At the National Money Show in New Orleans, May 9-11, the ANA
Museum Showcase will feature an exhibit dedicated to John Law and
the Mississippi Bubble. Law is infamous for his financial and
economic tactics, which helped France's economy boom, then
subsequently bust. The story of John Law and the Mississippi Bubble
is typically summed up in thick historical textbooks and
documentaries. The purpose of this blog is simply to acquaint the
audience with who Law was and the basics of the Mississippi
(John Law often used his
mathmatical brilliance to win card games)
Law, a Scottish economist, was born April 21, 1871, into a
family of bankers and goldsmith. At the young age of 14, Law began
to study banking and finances. By the age of 18, Law moved to
London. While there, Law was involved in a confrontation with
Edward Wilson, which stemmed from the two men competing for the
affections of an unnamed woman. The two men engaged in a duel,
resulting in the death of Wilson and the arrest of Law. Law was
sentenced to death; however, he was able to escape prison and
shortly thereafter lived in Amsterdam.
Upon his returned to Scotland he revealed his idea of
establishing bank notes which were backed by land, gold, or silver.
His idea was rejected by Scotland; shortly thereafter, he left the
During this time-period, France finished multiple wars that left
its economy in terrible financial shape. In 1715, King Louis XIV
died and his sole heir to the throne was a minor, hence the Duke of
Orleans became regent of France.
Law was a close acquaintance of the Duke and saw an opportunity.
The Duke was aware of the financial and economic savvy Law
possessed and regularly took his advice.
In 1716, Law convinced the French government to allow him to
open a bank that would issue bank notes (paper money) to be
supported by gold and silver. The idea was that it would generate
an increase in money circulation and increase commerce. Yet, most
importantly he believed the bank notes would revive France's trade
and economic power. His proposal to open a bank was granted,
resulting in the Banque Generale.
As a result, overseas commerce increased by 60 percent and the
number of French ships drastically rose from 16 to more than
In 1717, Law acquired what would later be known as The
Mississippi Company, a trading company, which he decided to merge
with the Banque Generale. To fund the Mississippi Company's
projects, he chose to sell shares of the company in exchange for
cash or state bonds. Those who invested in the Mississippi
Company saw their shares prices skyrocket. It was then that the
term millionaire was coined in France due to many individuals
quickly gaining large amounts of wealth. In order to fund the
purchases of shares in the company, Law made a critical mistake
when he opted to print more bank notes. This contributed to
inflation, which reached a monthly rate of nearly 23 percent in
January of 1720.
Law then decided to devalue the shares in the company and the
value of the bank notes was reduced to half of face value.
Shares that had peaked so high now fell at an alarming rate. In
September of 1721, they decreased down to 500 livres, which is
where they originally began.
The rise and rall of the Mississippi Company became known as the
Mississippi Bubble. The French government would not reissue paper
money for 80 years.
To learn more about John Law and the Mississippi Bubble, stop by
the ANA Showcase at the National Money Show. If that doesn't quench
your thirst for knowledge on this subject then attend Money Talks
on Friday, May 10, where Erin Greenwood, curator and historian at
The Historic New Orleans Collection, will lead the topic
discussion, "The Rise and Fall of John Law."
(Token issued in 1720 satirizes Laws' critics as being
envious of his success)