nearly £800 to below £150 in the space of a few short weeks. This was caused by the fact, quite simply, that the company had issued more shares than it could ever repay. When word got out that the company directors had sold off their own stocks, people began to panic. In Hanover, George Louis and Melusine were drunk on success and enjoying the high life. By the time the Regency Council, which held power in the king’s absence, sent word to Germany asking him to return and handle the emerging crisis, it was far too late.
In Hanover, a furious Melusine took up her pen and wrote to Aislabie in the strongest terms, asking why he hadn’t disposed of the shares she and her daughters held when the market was at its most healthy. Hoping that there was still time to make a profit, she instructed him that “if the best Occasion [to sell] is miss’d; You will be pleased to make use of those that shall offer themselves for the future, without expecting new advices.”46 The meaning was simple: get rid of them, because I won’t tell you again.
“If we had been present in England,” the Duchess of Kendal continued in one of the few letters of hers that remain, “We would not have fail’d to sell them out, when they were at such an advantageous Price, and I wish you had been so kind as to do it for us, the more when you judged and saw that they was, not to rise, but rather to fall as they have done. I am sorry, our absence made us miss that good Opportunity; and I hope You will be so kind as to take a little care of our Interest, if it is not to[o] great a disadvantage to your other Affairs.”47
But even as George Louis and Melusine headed for England, Aislabie didn’t sell. As the stock value plummeted still further, he feared the consequences for himself and the king should it become public knowledge that he had sold off the shares of the monarch’s mistress at a time when the markets were in turmoil. Whatever action Aislabie took, there would be consequences for someone.
The men at the head of the company had no such qualms. They sold off their own stocks just before the crash and in doing so, hastened the company’s collapse. When shareholders learned that the men at the very top had bailed out, they scrambled to follow. The more shareholders that sold, the more came forward to follow their example and the once sky-high stock price went into a terminal nosedive. People were ruined, bankrupted, or left suicidal, and in the search for a scapegoat, the ire of the nation turned on the king and his mistress. Supposedly, as Melusine – memorialised by one commentator for “her gigantic skeleton form and Jezebel face” – took the air in her carriage one day in London, a mob gathered to heckle and jeer. When she asked, “Good people, why do you abuse us? We come for all your goods!”, one brave member of the crowed bellowed back, “Aye, and for our chattels too!”. It was the South Sea Bubble farrago that led to an accusation that has haunted Melusine ever since, for she and George Louis were already “food for all the venom of the Jacobites,” wrote Horace Walpole, “and indeed nothing could be grosser than the ribaldry that was vomited out in lampoons, libels and every channel of abuse, against [George Louis and Melusine], and chanted even in their hearing about the public streets”48. Wrong though it was, the belief emerged that the “Five Hundred Germans all with empty purses” had sucked the country dry.
In reality, the Hanoverians had done no such thing. What they had done was allow their want of money to cloud their good judgment. The country stood on the brink of ruin and revolution, and it was left to Robert Walpole to come to the rescue. Walpole seized control of the nation’s perilous finances in the nick of time, keeping it from toppling into total ruin and naturally bolstering his own interests and position as he did so. Besides, he had been smart enough to get out of the South Sea scheme before the crash, pocketing a tidy profit in the process. Cometh the hour, Walpole knew, cometh the man.
As Britain teetered on the edge of bankruptcy and investors counted the catastrophic cost of their losses, one man had much to celebrate. Robert Knight49, the cashier of the South Sea Company, fled England and made for Calais. He took with him not just a fortune, but was also carrying what was effectively a blackmail list in the form of a ledger containing the names of the very illustrious figures who had been bribed into pushing the company into the ruinous monopoly it had enjoyed. In England, Melusine bore the brunt of the blame for encouraging the king’s interests in the company. She had good reason to hope that Knight would never be captured and made to stand trial in England, where he would almost certainly mention her name amongst those who had taken cash for favours. Though Knight had seemingly escaped justice, his colleague John Blunt was less fortunate. Boasting a successful history in the lottery business, Blunt had been made a Baronet in 1720 in recognition of his efforts on behalf of the South Sea Company and had enjoyed a long and lucrative career in the financial markets. The South Sea scheme was his brainchild and when people wanted a scalp, it was his head on the chopping block.
Luckily for Blunt, he just happened to be able to call Robert Walpole an ally and knew that, as long as he did as Walpole asked, he had little to fear. When he was questioned by the newly convened Commons committee into the disaster, Blunt intimated that Melusine was one of the influential patrons who had been happy to receive bribes to further the interests of the company. This was far from ideal, but it was still Knight who had the smoking gun, in the shape of the ledger which listed the bribes and their recipients. Rumour had it that Melusine’s name was in that ledger, and the ruthless Knight wouldn’t hesitate to drag his champions down with him if he fell. Melusine couldn’t afford that book to return to Britain’s shores. If it did, the cost to George I and by extension, Melusine, could be catastrophic. They needed Knight to escape at precisely the moment when all of Europe was looking to apprehend him.
It appeared Knight’s luck had run out when he was captured in the Brabant by the forces of the Holy Roman Empire, who were prepared to enter talks regarding his extradition to England. No doubt everyone whose name was written in that ledger held their breath, but fortunately for them, the Holy Roman Emperor prevaricated even as British MPs furiously demanded that Knight be returned to face punishment. When they sought George I’s intervention he too dragged his heels, assuring parliament that he was doing all he could do secure the extradition of Knight whilst in reality, he was doing as little as possible to achieve it. George Louis pointed out that he had no real legal right to request Knight be expelled from Antwerp and handed over to British custody, all he could do was ask, and hope that the Emperor would comply. Once again, rumour had it that the person behind this heel dragging was Melusine and as a result, she became the subject of a savage satirical print entitled The Brabant Screen. In it, the duchess is depicted as a double agent whose identity is protected by a screen from behind which she secretly passes messages to Robert Knight, informing him of the goings on in England and ensuring his continued freedom.
In fact, whilst George Louis was giving the furious politicians his assurances that he would do all he could to see Knight returned to face trial, in private, he was doing quite the opposite. He asked his envoy, William Leathes, to assure his Imperial counterpart, the Marquis de Prié, that should the opportunity arise for Knight to escape, then he shouldn’t be prevented from doing so. However, Knight’s escape must be achieved “in such a manner that it shall not appear that this escape is authorised by His Majesty or this government.”50
Unsurprisingly, when the chance came for Knight to escape, he took it. He fled his jailers for a comfortable life in France, where he was to remain for more than two decades. Though the infamous and damning ledger was never recovered, the damage to Melusine and the king had already been done. There might not be any proof of Melusine’s involvement in the scam, but her name had been indelibly linked with it. Once more, it was left to Walpole to calm the waters, whilst ensuring that he came out of the whole mess on top.
Walpole wasn’t the sort of man to let a chance pass him by. Though some of the guilty were thrown to the wolves and punished for their part in the South Sea Bubble, others were not. Walpole shrewdly made sure that those who could be allies in the future were either censured mildly or not at all. As Sir Blue String’s51 reputation as the man who could seemingly achieve the impossible soared, the king’s dipped lower and lower. He was jeered at as the dupe who had championed the South Sea Company simply to please his avaricious mistress. In contrast, Walpole’s power had never been so great, and he used it to bring down those who had crossed him. He had also finally secured the trust of Melusine, who was immensely grateful to him for rescuing what had seemed like a hopeless situation. Not everyone was so fortunate.
John Aislabie, the Chancellor of the Exchequer who had so annoyed Melusine by failing to sell her shares when the price was at an all-time high and who had managed other royal share portfolios too, was sent to the Tower of London and had to forfeit all the property and cash he had made since 1718. He was later released and lived in comfortable retirement until 1742. Others weren’t so lucky: Postmaster General James Craggs the Elder died as a result of a possible suicide in 1721, just one month after the passing of his son, James Craggs the Younger, who had also been implicated in the South Sea Bubble. Just as Aislabie was forced to surrender his funds and property, the estate of Craggs the Elder was forced to relinquish its assets too.
For Lord Stanhope and Lord Sunderland, meanwhile, who had sparred with Walpole and liberally courted the favour of Melusine, the South Sea Bubble was to prove fatal. Sunderland was investigated by the House of Commons but eventually acquitted, although his involvement cost him his political offices. He remained a favourite of George Louis following his resignation but died in 1722 aged just 49.
Stanhope’s own fate was no happier. His involvement in the South Sea Company led to an investigation that found he had made no personal profit and showed no dishonesty, but which left an indelible stain on his character. He collapsed during a debate in the House of Lords and perhaps unwisely spent the remainder of the evening at a party thrown by the Duke of Newcastle, where he “drank excessively of new tokay, champagne, visney and barba water, thirteen hours it is said.”52 He died the following day.
For Walpole and his brother-in-law, Viscount Townshend, the South Sea Bubble proved fortuitous. Under Walpole’s administration, he enjoyed renewed influence with the king and government alike, some of which he surely owed to Melusine’s favour53. Little wonder he called her “the good duchess and [our] fast friend”. Countess Cowper, Lady of the Bedchamber to the Princess of Wales, wasn’t quite so convinced. She dismissed Townshend as “the sneeringest, fawningest Knave that […] ever strove to put on a Mask, which is no better than an Ass’s face”54. Countess Cowper, of course, did not hold the reins of government.
Ass or not, Walpole and Townshend now commanded the affairs of state more thoroughly than ever before. Count de Broglio, the French envoy to Britain, knew this without a doubt when he wrote to inform his employer that, “[Lord Townshend and Mr. Walpole] should remain in power, for they appear anxious to maintain the good intelligence which subsists between the two crowns; they possess an unbounded influence over the king and the duchess of Kendal, they enjoy the whole power of government, and the entire confidence of the king.”55
Robert Walpole received a rather loftier epithet. To this day, he is recognised as the first Prime Minister of Great Britain.