What 1720 financial bubble burst after the collapse of John Law’s Mississippi Company?

The Mississippi Bubble was the 1720 financial bubble that burst after the collapse of John Law’s Mississippi Company.

John Law’s company held a monopoly over French trade and colonization connected with the Mississippi River region. Law also controlled the Banque Générale, later the Banque Royale, allowing paper money and company shares to support an enormous speculative boom. Investors bought shares in Paris as hopes of American wealth drove prices upward.

In 1720, confidence weakened when investors tried to convert paper assets and shares into hard currency. The company’s inflated valuation could not be justified by its actual returns, and the price collapsed. Law fled France after the scheme unraveled.

The Mississippi Bubble is often paired with Britain’s South Sea Bubble, which also burst in 1720. They were separate companies and schemes, although both reflected the era’s enthusiasm for chartered trading companies, paper finance, and speculative share prices. The episode damaged confidence in paper money and public finance in France.