Era 02 · 1719 — 1720

The South Sea Bubble

Peak to trough

−97% in 4 months

Pulse cycle

4.5s

The South Sea Company was granted a monopoly on trade with Spanish America — a business that turned out to be almost entirely theoretical. To mask the lack of actual revenue, the company proposed converting British government debt into its own shares. Insiders pumped the price with orchestrated rumors, sold into the retail mania they had manufactured, and walked away with fortunes before the inevitable collapse.

Events in this era

Jun 1720

Share price peaks at £1,050

South Sea stock rose from £128 in January to £1,050 in June — an eightfold gain in six months. Shares were bought on credit advanced by the company itself. Parliament members and the King's mistress were given free allotments, creating the appearance of official endorsement and suppressing early skepticism.

Peak market cap ~£200M (roughly 10× UK GDP)

Sep 1720

The collapse and the Tower of London

As insiders quietly cashed out, prices slipped. Other companies that had copied the South Sea pattern failed first. When the main stock broke £400, margin calls cascaded. By December it was near £124 — essentially back to where it had started. Parliament passed the Bubble Act in a panic, inhibiting joint-stock companies for the next 100 years.

−97% in 4 months; nationwide bankruptcies

1711

South Sea Company chartered

The company was granted a monopoly on trade with Spanish America in exchange for assuming £10 million of British government debt. The trade was almost entirely theoretical. The real business was converting government debt into company shares at prices the directors could influence. The fraud was architecturally built in nine years before it collapsed.

Government debt laundered into stock-market mania

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