The 1720 French financial scheme that collapsed after John Law’s Banque Royale issued excessive paper money was the Mississippi Bubble.
John Law promoted the Mississippi Company, which held a monopoly over French trade and colonization in the Mississippi region. Law also controlled the Banque Royale, whose paper currency helped expand credit and fueled demand for company shares. Investors bought shares at rapidly rising prices, often using borrowed money.
Confidence weakened when the company’s supposed colonial riches failed to match expectations and holders tried to exchange paper assets for specie. The share price fell sharply in 1720, and Law fled France. The Mississippi Bubble is often confused with the contemporaneous South Sea Bubble in Britain; both were major 1720 episodes, but the Mississippi scheme was centered in France and involved Law’s monetary system.