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Mississippi Bubble Essay

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The Mississippi Bubble In the early 18th century France had a very depressed economy. The government was severely in debt and the taxes were very high. At this time, France also controlled the colony of Louisiana, a settlement in North America. France was the first European country to settle this area of North America. This was a new world with many new opportunities and many new obstacles. The Mississippi Bubble was an economic bubble in France in the early 1700s that triggered a frenzy and ended in financial collapse. The scheme was engineered by John Law (1671-1729), a Scottish adventurer, gambler, economic theorist and financial wizard. Law was a colorful character who has been described as tall, handsome, and vain. He had a passion for …show more content…

These bank notes would be backed by the large sums of gold and silver that the bank held and would be used as a medium of exchange. Law thought it was the unpredictable supply of gold and silver that was slowing the economy rather than a true economic problem. Law proposed that by switching to paper, trade would speed up due to the increase in currency issued. He created a bank that took deposits in coin, but issued loans and withdrawals in paper. Law 's bank built up its reserves through a stock issue and also made a good profit by handling the government 's financial needs. The Encyclopedia Britannica said that “paper money was a new concept for the French; money to them was silver and gold. Law believed that paper notes would increase the money in circulation, which, in turn, would increase commerce.” These conditions would help rebuild and restimulate the finances of the French government. At this point in time Law’s idea was actually helpful to the French government, but he continued to look to the future to see what kind of money and powers he could gain. Law’s desire was a main cause of the governments

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