Which 1720 English stock bubble collapsed after Parliament passed the Bubble Act?
Answer
South Sea Bubble
The 1720 English stock bubble that collapsed after Parliament passed the Bubble Act was the South Sea Bubble.
The South Sea Company received a government-backed monopoly connected to trade with Spanish South America, although its actual commercial prospects were limited. In 1720, it proposed converting part of Britain’s national debt into company shares.
Share prices rose dramatically as investors were attracted by promotion, easy credit, and the prospect of profits. The scheme unraveled later that year, and the stock price collapsed, ruining many investors and damaging public confidence.
Parliament passed the Bubble Act in 1720. The law restricted the creation of joint-stock companies without a royal charter or parliamentary authority. The South Sea Bubble was part of a wider European speculative episode that also included France’s Mississippi Company.