The Mississippi Bubble was the 1720 French financial collapse centered on John Law’s Mississippi Company and its paper-money system.
John Law, a Scottish financier, became influential in France and helped establish a bank that issued banknotes. His company held a monopoly over French trade claims in the Mississippi region and absorbed other companies, including the French East India Company. Investors bought shares in Paris as expectations of American wealth grew.
Share prices rose dramatically in 1719 and early 1720, but the company’s real commercial prospects could not justify the claims built into its valuation. When holders sought to convert paper and shares into more stable assets, confidence broke down. The resulting collapse damaged savings and discredited Law’s financial experiment.
The Mississippi Bubble and the South Sea Bubble are often discussed together because both peaked in 1720. They were separate schemes in France and Britain, however. The Mississippi episode also illustrates how banking, money creation, monopoly privileges, and overseas speculation could reinforce one another.