Gregor MacGregor and the Republic of Poyais

This post is slightly off topic, it is just something I found interesting.I don't know if it is naivety or nostalgia for the past, but when I think of the 19th Century, fraud is not the first word that springs to mind. I have no reason to assume that fraud did not take place in the 19th Century, it just didn't occur to me. However before I started this blog, when my idea for a topic was just a thought rattling around in my head I was in Waterstones, not looking for finance books but rather an escape from finance when I stumbled upon a book called "Crisis economics" by Nouriel Roubini and Stephen Mihm. Nouriel Roubini was refered to as a number of things including "The seer who saw it coming" (The New York Times) on and "The man known as 'Dr Doom'" (Financial Times). Intrigued I decided to get it.

As I made my way through the book I came across this:

"...the panic of 1825 reverberated around the world. It began in Britain and had all the hallmarks of a classic crisis: easy money (courtesy of the Bank of England), an asset bubble (stocks and bonds linked to investments in the emerging market of Peru), and even widespread fraud (feverish selling of the bonds of a fictitious nation called the Republic of Poyais to credulous investors)." (Roubini & Mihm, 2010)

The first two parts didn't faze me, Roubini & Mihm were after all discussing a crisis and the reasons that it happened, easy money and an asset bubble. It was the last part about the wide spread fraud. Yes I am aware fraud exists in present day. However the selling of bonds for a fictitious place is something that I found far-fetched. In the day and age of Google it's hard to imagine how someone got away with selling the bonds of a completely made up place. If someone came up to you today and offered to sell you the bonds of somewhere, a quick Google search is all it would take to see if they are making the place up. Intrigued I had to find out more and a quick Google search was all it took.

Gregor MacGregor* was Scottish. He was a soldier and an adventurer and the person responsible for selling the fake bonds. His history is quite an interesting one, perhaps there were signs that he was not the most honest person you were ever going to meet. (You can read the full history here)

To cut a long story short after returning to England in 1820. At this point in time he claimed that the King of the Mosquito Shore and Nation, George Fredric Augustas I, had made him cacique of the Principality of Poyais, which was situated on the Bay on Honduras. Along with this claim MacGregor talked the talk, walked the walk and charmed his way into people's pockets with the promise of a better life in Poyais, much like a modern day conman. He chose to bring people from Scotland to Poyais. MacGregor managed to raise £200,000 by issuing bearer bonds on behalf of the Poyais government. He also created a currency called 'Poyais dollars' and convinced people to change their cash to this currency. Needless to say once these settlers travelled to Poyais in 1822, they discovered that no such place existed and it wasn't quite the tropical paradise free of disease that MacGregor had promised. Out of 240 people who travelled there, 50 made it back alive and they told their story and the papers published everything in 1823.

There is a number of surprising things regarding the fallout of this whole Poyais debacle:

1. Some of the survivors didn't blame him for what had happened;
2. MacGregor then tried the scheme in France (1825), all he did was change the name from Principality of Poyais to Republic of Poyais;
3. He then returned to England in 1826 and another scheme selling bonds was announced in 1827;
4. And again in 1828, this time selling land in Poyais;
5. And again in 1831 promoting "Poysisian New Three per cent Consolidated Stock";
6. and 1834, issuing land certificates;
7. and 1836 he wrote the constitution for Poyais;
8. and 1837 he again tried to sell land certificates.

Anyway this is just something I found interesting in the course of my research. I'll try stay on topic from now on. 


* Since writing this post I have discovered that Gregor MacGregor was the only man ever in British history to successfully market the bonds of a non existing country! (Courtesy of Dawson, F.G)