Which crash began when the South Sea Company collapsed in London in 1720?

The crash triggered by the South Sea Company’s collapse in London in 1720 was the South Sea Bubble.

The South Sea Company received a government-backed monopoly over trade with Spanish South America, although its actual trading prospects were limited. Its shares rose dramatically as investors were attracted by promotional claims and easy credit. The company also took over part of Britain’s national debt, linking its fortunes closely to government finance.

In 1720, Parliament authorized the company’s controversial expansion, and the share price surged before confidence broke. Selling spread rapidly, ruining many investors and exposing fraud and speculation. Parliament investigated the company’s directors, while economist Isaac Newton reportedly lost money in the collapse.

The South Sea Bubble is often discussed alongside France’s Mississippi Bubble, which burst during the same year. It was not the first speculative episode in history, but it became one of the classic examples of an asset bubble followed by a financial panic.