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The E-Sylum: Volume 25, Number 2, January 9, 2022, Article 30

POYAIS: GREGOR MACGREGOR'S FAKE COUNTRY

Pablo Hoffman passed along this article from The Hustle about a scam that gave rise to some Central American paper money rarities. Thanks! Bizarre story. Here's an excerpt, but see the complete article online. -Editor

  Bank of Poyais One Dollar note

On March 20, 1823, after 2 grueling months sailing across the Atlantic Ocean, passengers gathered on the deck of the Kennersley Castle for the first glimpse of their new lives in the country of Poyais.

The view was immaculate: Sun glistening in the shallow waters of a blue lagoon. Mahogany trees drooping over sandy beaches.

James Hastie, who was moving to Poyais with his wife and 2 children, thought the country had a very beautiful appearance from the sea.

Like many passengers, Hastie had signed a contract with the Poyaisian government to work as a laborer. Others, including doctors and lawyers, had cashed in their belongings in Europe for land in Poyais and the opportunity to establish themselves as a new upper crust in the Caribbean.

Rich or poor, it seemed impossible not to prosper. The myriad Poyais advertisements that circulated through Britain had promised fertile land, rivers stocked with fish, and forests teeming with deer.

But as Hastie and the others soon discovered, Poyais was not a country at all. It was one of the most elaborate — and deadliest — frauds in history.

The dot-com bubble of the early 19th century
In 1820s England, no phrase excited investors more than South America.

Britain was swimming in cash and optimism after the end of the Napoleonic Wars. But there was no more war to finance, and the interest rates of the most popular British-backed securities declined, tempting the record numbers of people trying to time the market for maximum profit to find something stronger and riskier.

South America — a catch-all for what is now Latin America — was the inevitable target.

Several countries had gained independence from Spain and were floating bonds to finance their incipient governments. Countries like Colombia and Chile sold bonds totaling ~£100m-£200m in today's money, promising 6% in annual returns by tapping into profits from state-run agriculture and mineral industries.

So began a craze akin to the dot-com bubble: Investors who knew basically nothing about the inner workings of South American countries went on a buying spree, inflating the value of the bonds and creating an intense resale market.

Map Poyais In this speculative environment, MacGregor crafted an insidious plan.

During his South American misadventures, he'd befriended George Frederic August I — the king of the Mosquito Coast Territory (present-day Honduras and Nicaragua) — and had been gifted 8 million acres on the eastern shore of Honduras, an area roughly the size of Maryland.

The land belonged to MacGregor, but it was under the dominion of the British-aligned Mosquito government. Of course, nobody in Europe knew these details.

So back in London, at various society events, MacGregor presented his land as the independent country of Poyais — and cast himself as the ruling Cazique.

In short order, MacGregor set about marketing the territory as a real country:

  • He designed a national flag and a coat of arms for Poyais featuring two unicorns.
  • He got British papers to detail bond prices for Poyais just as they did for legitimate countries.
  • Outside offices in Edinburgh, Glasgow, and London, he and his representatives handed out brochures and sang songs about Poyais.
To top it off, there was a book about Poyais that concluded the new country would rapidly advance in prosperity and civilization. (This ruse perhaps should have been obvious — the pseudonymous author's name was Thomas Strangeways.)

As 1822 wore on, the excitement spread, and MacGregor steadily increased the price of land from 1 shilling per acre to 4 shillings per acre (£6 to £24 per acre today). In the fall, investors snapped up £200k of bonds (~£24m today) at a 6% rate of return.

They believed they were financing a building boom in a developing country. In reality, the money lined MacGregor's pockets.

The bubble pops
As the victims of his fraud suffered, MacGregor threw ragers in London.

One guest remembered being asked at a party to take an oath to Poyais, only to find it impossible to recite the words in their drunken stupor, from… the wine having passed very freely round.

But MacGregor's celebration was short-lived.

South American bonds faltered in the middle of his Poyais scheme because the countries that sold their bonds spent the proceeds on military conflicts, failing to pay back their debts. Many investors grew skeptical of Poyais by association — even before knowing it was fake — and declined to pay the new installments they owed for their bond purchases.

The Poyais fraud was extraordinary because of the suffering and death it inflicted upon more than 200 would-be settlers. But the financial repercussions were hardly unique.

The South American bond bubble popped, contributing to the Financial Panic of 1825. By 1827, nearly every Central and South American bond issue had gone into default. In the aftermath of the panic, 52 English banks failed.

Knowing more trouble lay ahead as his victims returned, MacGregor fled to France. He escaped prosecution for his fraud and tried selling land in Poyais twice more before retiring to Venezuela.

To read the complete article, see:
The con artist who sold rich investors a fake country (https://thehustle.co/the-con-artist-who-sold-rich-investors-a-fake-country/)

  Heritage E-Sylum ad 2022-01-09



Wayne Homren, Editor

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