A few weeks ago, I discovered the government’s plan to write off the UK’s national debt. It’s based on a similar scheme used by the French. And it should leave Rishi Sunak with a debt-free government and a seriously enhanced net worth.

Here’s how the scheme works…

You set up a public company on the stock market. And the government sells certain rights to that company. They might be the right to trade in certain goods. Or the right to trade with a certain location.

This right, technically a monopoly, is immensely valuable because of the profits that can be had in that line of business. The result is that people clamour to own the valuable shares in the company. They bid up the price of the shares and the company can raise a lot of capital as a result.

But there’s a hitch. In return for the government selling the company a monopoly, the company must agree to buy or even write off the government’s debt with the capital it raises from investors. All of it.

Alternatively, only investors who own government bonds may purchase the shares in the new company with the trade monopoly. And those bonds must be cancelled once the shares are purchased.

The result is that the government debt is off the books or gone altogether: a massive problem is solved!

I know that that probably sounds absurd.

However, it has been done before. In fact, schemes like this are why we have public companies and stock markets in the first place…

About 300 years ago, back when the French king was a few years old, the Duke of Orleans was the Regent, and a Scotsman named John Law ran the French public finances (into the ground), a similar scheme was attempted.

Back then, France was in fiscal trouble too. And so… John Law came up with a solution. France had just acquired the Mississippi Valley in what is today the United States. The French government effectively owned one of the most fertile places in the world. And nobody was allowed to trade with it, unless by Royal Assent. Which could be bought.

And that sort of agreement is actually what created the weird and wonderful world of joint stock public companies like the ones you own in your pension fund today. Investors get together, form a company and buy trading rights off the government. Hence the names East India Trading Company, South Sea Company and Mississippi Company. Those companies owned the rights to trade with those places.

John Law’s idea was to sell the trading and mineral rights of Louisiana to such a company in exchange for that company buying the French national debt. It was a type of debt for equity swap, if that doesn’t confuse you. The company got the benefit of being allowed to trade with Louisiana and the French government got fiscal stability.

To make the scheme work, there had to be a speculative mania in Mississippi Company shares which would make Elon Musk blush. There had to be such a clamouring for the shares that it would make the French government debt disappear into the Mississippi Company’s coffers: ideally, the market value of the company would exceed the value of the outstanding debt.

And the scheme worked surprisingly well – in ever increasingly creative ways. That was until the bubble burst and the Mississippi Bubble managed to ruin both the public and private financial affairs of France. One key characteristic of bubbles is that they (almost) never deflate in an orderly way, as people and bankers in several countries – including the UK and the United States – have learnt the hard way in the last 15 years or so.

The English, facing a France newly able to afford to wage war thanks to its mad scheme’s initial success, decided to mimic the ploy. They didn’t own Mississippi. But there was the slave trade and the South Sea – the other parts of the Americas where Britain had influence.

The South Sea Company, in return for trading rights, bought up a tonne of government debt. In fact, in 1720, the South Sea Company actually took over the national debt!

The scheme only got weirder from there. I’ve been reading about it in a book about Richard Cantillon – the only speculator to have made a fortune in both the Mississippi Bubble and the South Sea Bubble without losing it again.

But the point was that the government effectively sold an exclusive right to trade with a foreign place to a company, thereby making it immensely valuable. In return, the company took on the government’s financial obligations, effectively cutting the national debt.

No doubt you’re surprised that two of the most famous financial bubbles were actually political operations to reduce nations’ government debt levels. So much for greedy free markets…

All of this brings me to what could be the UK government’s secret plan to write off the national debt with a South Sea Company de nos jours.

Can you think of any new location for which the UK government might be able to sell the trading and mineral rights to a newly created company listed on the stock market?

I can – space.

These days, not a week goes by without hearing about space station hotels, asteroids full of metals worth trillions, moon mining and space industries.

Private company rockets are taking off, carrying government payloads (instead of the other way around). New firms are being formed that promise to launch the first space stations of various types. And some are hitting serious valuations on stock markets.

The private space age is beginning. I bet the 18th century solution to too much government debt might make a comeback too.

At the moment, because of obscure treaties made with the likes of the Soviet Union, which didn’t believe in private property at the time, it’s not clear who owns space resources. Nor is it certain whether they can be owned as such. They aren’t just there for the taking, in other words. At least, not legally.

This is what creates the opportunity. Governments could sell the rights to those resources to companies listed on the stock market. The ownership of asteroids, moon landing rights, orbital paths, and licences to “trade” with space, for example, could be traded.

Given the promise of future profits, the companies owning those rights would be immensely valuable, even today. Even if the resources of a particular asteroid were sold at a steep discount today to make up for the fact that they won’t be mined for a few decades, ownership of those resources would still be valuable today. It’s not as if a lot of US tech stocks will make a profit anytime soon either.

Governments could sell these rights to companies in exchange for taking on government debt, as the Mississippi Company and South Sea Company did. This would dramatically reduce the total sovereign debt burden and trigger a speculative mania in space resources stocks that secure the trading rights.

What could possibly go wrong?

Nick Hubble
Editor, Fortune & Freedom