Mississippi Scheme

Mississippi Scheme,

plan formulated by John LawLaw, John,
1671–1729, Scottish financier in France, b. Edinburgh. After killing a man in a duel (1694) he fled to Amsterdam, where he studied banking. Returning to Scotland (1700), he proposed to Parliament plans for trade and revenue reforms and published
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 for the colonization and commercial exploitation of the Mississippi valley and other French colonial areas. In 1717 the French merchant Antoine Crozat transferred his monopoly of commercial privileges in LouisianaLouisiana
, state in the S central United States. It is bounded by Mississippi, with the Mississippi River forming about half of the border (E), the Gulf of Mexico (S), Texas (W), and Arkansas (N). Facts and Figures

Area, 48,523 sq mi (125,675 sq km). Pop.
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 to Law, who, with the sanction of the French regent, Philippe II, duc d'Orléans, organized the Compagnie d'Occident. Its shares first depreciated in value but rose rapidly when Law, director of the new royal bank, promised to take over the stock at par at an early date.

In 1719 the company absorbed several other organizations for the development of the Indies, China, and Africa, and Law thus controlled French colonial trade. The consolidated company, renamed the Compagnie des Indes (but commonly known as the Mississippi Company), was given, among other privileges, the right of farming the taxes. It then assumed the state debt and finally was officially amalgamated (1720) with the royal bank. Public confidence was such that a wild orgy of speculation in its shares had set in. The speculation received a strong impetus from Law's advertising, which described Louisiana as a land full of mountains of gold and silver. One story told of a fabulous emerald rock on the Arkansas River, and an expedition promptly set out to find it.

Overexpansion of the company's activities, the almost complete lack of any real assets in the colonial areas, and the haste with which Law proceeded soon brought an end to his scheme. A few speculators sold their shares in time to make huge profits, but most were ruined when the "Mississippi Bubble" burst in Oct., 1720. In the governmental crisis that followed, Law's financial system was abolished, and he fled the country (Dec., 1720). Although a failure in its financial aspects, the Mississippi Scheme was responsible for the largest influx of settlers into Louisiana up to that time.

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References in classic literature ?
I and a brother banker have obtained a grant of a railway, the only industrial enterprise which in these days promises to make good the fabulous prospects that Law once held out to the eternally deluded Parisians, in the fantastic Mississippi scheme. As I look at it, a millionth part of a railway is worth fully as much as an acre of waste land on the banks of the Ohio.
He also writes about the Mississippi Scheme and the South Sea Bubble, speculative crazes in France and England respectively, which played on popular greed for wealth generated in the New World during the early 18th century.
The Mississippi Scheme involved the production of paper money in place of coinage.
Two of the biggest in history took place within months of each other almost three centuries ago--in Britain and France in 1720: the South Sea Bubble and the Mississippi Scheme. There are now concern about the financial viability of the current system of shareholder value.
Some of these points can be illustrated in the South Sea Bubble and the Mississippi Scheme.
The beginning of the book covers the investment fads such as, the Tulip Mania (1635), John Law's Mississippi Scheme (1720), and the South Sea Bubble (1721).
Volume 2 contains eleven original materials and four analytical pieces focusing on the Mississippi Scheme and England's Exchange Alley.
It is undoubtedly one of the most significant findings of Harris's research that the elusive figure of John Law, notorious for his Mississippi scheme which shook the French state to its foundations and made the Scottish financier an outlaw, was instrumental in a project to encourage the emigration of skilled workers to France.
The Mississippi Bubble, or Mississippi Scheme, devised by John Law to promote and finance French colonization in Louisiana ruined thousands of investors.
Yet the principle of the Mississippi scheme was not all that different from that of the junk bond.
The Mississippi Schemes and South Seas Bubble, in which investors poured money into monopolistic French and British trading companies, is such an example.

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