What was the name of the 1720 English stock-market crash linked to the South Sea Company?
Answer
South Sea Bubble
The 1720 English stock-market crash linked to the South Sea Company was called the South Sea Bubble.
The South Sea Company received a government-backed monopoly over trade with parts of Spanish South America, although its actual commercial opportunities were far more limited than many investors imagined. Its shares rose spectacularly in 1720 as promoters encouraged speculation and the company proposed converting government debt into shares.
The bubble burst later that year. Share prices collapsed, ruining many investors and damaging public confidence in joint-stock companies. The episode became one of the best-known early examples of a speculative financial bubble.
The South Sea Bubble was not the only bubble in 1720. France’s Mississippi Company also experienced a spectacular rise and collapse under John Law. Parliament responded in Britain with the Bubble Act of 1720, which restricted the creation of joint-stock companies without an authorized charter.