Mississippi Company: John Law's $6.5T bubble that ruined France

The Mississippi Company was founded in 1717 by Scottish economist John Law, who had convinced the French regent, Philippe d'Orléans, to let him implement a radical new financial system. The company was granted a monopoly on trade with the Louisiana territory and, through a series of acquisitions, took control of France's tobacco monopoly, royal mints, tax collection, and eventually the central bank. Shares were sold at 500 livres each, payable in government debt.

By late 1719, the share price had soared to 10,000 livres — a 20-fold increase in eighteen months. At its peak, the company's market value was the equivalent of $6.5 trillion today, making it the most valuable company in history by some measures. The French economy was flooded with paper money, as Law's bank printed notes to fund the share purchases. The system was a self-reinforcing loop of rising share prices and expanding money supply.

The bubble burst when shareholders began selling to take profits. The money supply had doubled, causing 23% monthly inflation by January 1720. Confidence collapsed as the public realised that the Louisiana territory was not producing the expected wealth. By December 1720, shares had fallen to 1,000 livres, and by September 1721 they were back to 500. John Law was dismissed, fled to Venice, and died poor. The French government paid 514 million livres to restructure the company, and the episode discredited paper money in France for generations.