John Law created the financial system behind France’s Mississippi Bubble, which collapsed in 1720.
Law was a Scottish economist and financier who persuaded the French regent to let him establish a bank issuing paper money. He later gained control of the Mississippi Company, which held a monopoly over French trade and colonization in parts of North America. The company’s shares rose dramatically as investors bought into ambitious claims about Louisiana’s wealth.
The system linked banknotes, government finance, and company shares so closely that confidence in one supported the others. When doubts spread and investors tried to convert paper assets into precious metals, the arrangement became unstable. Share prices collapsed in 1720, and Law fled France.
The Mississippi Bubble is often paired with Britain’s South Sea Bubble because both burst in 1720. They were separate schemes, however. John Law was not the head of the South Sea Company, and the Mississippi Company’s main colonial focus was French Louisiana.