John Law’s paper-money scheme collapsed in the Mississippi Bubble of 1720.
John Law was a Scottish economist and financier who became France’s Controller General of Finances. His Banque Générale issued banknotes, and his Mississippi Company promoted trade and settlement in French Louisiana. The company later absorbed other French trading privileges and became closely tied to the government’s debt-management system.
Speculation drove the company’s share price sharply higher in 1719 and early 1720. Investors increasingly relied on paper claims rather than realizable profits. When confidence weakened, shareholders tried to exchange notes and shares for hard money, but the system could not meet the demand. The bubble collapsed, and Law fled France.
The episode is often paired with Britain’s South Sea Bubble because both peaked in 1720. They were separate schemes, however. The Mississippi system’s collapse undermined confidence in paper currency and left a lasting influence on debates about central banking and public debt.