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The Mississippi Scheme and Its Antecedents: Naturally

The time for trying to sell them had not yet arrived. Naturally such a locality rose in value, and as demand emphasises paucity of space, extraordinary prices ruled. Even a small share in the lucky street, where fortunes could be made in an hour, rose to fabulous value. Houses formerly letting for forty pounds a year now fetched eight hundred pounds per month. And no wonder, when shares of the face value of five hundred livres sold for ten thousand! When there is such an overwhelming desire to buy, then is the opportunity for sellers to realise, and the time for such speculation on the one side, and for such commerce on the other, is naturally short and the need pressing. At the beginning of 1720 everything seemed to be increasing in a sort of geometric ratio. After a dividend of forty per cent. had been declared, shares of five hundred value rose to eighteen thousand. Greed, and the opportunity for satisfying its craving, turned the heads of ordinarily sensible people. The whole world seemed mad. It appeared right enough that the financial wonderworker who had created such a state of things should be loaded with additional honours. It was only scriptural that he who had already multiplied his talents should be entrusted with more. was universal rejoicing when John Law-exiled foreigner and condemned murderer-was appointed, in January, 1720, Controller-General of the whole finances of France. Naturally enough, even the hard head of the canny Scot began to manifest symptoms of giving way in the shape of becoming exalté. And naturally enough his ene- There mies-financial, political and racial-did not lose the opportunities afforded them of taking advantage of it. Tongues began to wag, and all sorts of rumours, some of them reconcilable with common sense and easily credible, others outrageous, began to go about. Lord Stair reported that Law had boasted that he would raise France on the ruins of England and Holland, to a greater height than she had ever reached; that he could crush the East India Company and even destroy British trade and credit when he chose. Stair resented this, and he and Law from being close friends became enemies. To appease the incensed and at present all-powerful Law, the powers that were recalled Lord Stair. On 23 February 1720, the Compagnie des Indes and the Banque Royale were united, thus linking the ends of the financial chain. "The System" was now complete.

When Aladdin set the Genius, who had hitherto worked so willingly, the final task of hanging a roc's egg in the centre of the newly-created palace, he brought the whole structure tumbling about his ears. So it was with John Law and the egregious Mississippi Scheme. His idea was complete and perfect. But the high sun when it reaches its meridianal splendour begins from that instant its downward course.

The reaction was not long in manifesting itself.

Usually in such matters there is a pause before the great driving-wheels reverse their motion, and the backward motion, beginning slowly, gathers way as it progresses. But in this case human intelligence and not soulless machinery was the propulsive force of reaction. The speculators had begun to work before the onward movement had come to an end or even begun to slacken. They were loaded up with a vast amount of stocks whose value, even if there had been money to redeem them, was severely limited, whereas they had purchased at prices varying between the first rise above nominal value and that reached by the last desperate speculator. It is not wise to hold such inflated stock too long, and in a crisis sailing-master Wisdom orders Quarter-master Caution to take a trick at the helm. When the bare idea of unification of financial interests was mooted, the wise holders of stock commenced to unload. When this movement began its progress was rapid-so long as there was anything to be moved. The first class to feel it were the bankers. The specie ran out like the pent-up water from a burst reservoir, till in an incredibly short time there was not sufficient remaining to afford the money-change needed in daily life. The advisers and officials of the State, seriously alarmed, began at once to take strong measures supported by royal decrees. Then as ruin began to stare the whole nation in the face more and more with every hour, desperate expedients were resorted to. The value of the currency was made by every stratagem, dishonest trick, and unscrupulous exercise of power, to fluctuate so that such differences or margins as arose might be grasped forthwith for national use. Payments in bullion, except for very small amounts, were forbidden. The possession of anything over five hundred livres in specie was deemed an offence punishable by confiscation, partial or wholesale, and by fine. Domiciliary visits were paid to seek evidence of offence and to enforce the new laws, and informers in this connection were well paid. Then began a war, between public oppression and individual trickery, to defend acquired rights and evade unjust demands. The holders of paper money, unable to realise in specie, tried to protect themselves by purchasing goods of intrinsic value.

Precious metals, jewels, and such like were bought in such quantities that the supplies diminished and the prices grew, until to avoid immediate ruin, such purchases were proclaimed illegal and prohibited.

Then ordinary commodities of lesser values were tried as means of barter, till their prices too rose to such an extent that trade was paralysed. In order to meet the growing danger a still more desperate expedient was resorted to. A decree was issued the effect of which would be to reduce-gradually it was hoped the obligation of bank notes to one-half their nominal value. This completed the panic, for here was a position which could not be guarded against by any prudence or wisdom.

No one could henceforth by any possibility be financially safe. The speculators who had already realised were alone safe. Bona fide investors, if not already overwhelmed by disaster, saw the tide of ruin rising rapidly around them. Nothing within the power of the state could now be done to check or even lessen the state of panic; not even the reversal of the late decree in ten days after its issue. To make matters still worse the Banque at this very time suspended payment. Probably in a wild endeavour to do something which would avert odium from itself by saddling the responsibility on someone else, the Government procured the dismissal of Law from the Controller-Generalship of Finance. However-strange to sayhe was very soon appointed by the Regent as Intendant-General of Commerce and Director of the ruined bank. The much-vaunted, idolised, and believed-in "System" had now fallen hopelessly and was ruined forever. Law was everywhere attacked and insulted with such unmitigated rancour that he had to leave the country. He had invested the bulk of the great fortune which he had by now acquired, in estates in France; and these together with everything else that he had were now confiscated. At the end of the same year, 1720, whilst he was at Brussels he was asked by the command of the Czar (Peter), to administer the finances of Russia, but declined. After this episode, grateful to a broken man, he spent a couple of years wandering about Italy and Germany and probably gaining a fluctuating income through gambling. Next he was to be found in Copenhagen where he had sought sanctuary from his creditors. Next year there was an outward change in his status, when he went to England, on a ship of war, at the invitation of the Government. There he was presented to George I. Somewhat to his chagrin he was denounced in the House of Lords as a Catholic-(he had abjured his old belief of Protestantism before accepting the high office of Controller-General of Finances in 1720)-and an adherent of the Pretender. He pleaded in the King's Bench the Royal pardon for the murder of Beau Austin which had been sent to him in 1719. He spent the succeeding few years in England whence he corresponded with the Duke of Orleans. He expected to be recalled to France but his hope was never realised. He wished to go to the Continent but was practically a prisoner in England, fearing to leave it lest he should be arrested by his creditors, amongst whom was the new French East India Company which had been reconstructed on the ruins of the old. In 1725 Sir Robert Walpole, then Prime Minister, asked Lord Townshend, the Secretary of State, to give Law a King's commission of some sort, so that such might serve for his protection. In the same year he went to Italy. He died in Venice in 1729, in what, compared with his former state, was poverty. To the last he was a gambler, always ready to take long risks for a prospect, however remote, of large gain. A story is told that in his last years he wagered his last thousand pounds to a shilling (20,000 to 1) against the throwing of double sixes six consecutive times.

The law of chances was with him and naturally he won. He renewed his wager but the authorities would not allow the further gamble to take place.