What was the name of the 1720 French financial collapse involving John Law's Mississippi Company?
Answer
Mississippi Bubble
The 1720 French financial collapse involving John Law's company was called the Mississippi Bubble.
John Law, a Scottish financier, promoted paper money and a company connected with French colonial trade. The Mississippi Company received control over commercial interests associated with France's Louisiana territory. Investors bought its shares in large numbers, encouraged by optimistic claims about the colony's wealth and by the availability of paper money.
Share prices rose rapidly before confidence failed. Holders tried to exchange paper assets for hard currency, but the system could not support the demand. The company and Law's financial structure collapsed, causing severe losses and damaging confidence in paper money.
The Mississippi Bubble happened at roughly the same time as Britain's South Sea Bubble, but the two were distinct. The French episode was especially important because it combined a speculative company boom with an ambitious experiment in banking, public finance, and currency.