The Mississippi Bubble was the French speculative bubble that collapsed in 1720 after John Law’s company issued heavily promoted shares.
John Law, a Scottish financier, gained influence in France by promoting paper money and a state-backed company connected with trade in the Mississippi region of North America. The Compagnie du Mississippi was later linked with the Compagnie des Indes and became the center of a huge share-buying frenzy.
Investors crowded into Paris to buy shares as prices rose far beyond the company’s realistic commercial prospects. The system depended heavily on confidence in Law’s paper currency and the company’s future profits. When confidence weakened, investors rushed to exchange paper and shares for more stable forms of wealth.
The collapse caused severe losses and damaged public trust in paper money and financial innovation. The episode occurred at roughly the same time as Britain’s South Sea Bubble, but the two were separate schemes in different countries.