Which French financial scheme collapsed in 1720 under John Law’s paper-money system?

The French financial scheme that collapsed in 1720 under John Law’s paper-money system was the Mississippi Bubble.

The Mississippi Company, later known as the Company of the Indies, held a monopoly over French trade and colonization connected with the Mississippi territory. Scottish financier John Law promoted the company while also directing a bank that issued paper money. Investors could use the expanding money supply to buy company shares, driving prices sharply higher.

The system became unstable when confidence in the company and the paper currency weakened. Investors tried to exchange their holdings for more reliable assets, but the bank and company could not sustain the promises associated with the boom. Share prices collapsed in 1720, ruining many participants and ending Law’s experiment in France.

The Mississippi Bubble happened at roughly the same time as Britain’s South Sea Bubble, but the two were separate events. Law’s system combined a trading monopoly, government finance and paper currency, making it an especially important episode in the history of financial bubbles.