The South Sea Bubble was the speculative bubble that burst in London in 1720, causing one of Britain’s earliest major stock-market crashes.
The South Sea Company received a government-backed monopoly over trade with Spanish South America, although its realistic trading opportunities were limited. Investors became excited as the company promoted ambitious expectations and its share price rose dramatically. The company also took over part of Britain’s national debt, linking its fortunes closely to public finance.
When confidence weakened, the share price collapsed. Many investors lost fortunes, and the scandal damaged public trust in company promotion and political influence. Parliament investigated the affair, and several politicians were accused of benefiting from the scheme.
The South Sea Bubble occurred alongside John Law’s Mississippi Bubble in France. The two episodes are related in time but were separate companies and markets. Tulip Mania happened in the Dutch Republic during the seventeenth century, much earlier than the South Sea crisis.