In 1717, the Mississippi Company, registered in France, began colonizing a valley in the lower Mississippi River, establishing the city of New Orleans there. To finance its ambitious plans, the company, which had ties to the court of Louis XV, sold shares on the Paris Stock Exchange.
John Doe, director of the company, has also served as Governor of the French central bank. Moreover, the king appointed him as inspector general of finance – about the same as now the minister of finance. In 1717, the valley in the lower Mississippi boasted nothing but swamps and alligators, but the company spread rumors about the colony's fabulous wealth and limitless possibilities.
French businessmen believed in these tales, and the company's stock prices skyrocketed. Their original price was 500 livres per share. On August 1, 1719, each share was sold for 2,750 livres. By August 30, the share was worth 4,100, and by September 4 – 5,000 livres. By December 2, the share price of the Mississippi company exceeded 10,000 livres. The streets of Paris were euphoric.
A few days later, panic broke out. Investors saw that the price was falling and wanted to get rid of their stake as soon as possible. A collapse began. In an attempt to stabilize shares, the French central bank – you remember who headed it – began buying up Mississippi shares. But the bank couldn't buy them all. Soon he ran out of money. Then the inspector general of finance ordered money to be printed in order to continue paying for the shares. As a result, the bubble consumed the entire financial system of France, and no amount of tricks could help.
The price of one share fell from 10,000 livres to 1,000. Then the shares depreciated, and people lost everything, down to the last penny. The central bank and the royal treasury were left with a huge number of shares that were not worth the paper on which they were printed. And there was no money. Most of the big businessmen survived and even won – they dumped shares on time. Small investors have lost everything, many have committed suicide.