The South Sea Bubble

A speculative bubble in the shares of the South Sea Company that inflated through the spring and summer of 1720 and collapsed that autumn, one of the standard episodes in British parliamentary and financial history. The Company had taken on a large share of Britain's national debt in exchange for a trading monopoly and government-backed conversion terms; speculative buying drove its share price far beyond anything its trading revenue could support, and the ensuing collapse ruined thousands of investors and implicated sitting government ministers in the Company's own stock manipulation. Parliament's response, the Bubble Act restricting the formation of new joint-stock companies without royal charter, made the episode a first-order political and constitutional event as much as a financial one. It stands beside Tulip Mania as one of the two episodes historians and economists alike reach for first when discussing speculative manias.