Brief Overview of the Mississippi Bubble

The Mississippi Bubble was an economic bubble that occurred in France in the early 1700s. It developed around the same time as Britain’s disastrous South Sea Bubble. The ‘brains’ behind the Mississippi Bubble was a Scottish financier, John Law. He was described as a ‘gambler and playboy’ who managed to get himself into the highest levels of French public finance.  Law used his friendship with the ‘Duke of Orléans’ to achieve his dreams. 

John Law became the 'go-to guy', the French government’s number one financial advisor and he used this position to open a bank, the Banque Générale. This bank had the authority to issue ‘paper’ money i.e. bank notes. Law later formed the Mississippi Company, subsequently known as "the Compagnie des Indes", which was granted control of the development of France’s extensive territory in North America.

This American land was very new to the French people and most knew nothing about it. However they did believe the rumours that this land was rich in silver and gold,which happened to be the French currency at the time. This led investors to bid Compagnie des Indes shares up to crazy heights. Unfortunately, the company’s prediction turned out to as wrong as could be and the shares crashed. This crash led to a downturn in France’s stock market and even severely affected public finances. You can read a very good overview of the Mississippi Bubble here.

I will subsequently explore the Mississippi Bubble in more detail explaining the events leading up to the bubble, the actual bubble phase, the crash and the lasting effects on our world today.