The Encyclopedia Americana (1920)/Mississippi Bubble

MISSISSIPPI BUBBLE, a celebrated financial scheme projected by (q.v.) at Paris in 1717. Law issued shares for a vast company to be called the Compagnie d'Occident, and to be engaged in the colonization and cultivation of the banks of the Mississippi. Reports skilfully spread as to gold and silver mines discovered in these parts raised in the people the hope of great gains. The company soon absorbed those of the Senegal and the East Indies. Such were the hopes raised by this undertaking that the shares originally issued at $100 were sold at 10, 20, 30 and 40 times their value. Law had promised to the regent that he would extinguish the public debt. To keep his word he required that the shares in this company should be paid for one-fourth in coin and three-fourths in billets d'état or public securities, which rapidly rose in value on account of the foolish demand which was created for them. In October 1719 the shares mounted as high as $4,000. The state took advantage of the popular frenzy to issue increased quantities of paper money, which was readily accepted by the public creditors and invested in shares of the Compagnie des Indes. This went on till the value of the paper money in circulation was more than three milliards, while the value of coined money was no more than 700,000,000. Before this stage was reached Law himself who had originated the idea of paper money had endeavored to check the issue but his efforts were unavailing. A catastrophe was now inevitable. About the end of 1719 the more prudent speculators began to sell out. In payment of their shares they received, of course, in great part, billets d'état, and with these bought gold, silver, diamonds, lands or anything else having a real value. As the billets became depreciated such articles as tallow, soap, etc., were often bought at fabulous prices. Law struggled desperately against the fall in the value of these shares, but all his devices to check their downward course were futile or had only a temporary success, and when the state finally declared that it would receive no further payments in paper, he perceived that all attempts to bolster the scheme were in vain, and made his escape from France (December 1720). The affairs of the company were wound up by the state acknowledging itself debtor to the creditors of the company to the amount of $340,000,000. The public debt was augmented by $2,600,000 of “annual rentes.”