History Repeating: Similarities Between the Mississippi Bubble and the Subprime Crisis
Introduction
The Mississippi Bubble, that took place in France in 1717, has been compared to the subprime crisis that began in 2006 in the United States. The similarities between the two crises were not actually noticed until after the subprime crisis had begun. The similarities are present in the development, policy responses, and the roles that each government played. Could these two crises that occurred more than 300 years apart be so similar that with a proper analysis of the Mississippi Bubble have helped in any way with the subprime crisis? It is said that history repeats itself, so did the economic crises from 1717 reoccur in 2006? Before being able to denote the similarities a thorough understanding of the two must exist.
The Mississippi Bubble
The Mississippi Bubble was a direct result of a scheme to make the French colonies in America and Canada look wealthier than they actually were between the years of 1717 and the end of 1720. The bubble was originated by the Mississippi Company, a French trading company, which was developed by John Law. Law’s company was developed in 1717 and quickly became a monopoly on trade rights with these colonies (Your Dictionary, no date). The Mississippi Company held trading privileges to the French territories along the Mississippi River for twenty-five years (Jon Moen, 2001). Terms for this deal included that the company was required to have 6,000 French residents and 3,000 slaves settle in the area (Sandrock no date). Law’s company was permitted to appoint its own governor and officers in the colonies as well as grant land to potential developers of their choice (Moen). In addition to this, the company was also permitted to hold a monopoly on the growing and selling of tobacco (Sandrock). The company was originally funded by the selling of shares in the company for cash and state bonds at low interest rates (Moen). These bonds are what mattered most to Law.
Eventually the Mississippi Company began to take over
The Mississippi Bubble, that took place in France in 1717, has been compared to the subprime crisis that began in 2006 in the United States. The similarities between the two crises were not actually noticed until after the subprime crisis had begun. The similarities are present in the development, policy responses, and the roles that each government played. Could these two crises that occurred more than 300 years apart be so similar that with a proper analysis of the Mississippi Bubble have helped in any way with the subprime crisis? It is said that history repeats itself, so did the economic crises from 1717 reoccur in 2006? Before being able to denote the similarities a thorough understanding of the two must exist.
The Mississippi Bubble
The Mississippi Bubble was a direct result of a scheme to make the French colonies in America and Canada look wealthier than they actually were between the years of 1717 and the end of 1720. The bubble was originated by the Mississippi Company, a French trading company, which was developed by John Law. Law’s company was developed in 1717 and quickly became a monopoly on trade rights with these colonies (Your Dictionary, no date). The Mississippi Company held trading privileges to the French territories along the Mississippi River for twenty-five years (Jon Moen, 2001). Terms for this deal included that the company was required to have 6,000 French residents and 3,000 slaves settle in the area (Sandrock no date). Law’s company was permitted to appoint its own governor and officers in the colonies as well as grant land to potential developers of their choice (Moen). In addition to this, the company was also permitted to hold a monopoly on the growing and selling of tobacco (Sandrock). The company was originally funded by the selling of shares in the company for cash and state bonds at low interest rates (Moen). These bonds are what mattered most to Law.
Eventually the Mississippi Company began to take over