John Law's banknote-backed financial scheme collapsed in 1720 during the Mississippi Bubble.
Law, a Scottish economist and financier, became controller general of finances in France. He established the Banque Générale in 1716 and later reorganized it as the Banque Royale. His Mississippi Company was granted a monopoly over French trade in the Mississippi region and became the centerpiece of a broad debt-conversion and money-creation system.
Shares in the company rose dramatically as investors exchanged government debt and cash for stock. The boom attracted buyers in Paris and created one of the era's most famous speculative episodes. Confidence failed in 1720 when investors sought to convert paper claims into precious metal and the system could not sustain the demands.
Law fled France after the collapse. The episode is often paired with Britain's South Sea Bubble, which also burst in 1720, but the companies, governments, and financial mechanisms were separate.