By Jesse Colombo (This article was written on May 18th, 2012)
The South Sea Bubble was a speculative bubble in the early 18th
century involving the shares of the South Sea Company, a British
international trading company that was granted a monopoly in
trade with Spain’s colonies in South America and the West Indies
as part of a treaty made after the War of the Spanish
Succession. In return for these exclusive trading rights, the
company assumed England’s war debt. When investors recognized
the potential profits to be made from trade with the gold and
silver-rich South American colonies, they bid the South Sea
Company’s shares and the shares of similar trading companies to
incredible heights in a typical speculative bubble fashion. Not
long after virtually all classes of British society were
thoroughly engaged in wild stock speculation, the South Sea
Bubble popped and stock prices violently collapsed, financially
ruining their investors. Events Leading Up to the South Sea
Bubble The South Sea Company was found