The South Sea Bubble was the 1720 British market bubble that collapsed alongside the Mississippi Bubble.
The South Sea Company received a government-backed monopoly over trade with parts of Spanish South America and proposed converting government debt into company shares. Excitement about its prospects drove the share price dramatically higher in 1720, even though the company’s real trading opportunities were far more limited than investors imagined.
Speculation spread beyond the company itself. Numerous ventures sought money from the public, and Parliament passed the Bubble Act in 1720, partly to restrict unauthorized joint-stock companies. When confidence broke, South Sea shares fell sharply and many investors suffered severe losses.
The Mississippi Bubble, associated with John Law’s Company of the Indies in France, collapsed during the same year. The two episodes are often discussed together because they show how promotional stories, easy credit, and crowd enthusiasm can inflate asset prices. The South Sea episode also helped establish the phrase “bubble” in financial discussion.