Mississippi Bubble 1720
John Law’s Mississippi Company and Banque Royale fused monetary expansion, colonial equity, and French public finance until 1720 — a state-run bubble that ended in a paper-money collapse.
Definition
Law swapped government debt for shares, printed banknotes, and promised Louisiana riches. The system required ever-rising share prices to stay consistent with the note issue. When confidence broke, notes and shares were both repriced by decree — a sovereign default in equity clothing.
Why it matters
It is the cleanest early case of fiscal dominance plus a stock-market peg. Modern ‘print and pump’ debates still live here.
Case
Share prices and note issuance exploded in 1719–20; the 1720 ‘visa’ and demonetizations wiped holders. France’s later suspicion of paper money is partly this scar.
How to read it
Follow the circularity: notes buy shares, shares back notes, debt is ‘retired.’ When any leg stops, the identity breaks.