Which British bubble burst in 1720, contributing to a major early stock-market crash in London?

The South Sea Bubble burst in 1720, contributing to a major early stock-market crash in London.

The South Sea Company received a monopoly over British trade with parts of South America in exchange for taking on government debt. Expectations about the company’s commercial prospects drove its shares sharply higher, even though the expected trade profits were unrealistic and difficult to realize.

Speculation spread beyond the company itself. Investors bought shares using borrowed money, and numerous new ventures appeared during the boom. When confidence weakened, the share price collapsed, ruining many investors and causing political scandal in Britain.

The South Sea Bubble is often discussed alongside France’s Mississippi Bubble, which also collapsed in 1720. They were separate schemes in different countries, although both reflected the period’s enthusiasm for company shares and paper wealth. The crisis helped prompt restrictions on the formation of joint-stock companies under the Bubble Act.