Which 1720 company collapse is associated with the most famous stock-market bubble in Britain?
Answer
South Sea Company
The South Sea Company collapse is associated with Britain's most famous stock-market bubble of 1720.
The company received a government-backed arrangement to manage part of Britain's public debt and promoted expectations of enormous trading profits with Spanish America. Its shares rose dramatically as investors speculated, often buying shares with borrowed money and trusting increasingly extravagant claims.
The bubble burst later in 1720. Share prices collapsed, ruining many investors and creating a political scandal. Parliament investigated the company's directors and associated corruption, while public anger intensified over the losses.
The South Sea Bubble occurred alongside France's Mississippi Bubble, which involved the Mississippi Company and John Law's financial system. The two episodes are sometimes discussed together, but they were separate schemes. The phrase “South Sea Bubble” therefore identifies the British company, not the Mississippi Company.