The South Sea Bubble was the British financial bubble that collapsed in 1720 and became one of the earliest major stock-market crashes.
The South Sea Company received a government-backed monopoly over trade with parts of Spanish America, although its actual commercial opportunities were limited. Its shares rose dramatically as promoters and speculators spread optimistic claims about the company’s prospects. Investors from different social classes joined the frenzy.
Parliament passed the Bubble Act in 1720, partly to restrict competing joint-stock companies. When confidence weakened later that year, South Sea shares fell rapidly. Many investors suffered severe losses, including prominent figures and members of the political establishment. The scandal damaged public trust in company promotion and financial speculation.
The South Sea Bubble is often discussed alongside France’s Mississippi Bubble, which also burst in 1720. They were separate schemes, although both reflected the era’s enthusiasm for paper wealth and monopolistic trading companies. The episode helped establish the enduring meaning of “bubble” in financial history.