Which 1720 French financial scheme collapsed after John Law’s bank and company expanded credit?

The 1720 French financial scheme that collapsed after John Law’s bank and company expanded credit was the Mississippi Bubble. The episode involved the Mississippi Company and the Banque Générale, later reorganized as the Banque Royale.

John Law promoted paper money, a state bank, and shares in a company claiming valuable trading rights in French Louisiana. The company absorbed other commercial privileges and became closely tied to the French government’s finances. Easy credit and rising share prices attracted investors from across France.

Confidence broke when the company’s commercial returns failed to match the claims implied by its market valuation. Holders rushed to exchange paper assets for metal currency, exposing weaknesses in the system. The Mississippi Bubble is frequently confused with Britain’s South Sea Bubble because both peaked in 1720, but the French episode was built around Law’s monetary experiment and colonial company.