The South Sea Bubble was the 1720 financial bubble that collapsed after Parliament restricted the South Sea Company’s share dealings.
The South Sea Company had received a monopoly over British trade with parts of Spanish South America, although the commercial opportunities were far smaller than many investors imagined. In exchange for taking on government debt, the company gained political influence and attracted intense speculation.
Its shares rose dramatically during 1720, encouraging ordinary investors and prominent figures to participate. Parliament passed the Bubble Act in June 1720, restricting unauthorized joint-stock companies and contributing to the reversal in confidence. South Sea shares then plunged later that year.
The episode is often discussed alongside John Law’s Mississippi Bubble in France, which also collapsed in 1720. They were separate schemes, although both demonstrated how promotional stories, easy credit, and speculative trading could inflate prices far beyond underlying business prospects.