The first financial market bubble

Once a financial market bubble has emerged and flared, there is a reflex action on the part of media commentators to scour through history for historical precedents using works such as Mackay, Galbraith and Kindleberger. Between 1716 and 1720 John Law choreographed a major monetary and financial revolution in France. It became popularly known as the Mississippi System. While the rise and collapse of the Mississippi System presented a fascinating insight into early European financial development, it also provided the background for one of the great debates between John Law and Richard Cantillon on the nature and role of money in the economy. Cantillon&s;s analysis provided a template for the way in which the real and financial economies can be meshed together. Both Law&s;s and Cantillon&s;s books present a range of exciting insights into the nature of money and macroeconomics. Law identified France&s;s dual financial crises, the shortage of money and the excessive amount of public sector indebtedness.