The South Sea Bubble was the 1720 British market bubble that collapsed after Parliament approved the South Sea Company’s debt-conversion scheme.
The South Sea Company received a government-backed monopoly over trade with Spanish South America, although its commercial prospects were far less impressive than promotional claims suggested. In 1720, it proposed converting much of Britain’s national debt into company shares. Parliament approved the plan, and excitement drove the share price sharply higher.
The boom spread beyond the South Sea Company. Investors bought shares in numerous speculative ventures, including companies later mocked as “bubbles.” When confidence weakened and selling accelerated, South Sea shares fell dramatically, damaging investors and exposing political connections behind the scheme.
The South Sea Bubble is often confused with the Mississippi Bubble, a separate French speculation that also collapsed in 1720. Both episodes helped establish the word “bubble” as a lasting term for an unsustainable asset-price boom.