A speculative bubble in the shares of the South Sea Company that inflated through the spring and summer of 1720 and collapsed that autumn. The Company had taken on a large share of Britain's national debt in exchange for a trading monopoly and government-backed conversion terms, and speculative buying drove its share price far beyond anything its actual trading revenue could support. The collapse ruined thousands of investors, implicated government ministers in the Company's own stock manipulation, and led Parliament to pass the Bubble Act restricting the formation of new joint-stock companies. It stands beside Tulip Mania as one of the two episodes economists reach for first when discussing speculative manias.
Facts
Event DateThe exact day of the peak is not settled in sources; the share price reached its high point in early August 1720 before collapsing by late September. Connections
Associated With
The Bank of England was the South Sea Company''s direct rival for management of the national debt through the whole episode; the crash confirmed the Bank''s position as banker to the British government.
Source Wikipedia
Contemporaneous speculative bubbles of 1719-1720, often studied together as twin episodes of early paper-money mania.
Source Wikipedia
Source Encyclopaedia Britannica
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Sources
1. Wikipedia: South Sea Bubble
South Sea Bubble, CollapseQuote, South Sea Bubble, Collapse
the price started to fall, dropping back to £100 per share before the year was out.
2. Encyclopaedia Britannica
Encyclopaedia Britannica, Inc.- South Sea Bubble
britannica.com/money/South-Sea-Bubble
The bubble, or hoax, centred on the fortunes of the South Sea Company, founded in 1711 to trade (mainly in slaves) with Spanish America, on the assumption that the War of the Spanish Succession, then drawing to a close, would end with a treaty permitting such trade.
View the Source 3. Wikipedia
Wikimedia FoundationSouth Sea Bubble
The price finally reached 1,000 pounds in early August 1720, and the level of selling was such that the price started to fall
Associated With: Bank of England, South Sea Bubble (South Sea Company), Recriminations section
At the time of these events, the Bank of England was also a private company dealing in national debt, and the crash of its rival confirmed its position as banker to the British government.
View the Source South Sea Company (Wikipedia)
WikipediaIn Group: Early Modern Speculative Manias, LeadQuote, In Group: Early Modern Speculative Manias, Lead
The South Sea Company was a British joint-stock company founded in January 1711, created as a public-private partnership to consolidate and reduce the cost of the national debt.
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