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South Sea Bubble (1720)
1720· Crisis or event
Fact, law or dataA rule, statute, definition or measured number.
The 1720 boom and crash of the South Sea Company's shares in London, which ruined many investors and exposed political bribery.
See it on the Money & Finance map →How it works
Founded in 1711, the company took over British war debt in return for interest and a monopoly on trade with Spanish America, much of it the transport of enslaved Africans. In 1720 it offered to swap its shares for most of the national debt. Insiders and bribed officials talked up the stock, which rose from about £128 in January to about £1,000 by summer, while copycat schemes multiplied. By autumn it fell below £200. A parliamentary inquiry found bribery reaching government ministers.
Why it matters
It shaped British finance for a century: the Bubble Act restricted joint-stock companies until 1825, and the episode became a template for later manias.
Facts, rules and data
Daily share prices in London price lists and newspapers; the company's records and the 1721 parliamentary report. Isaac Newton reportedly lost about £20,000; his famous line about the madness of people is probably apocryphal.
Debates and risks
Historians debate whether the debt swap was a sound idea ruined by speculation, and how much John Law's parallel Mississippi Bubble in Paris fed it.
Connections (2)
▸South Sea Bubble (1720) was an early mania in Stocks: owning a slice of a companyFact, law or data
The connection
The South Sea craze was one of the first manias in tradable company shares, a form only about a century old. Investors bought on rising prices and installment plans, and copycat companies floated shares for vague ventures. The crash and the Bubble Act soured Britain on joint-stock companies, slowing their spread until the act's repeal in 1825.
When and why
Exchange Alley, London, 1720, alongside John Law's Mississippi Company in Paris and smaller share booms in Amsterdam.
How we know
Price lists such as John Castaing's Course of the Exchange record the daily share prices; the Bubble Act of 1720 is on the statute books.
Debates and risks
Historians debate whether the Bubble Act aimed to curb speculation or to protect the South Sea Company from rival share issues.
▸South Sea Bubble (1720) is an early example of Bubbles, crashes and panics: how crises unfoldFact, law or data
The connection
The South Sea episode shows the full crisis sequence: a novel financial scheme, insider promotion, easy credit to buy shares, copycat ventures, a peak, then forced selling as loans and installment payments came due. The Sword Blade Company, the South Sea Company's banker, failed, spreading the damage beyond shareholders.
When and why
London, 1720; the crash ran from late summer through autumn, coinciding with the collapse of John Law's scheme in Paris.
How we know
Share-price series, the 1721 parliamentary inquiry and records of failed banks such as the Sword Blade Company document the sequence.
Debates and risks
How much the crash damaged Britain's wider economy, which recovered fairly quickly, is debated by economic historians.