The Mississippi Bubble was the French-financed scheme that collapsed in 1720 after its paper money and company shares became dramatically overvalued.
Scottish financier John Law controlled the Banque Royale and the Mississippi Company, which was associated with a monopoly over French trade and colonization in North America. Law’s system linked bank-issued paper money with company shares, encouraging investors to buy into expectations of enormous wealth from Louisiana.
Shares rose from roughly 500 livres in early 1719 to about 15,000 livres in early 1720. Confidence then reversed. Holders tried to exchange paper and shares for more reliable assets, while the bank and company could not sustain the promises implied by their prices. The system collapsed during 1720, and Law fled France.
The Mississippi Bubble is frequently confused with Britain’s South Sea Bubble because both burst in the same year. They were different companies and countries. The scheme’s “Mississippi” name referred to the company’s North American colonial interests, not to a modern stock exchange.