Which financial bubble burst when the Mississippi Company collapsed in France in 1720?

The bubble that burst when the Mississippi Company collapsed in France in 1720 was the Mississippi Bubble.

Scottish financier John Law controlled the company, which held a monopoly over French trade with parts of North America. Law promoted its shares while also developing a paper-money system through the Banque Générale, later linked to the Banque Royale. Excitement about colonial wealth drove the share price dramatically higher.

The company’s reported prospects exceeded the immediate economic reality of its Louisiana holdings. As confidence weakened, investors tried to convert paper and shares into hard money. A rush to sell followed, and the price collapsed during 1720.

The Mississippi Bubble is often compared with Britain’s South Sea Bubble, which also peaked and crashed in 1720. They were separate schemes in different countries, although both became classic examples of speculative bubbles and financial innovation outrunning fundamentals.