The 1720 French financial scheme that collapsed after John Law’s Mississippi Company lost investor confidence was the Mississippi Bubble.
John Law’s company held a monopoly over French trade with territories associated with the Mississippi River. Law also gained influence over banking and public finance, helping link the company’s shares with the French monetary system. Expectations of enormous American wealth caused share prices to soar.
The valuation became detached from the company’s actual economic results. When investors began converting paper wealth into reliable money and selling shares, confidence weakened rapidly. The collapse ruined many holders and damaged Law’s reputation, forcing him to leave France.
The Mississippi Bubble occurred at roughly the same time as Britain’s South Sea Bubble. The two episodes are sometimes grouped together as Europe’s great speculative bubbles of 1720, although they involved different companies, governments, and financial arrangements.