Mississippi Bubble

Mississippi Bubble

An 18th-century speculative bubble resulting from the Mississippi Company, which had a charter from the King of France for overseas trade with the Louisiana Territory and elsewhere. The Company's founder, John Law, promoted the trade of the stock, which was guaranteed indirectly by the King. The company issued notes (through the Banque Royale) until the government admitted it did not have sufficient coinage to cover the notes it had printed. This resulted in a bank run and the burst of the bubble in 1720. The Mississippi bubble was one of the first times a bank issued paper money.
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Shih compared the rapid inflation of Bitcoin to famous historic economic bubbles, like Tulip mania, the Mississippi Bubble, the South Sea Bubble, and the Dotcom Bubble, and stated that if the Bitcoin bubble bursts it may be the largest bubble to ever pop in history.
Famous historical examples are the Dutch Tulip Mania (1634-7), the Mississippi Bubble (1719-20), the South Sea Bubble (1720) and the Roaring 20s that preceded the 1929 crash.
In 1716, John Law organized France's Mississippi bubble along the same lines, retiring France's public debt by selling shares to create slave-stocked plantations in the Louisiana territories.
In France, John Law's Mississippi Bubble led to a speculative mania and a spectacular collapse that bankrupted thousands and drove the monarchy, once and for all, away from efforts to establish public credit.
This Commentary explains the two schools of thought and shows how both can describe a famous historical episode known as the Mississippi bubble.
At present, his research in financial history includes one project on capital movements during the South Sea and Mississippi Bubble episodes and another on the micro-structure of stock markets in the nineteenth century.
It bids fair to make the tulip mania and the Mississippi bubble look like temporary blips on an otherwise sound financial scene.
In 1720 the South Sea Bubble collapsed in Great Britain, while in France, the Mississippi Bubble did the same.
The Mississippi Bubble, or Mississippi Scheme, devised by John Law to promote and finance French colonization in Louisiana ruined thousands of investors.
His first successful book was The Story of the Cowboy (1897), but it was not until he published a novel, The Mississippi Bubble (1902), that he was able to rely on writing for his livelihood.
The failure of John Law's Mississippi Bubble (a trade scheme of June, 1720), the increasing national debt due to royal prodigality, and the repeated hiring and dismissal of incapable finance ministers -- and even of capable ones like Cardinal Fleury, Turgot, and Necker -- all contributed to the economic instability of France.
But no, seriously, I love to follow these exercises of swindling by paper pirates: Robert Vesco, Bernie Cornfield, the Equity Funding scam, James Ling, the present round of worthless mortgages that BankAmerica was gulled into buying, Michelle Sindona, the purloined works of the Vatican's Works of God bank, Calvi and the Banco Ambrosiano, P-2, or, if you're historically minded, the Great South Sea Bubble, the Mississippi Bubble, the Credit Mobilier, or, last but not least, the present world's unpayable debt pyramid.
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