The 1720 speculative bubble centered on the British trading company whose collapse shook London markets was the South Sea Bubble.
The South Sea Company received a government-backed arrangement involving Britain’s public debt and promoted expectations of immense profits from trade with Spanish America. Its shares rose dramatically in 1720, attracting aristocrats, merchants, and ordinary investors. Many buyers purchased shares with borrowed money or joined newly formed speculative ventures.
Confidence collapsed later that year. The share price fell, investors faced ruin, and the crisis damaged banks and prominent public figures. Parliament investigated the affair, and the episode became one of the best-known examples of early financial speculation.
The South Sea Bubble is often mentioned alongside France’s Mississippi Bubble, which burst in the same broad period under John Law’s financial system. They were separate schemes. The term “bubble” also became widely used for speculative market episodes because of these famous eighteenth-century collapses.