John Law’s banknote system was central to the Mississippi Bubble crash.
John Law was a Scottish financier who became controller general of finances in France. He established the Banque Générale, later associated with the Banque Royale, and promoted paper money alongside the Mississippi Company. The company’s shares rose dramatically as investors imagined immense wealth from France’s American claims.
The system depended on confidence in both the company and the paper currency. When doubts spread and holders tried to convert notes and shares into more dependable assets, the structure destabilized. The bubble burst in 1720, causing severe financial losses and forcing Law to flee France.
The company’s name refers to the Mississippi Company, which was linked to the French Louisiana enterprise. The crash is sometimes incorrectly treated as a simple stock-market event; it was also a currency, banking, public-debt, and colonial speculation crisis.