The 1720 French stock-market bubble that burst after John Law’s Mississippi Company lost investor confidence was the Mississippi Bubble.
John Law promoted the Mississippi Company, which held a monopoly over French trade and colonial development in the Mississippi region. Law also gained control of parts of France’s banking and monetary system, helping create a powerful link between paper money, government finance, and company shares. Investors pushed the company’s share price dramatically higher in 1719 and 1720.
Confidence collapsed when the quantity of issued notes and shares exceeded faith in the company’s underlying prospects. Holders rushed to exchange paper assets for more stable money and goods, producing a sharp fall in share prices and damaging Law’s financial system. Law fled France after the scheme failed.
The Mississippi Bubble is distinct from Britain’s South Sea Bubble, which also peaked and collapsed in 1720. Both were famous speculative episodes, but they involved different companies and national financial systems.