Millionaire: The Philanderer, Gambler, and Duelist Who Invented Modern Finance (12 page)

News of the disaster reached the rest of Europe along with reports of Law’s most daring maneuver. He had offered to take over the burden that had weighed so heavily on the nation since Louis’s final failing years, and lend the state enough to repay the national debt—1.2 billion livres at an interest rate of 3 percent. The proposal was intertwined with a highly contentious pledge to pay 52 million livres for the right to take over tax collection. At the time France leased this right to private enterprise in the shape of the General Receivers, who were responsible for direct taxation, and to the Farmers General, a syndicate of forty private financiers, who were responsible for collecting indirect taxes, such as customs duties and levies on salt and alcohol. The Farmers General were also the largest creditors of the state and profiteers from government indebtedness. The owner of a so-called tax farm lease had to estimate the sum of revenue he would raise and advance it to the state. If the revenue was below this amount, he himself was obliged to pay the state, while any revenue above it he could keep. In fact, research has recently shown that the forty financiers were not actually rich enough to advance the whole sum to be collected. They acted as “names,” or front men, for numerous anonymous investors and courtiers. It was a system that lay open to huge profits, corruption, and inefficiency, and one that was dominated by the Pâris brothers, the four most powerful financiers of France. Law’s fascination for finance had always been entwined with concern for moral economic issues. He saw injustice in the huge advantages the tax system gave to an established elite. Now he grasped the chance to eliminate them, little realizing how fiercely they would respond.

The massive sum needed to cover the government loan would be raised by a further issue of Mississippi shares. Existing bondholders would be given a choice of converting into shares or company annuities, which offered a return of 3 percent—at least 1 percent less than they currently received. The intention was to make shares a far more attractive proposition than annuities. The scheme was by far the most grandiose yet: Law was aiming to raise seventeen times more than the sum of all the previous issues, and again he made it sound entirely plausible.

Thus on September 13 a fourth issue of 100,000 shares, known as
cinq-cents,
was launched, priced at 5,000 livres with a nominal value of 500. As before, the issue was consumed hungrily by the Mississippi-mad public. Two more identical issues followed, then a final one of 24,000. Unlike earlier subscriptions, there were no restrictions on purchase—you did not need to own shares already; anyone might grow rich by buying into the Mississippi dream. The Earl of Stair noted, “The public had run upon this new subscription with that fury, that near the double of that sum is subscribed for: and there have been the greatest brigues [intrigues] and quarrels to have place in the subscription, to that degree that the new submissions are not yet delivered out, nor is the first payment received. Mr. Law’s door is shut, and all the people of quality in France are on foot, in hundreds, before his door in the Place Vendôme.” Scenes like this call to mind descriptions of the glamorous Anthony Morse—a stock dealer who in the midst of the nineteenth-century American stock boom acquired shares 5 or 10 million at a time and was frequently besieged by crowds of lesser speculators desperate for an investment tip.

Canny and ambitious though the scheme undoubtedly was, Law seems to have naïvely ignored the effect of his plans on the tax farmers and financiers, and the court nobility who backed them. The double blow—denying their lucrative tax profits and significantly reducing their income from their government bonds—was bound to spark an angry response and make them determined to undermine his reforms. Law disregarded the danger at his peril.

The shares were traded in the company’s new offices in Paris’s ancient commercial heartland, the rue Quincampoix, a street that today crouches under the shadow of the Centre Pompidou, in the Les Halles district. The rue Quincampoix is a long, thin thoroughfare, terminating at the rue aux Ours to the north and the rue Aubry le Boucher to the south. The road had long been a center for money changers, businessmen raising capital to start new ventures, and, during the reign of Louis XIV, traders in the unpopular
billets.
Its tongue-twisting name comes from one of its twelfth-century money-dealing residents, Nicolas de Kiquenpoit.

In volatile markets news is an essential tool that helps traders anticipate where prices might move next. Today’s brokers have at their disposal data vendors such as Reuters and Bloomberg offering a mass of up-to-date analysis, research, prices, and charts. The eighteenth-century equivalent was gossip. News of the colonies, government policy, and Law’s next move was endlessly anticipated and assessed in the rue Quincampoix. So many gravitated here to talk and trade that the surrounding streets were paralyzed by horses and carriages. D’Argenson, the finance minister, whose official residence was also in the street, was infuriated when one day in November he spent more than an hour stuck in a traffic jam. Eventually carriages were banned, gates erected to control the crowds, and guards posted to prevent night dealings, which disturbed residents. In another futile attempt to restore some semblance of order, one entrance was reserved for speculators of quality, the other for everyone else.

At the sound of a morning bell, the gates opened and convention vanished. Aristocrats jostled with their footmen and maids; bishops and priests vied with courtesans, opera singers, and actresses; magistrates did business with pickpockets; Italians, Dutch, and English mingled with the French. Daniel Defoe described the extraordinary scenes: “Nothing can be more diverting than to see the hurry and clutter of the stock-jobbers in Quincampoix street; a place so scandalously dirty, as if it had been not the sink of the city only, but of the whole kingdom. . . . The inconvenience of the darkest and nastiest street in Paris does not prevent the crowds of people of all qualities . . . coming to buy and sell their stocks in the open place; where, without distinction, they go up to the ankles in dirt, every step they take.” Even the nine-year-old King Louis XV was caught up in the frenzied mood. When a plan of Paris was laid before him, he was said to have demanded that Quincampoix be highlighted in gilding.

The Parisian elite was startled by the extraordinary number of people from the lower orders who prospered spectacularly from Mississippi speculation. Money was easy to borrow, and since you only needed put down a 10 percent deposit to play the market, people from all walks of life rushed to sell their châteaux, their diamonds, their cows, and their crops to join in. The privileged greeted the new social mobility with diffidence, worried that the hierarchy that for centuries had underpinned their superior status had vanished along with financial gloom. Even Voltaire was bemused. Writing to the Parlement councilor Nicolas de Genonville he commented:

It is good to come to the country when Plutus is turning all heads in the city. Have you really all gone mad in Paris? I only hear talk of millions. They say that everyone who was comfortably off is now in misery and everyone who was impoverished revels in opulence. Is this reality? Is this a chimera? Has half the nation found the philosopher’s stone in the paper mills? Is Law a god, a rogue or a charlatan who is poisoning himself with the drug he is distributing to everyone?

Journals and memoirs of the time recount scores of tales of Mississippians propelled from poverty to wealth overnight. As with today’s lottery winners, writers of the rags-to-riches stories reveled in the difficulties of those who found the transition hard to make, often ridiculing them for daring to aspire to luxurious living. There are tales of a footman who earned so much that he was able to buy himself a fine carriage, but when it was delivered forgot his changed circumstances and found himself taking up his old position at the rear. A baker’s son from Toulouse was said to have bought an entire shop full of silver plate for 400,000 livres, and sent it home to his wife with orders to invite the local gentry for dinner and use the silver. The woman was unused to such luxurious objects but did as instructed. When her guests arrived they collapsed in mirth to see soup served in a church offertory basin, the sugar dispensed from an incense burner, and the salt from chalices.

Of the fabled Mississippi investors who came from modest backgrounds the most spectacular success was that of the widow Chaumont from Namur, who came to Paris to collect a debt, which was paid to her in
billets d’états.
She invested them in Mississippi stock and swiftly made several million livres. She spent part of the proceeds buying the Château d’Ivry, and every week held legendary banquets where guests consumed “an oxen, two calves, six sheep and numerous fowls.”

Law’s own coachman was said to have made such profits that he tendered his resignation, having employed two drivers, one for himself and one for Law—he offered his ex-employer first choice. Another much-recorded incident relates the story of an exquisitely dressed woman who was observed descending from an immaculate carriage. When the aristocratic spectators asked who she was they were told “a woman who has tumbled from a garret into a carriage.”

Many of the servants who grew wealthy did so when their employers commissioned them to sell on their behalf at a certain sum. Often they arrived at the rue Quincampoix to find the price far higher than expected, in which case they could pocket the difference and use it as capital to trade. One of the many diarists of the time tells of a gentleman who sent his servant with 250 shares and instructions to sell at 8,000 livres. The servant sold them for 10,000, making a profit of half a million livres in a morning, then reinvested and a few days later found himself worth 2 million.

By October the share price was 6,500 livres. The rise was not, however, without vacillation. In the tumult of rue Quincampoix, traders operated independently and unregulated; prices at one end of the street varied dramatically from those at the other, and fortunes made in one hour could be reversed during the next. The Princess Palatine, the regent’s mother, recalled wryly that when the royal physician, Monsieur Chirac, heard that his stock had fallen dramatically he muttered, while taking a patient’s pulse, “Good Lord, it’s going down, it’s going down.” Fearing she was about to die, the lady began to sob. Chirac hastily consoled her: “Your pulse is splendid and you are quite well. I was thinking of the Mississippi shares on which I am losing because they are going down.”

Along with the share-trading frenzy came an orgy of property speculation. Houses in the rue Quincampoix were bought or let by the shrewdest businessmen “foreseeing from the commencement that the ground of the street would rise in value to such an extent, that ten square feet might bring in the income of a lordly estate.” Property previously let at up to 800 livres per annum could be divided into twenty or thirty tiny offices and each sublet at up to 400 livres a month, a sum equivalent to an average craftsman’s annual salary.

Lean-to shacks were erected in alleyways and on rooftops and rented out for vast sums. As the throng continued to swell, local innkeepers, confectioners, and chefs charged huge prices for their services. Cafés opened nearby where aristocratic ladies and gentlemen could sip their
tasse
of coffee or chocolate and play quadrille while their brokers made them rich. All usual constraints of value were lost: a single chicken was said to change hands for 200 livres, and in one of the most bizarre and often repeated legends of the time, a hunchback was said to have earned 150,000 livres in a few days by leaning against a mulberry tree and renting out his hump as a writing desk on which to sign contracts.

A golden key, so the saying goes, opens any door, and many craved social acceptance along with their newfound wealth. Saint-Simon recorded the desperate lengths to which some would go to improve their status. The wealthy Mississippian d’André, who “had made mounds of gold,” used some of it to betroth his three-year-old daughter to the thirty-three-year-old Marquis d’Oyse, paying 600,000 livres and undertaking to make further annual payments of 20,000 livres until the child reached twelve, when an enormous estate would be made over as a final payment and the wedding would take place. The deal so amazed the
haut monde
that the lawyer Marais wrote in his diary, “The babies of Mississippians now cry for marquis instead of dolls.” D’André was one of many who subsequently lost his fortune, and the contract ended in an acrimonious lawsuit that was still dragging on fifteen years later.

Predictably Mississippians were drawn to unbridled luxury: a fine carriage trimmed with crimson velvet and gold fringing became the badge of success in the same way that a Rolls-Royce, Mercedes, or Ferrari broadcasts prosperity today. The age-old symbols of wealth—jewels, expensive clothing, gold, silver, property, and prestigious furnishing—were avidly sought. A window into this world of unabashed materialism is revealed in the paintings of Watteau, in which flamboyant figures in shimmering pastel silks pose in stagey
fêtes champêtres
or, as in the famous painting
L’Enseigne de Gersaint,
shop for works of art. The diplomat Daniel Pulteney gasped at the excess: “It is certain that the commerce of people here increases every day and that all manner of luxury does too; the Hollanders have drawn several millions from hence for jewels, lace and linen; I was told yesterday that one shop had sold in less than three weeks lace and linen for 800 thousand livres and this chiefly to people who never wore any lace before.” Defoe was similarly staggered by Parisian consumer frenzy: “Money,” he said, “flows like the waters of the Seine.”

Goldsmiths and silversmiths, whose business had languished in the wake of Louis XIV’s financial crisis, now found themselves inundated with orders. Within three months, 120,000 silver plates and matching dishes to a total value of more than $11 million had been cast, chased, engraved, and sold. The weavers at tapestry workshops in the Gobelins, in the provincial town of Aubusson, and in the Savonnerie carpet factory were deluged with commissions. Porcelain, another eye-catching, luxurious status symbol, was imported in vast quantity to fill the tabletops, cabinets, and walls of the elegant salons of the newly rich. The ateliers of furniture makers such as Charles Cressent and the Boulle brothers, sons of the great Charles André, pandered to the burgeoning craving for articles of unrivaled ostentation and intricacy. Showpiece commodes,
bureaux plats,
and cabinets were expensively veneered in exotic tropical timbers such as amaranth, kingwood, and satinwood—imported in Mississippi Company vessels—and further embellished with gilded nymphs and goddesses writhing among lush foliage. Such objects embodied prestige, bounty, status—the universal message of wealth both old and new. Summing up the prevailing mood, the regent’s doughty mother wrote, with a note of apprehension, “It is inconceivable what immense wealth there is in France now. Everybody speaks in millions. I don’t understand it at all, but I see clearly that the god Mammon reigns an absolute monarch in Paris.”