The South Sea Bubble was the speculative bubble whose collapse helped trigger Britain’s 1720 financial crisis.
The South Sea Company received a government-backed monopoly over trade with parts of Spanish America, although its actual commercial prospects were far less impressive than promoters suggested. In 1720, investors drove the company’s share price dramatically higher, encouraged by easy credit, political connections, and extravagant expectations.
When confidence broke later that year, the share price plunged. Many investors lost fortunes, and the collapse damaged public trust in company directors, politicians, and financial promoters. Parliament investigated the scandal, exposing corruption and improper dealings.
The South Sea Bubble is often discussed alongside France’s Mississippi Bubble, which also burst in 1720. They were separate schemes, however. Tulip Mania occurred in the Dutch Republic during the seventeenth century and was not the event behind Britain’s 1720 crisis.