What 1720 British speculative bubble and crash involved the South Sea Company?

The 1720 British speculative bubble and crash involving the South Sea Company was the South Sea Bubble.

The South Sea Company received a government-backed proposal to convert part of Britain’s national debt into company shares. Investors were attracted by promises and expectations connected with trade monopolies, especially commerce associated with Spanish America. The company’s share price rose dramatically during 1720 as speculation spread through London.

The boom encouraged many other ventures, including companies formed for vague or unrealistic purposes. Parliament passed the Bubble Act, which restricted some unchartered joint-stock companies, but the measure did not prevent the South Sea scheme from collapsing. By the end of 1720, the company’s shares had plunged and many investors faced ruin.

The event is a classic example of a speculative bubble, though it was not a modern stock-market crash in the same sense as the 1929 or 1987 collapses. It is also distinct from France’s Mississippi Bubble, which burst during the same year.