Millionaire: The Philanderer, Gambler, and Duelist Who Invented Modern Finance (18 page)

A large mob carried three bodies in angry procession to the Palais Royal and demanded the regent’s attention from outside the locked gates. While the regent sent for military reinforcements—some 6,000 uniformed troops were presently camped on the outskirts of Paris—Le Blanc, the secretary of state, and the Duc de Tresmes, the governor of Paris, arrived outside the forecourt. As the gates opened to admit them, a crowd of four or five thousand flooded in. Still in his carriage, the Duc threw handfuls of silver and gold into the crowd to appease them. Minutes later his sleeves were torn to shreds. Le Blanc needed an armed escort to reach the steps of the
palais
and face the tumult. Eventually, having secured a promise that money would be distributed throughout the city, the crowd began slowly to drift away.

But the mood in the streets remained ugly. A second mob directed their attentions to Law and marched to the Place Vendôme to lynch him. Having failed to force the gates, they hurled missiles at his house, shattering most of the windows before guards arrived and arrested the ringleaders. Law had heard the furor and wisely escaped to the Palais Royal. Had he not, there was little doubt in anyone’s minds what would have happened. “The rabble, who take things as they understand them, be they right or be they wrong, threw it all upon Mr. Law; and, had he returned into his coach, there had certainly been an end of all his designs and projects at once,” Defoe affirmed.

Later that morning Law’s empty carriage was spotted in the rue Richelieu, leaving a side entrance of the Palais Royal. A group barred its path and attacked. Law’s driver suffered cuts and bruises and a broken leg before he escaped; the carriage was reduced to a splintered wreck.

For his own protection Law moved into the Palais Royal. He was deeply shaken by the violence, and as before, the symptoms of acute distress were apparent. According to the regent’s mother, he remained “as white as a sheet” for several weeks after the incident. Even when he returned to his own residence the risk of assault still lingered. Youths said to have been employed by Law’s growing band of opponents kept watch on his every move, in the hope that a chance for vengeance would present itself. The children were still at Bourbon’s country estate, but Katherine was now a virtual prisoner in her home and the hostility with which Law and she were regarded must have seemed terrifying. From now on, according to Buvat, a watch on foot and horseback patrolled the house and the bank’s offices day and night. Law ventured out only with guards, and careful precautions were always taken. “When he removes,” wrote Daniel Pulteney, “it is not in his own équipage, and it is observed that the Swiss guards are dispersed about the streets he is to pass through.”

Throughout the riots, the Parlement was deep in session. Their president, hearing of the attack on Law’s carriage and driver, with a sudden (if improbable) burgeoning of poetic wit, is said to have told fellow members:

Messieurs! Messieurs! Bonne nouvelle!
Le carrosse de Lass est reduit en cannelle!

Sirs! Sirs! Good news!
Law’s carriage has been reduced to splinters!

The Parlement was supposedly pondering an edict to extend the trading privileges of the Mississippi in return for a substantial payment, which would allow further notes to be withdrawn. Swift to blame the disruptions on Law’s system, the members pushed home the advantage, refusing to register the edict, in the hope that their dissension, added to civil unrest, would finally topple Law. But the regent struck back, banishing them to Pontoise, a village forty miles from Paris. This was perceived by shareholders as a move in Law’s favor, and share prices rallied modestly. But the recovery was fleeting, soon overshadowed by frightening news: France faced an epidemic of plague.

The outbreak had begun in Marseille when crew members of a merchant ship from Syria, where the disease was rampant, evaded the usual rigorous quarantine restrictions and docked in port. Only after the cargo of silk and wool had been unloaded was the crew found to be infected. Eight people suddenly succumbed in the insanitary shanties surrounding the port. Slowly and insidiously the disease spread through the crowded dockside slums to the spacious villas of the well-to-do. “The fury of this distemper can’t be described,” wrote a terrified Defoe. “It begins with a light pain in the head, and is followed with a cold shivering, which ends in convulsions and death; and (which is more terrible) we are informed that not one person, no not one . . . touched with it, has been known to recover, and they seldom live above six hours after they are first taken.” At the end of July, an epidemic was formally acknowledged and a
cordon sanitaire
placed around the city, preventing people from leaving the infected area but also hindering supplies of food from reaching the inhabitants, who desperately needed it. As the disease ran rife, piles of rotting corpses were heaped so high that galley slaves were brought in to bury them, and since they were poorly supervised, looting broke out. By August a third of the city’s inhabitants—around 15,000 people—had perished from famine or disease and the
cordon sanitaire
had failed. The disease, like some exotic creeper, had spread its tendrils through Provence. In Toulon some 9,000 perished; a further 7,500 lives were claimed in Aix, a city, Defoe said, that was “utterly abandoned; the inhabitants poor and rich are fled to the mountains of the upper Provence, in hopes that the sharpness of the air, those hills being always covered with snow, may preserve them from the infection.” A month later the lawyer Marais recorded the harrowing descriptions of a doctor who had recently visited the affected area: “A town desolate and moaning, entire families destroyed, doctors and surgeons nearly all dead . . . the outskirts of the town full of looters and robbers who ransack the country houses of the bourgeois, who themselves don’t know how they will escape either the plague or the thieves.”

Europe looked on compassionately but amid growing fears that the epidemic’s grasp would reach Paris, the Netherlands, and even London. “Large collections have been made and are making in the cities of France for the relief of the distressed people at Marseille and other places,” reported Defoe, who singled out for special mention the city of Genoa, which sent both money and a ship laden with food and medical supplies. Law and the regent also sent large sums to help.

To stop the spread, draconian quarantine restrictions were imposed. Ships were liable to weeks of delay: in one particularly extreme example in Holland, three ships arriving from the Levant were burned while their crews were forced to wade ashore naked and spend a period of quarantine on an island. Private travelers were also hampered by the inconvenience of being obliged to have health certificates stamped in every town through which they passed, and in certain areas such as Tyrol were still liable to be held in quarantine for weeks if they were known to have passed through France.

In the minds of many the plague became a metaphor for economic malaise, and Law, whose schemes had sparked the speculation contagion, was blamed. For his system the disease proved fatal. The key ports of Marseille and Toulon shut down, trade with Africa and the rest of the Mediterranean, until now flourishing, drew to a standstill. “Not a ship comes in to Marseille from any place that has heard of it,” remarked Defoe. “Commerce is universally stopped.” He could also have added that so had much of the income of the Mississippi Company. As a general slump in trade took hold, manufacturing dwindled, taxes on imports and exports diminished, holders of state investments could not be paid and thus had to sell Mississippi shares. “One cannot say what effect the demand for silver had but every prudent man sold some of his shares to have enough to feed his family during this public calamity,” Law later wrote. By the time the epidemic was over it had claimed over 100,000 lives and, as Law had feared, the system he had created.

T
HE
W
HIRLIGIG
OF
T
IME

Cy git cet Ecossais célèbre,
Ce calculateur sans égal,
Qui par les règles de l’algèbre,
A mis la France à l’hôpital.

Here lies this famous Scot,
This peerless calculator,
Who by the rules of algebra
Has put France in the poorhouse.

Anonymous,

Paris (1720)

A
MID THE MURKY INTERIOR OF
J
ONATHAN’ S COFFEE
-house in London’s Royal Exchange people gather to gossip, intrigue, bargain, or perhaps to gape at a new print strung on the wall before them. The image is profoundly disturbing. A billowing curtain is drawn back by Harlequin and Scaramouch—two well-known figures from the commedia dell’arte—to reveal hell on earth, the rue Quincampoix, in which a heaving tangle of anxious investors, arms flailing, eyes wild, mouths beseeching, wave serpentine banknotes overhead. Amid the mêlée, oblivious to the madness, three men, representing English, French, and German investors, stand complacently on a dais of paper. A supplicant figure—John Law—squats obscenely at their feet and allows them to pour coins in his gaping mouth, while from bared buttocks he excretes paper notes that are snatched by one of the frenzied figures in the mire below. In the foreground a caged figure of Mercury—symbolic of commercial prosperity and, in this case, of ruined speculators—weeps as a man in front performs various gambling tricks. The message, of venality, folly, degradation, chaos, is explicit and sickening—deliberately so. But by the time this engraving, from a famous series published in Holland in 1720 entitled
The Mirror of Folly,
was printed, disseminated, grasped, and gawped at in scores of similarly unsavory interiors, it was far from unique.

Anti-Law venom enveloped Europe. There were scores more equally scathing compositions, mostly dwelling on the imagery of windmills, whirligigs, bubbles, bladders, cabbages, corruption, folly, and cruelty. Elsewhere satire surfaced in hundreds of ferocious poems, medals, pamphlets, plays, novels, and playing cards that circulated in the cabarets, taverns, coffeehouses, and meeting places of every town and city in Europe. Ironically, a series of silver coins was produced in Gotha, immortalizing Law in the very substance he had tried so hard to banish.

Law could avert his gaze from such vitriol, but he could not ignore its existence, nor that it sprang from a crystallization of public hatred. For a man whose intentions had always been benevolent, who had cherished dreams of bringing contentment to all, mass condemnation was deeply wounding. His behavior became increasingly erratic. One day he was full of the old bravura, attending a concert at the home of the financier Crozat with the regent and Katherine, convincing others, and himself, that the economy was improving, that he was in control, and telling friends that “what has been his is still, and that he would always be the master of all the money in Europe.” The next he was beset with doubt, unusually short-tempered and high-handed with members of the council, introducing ever harsher legislation to bring the system back on course. Occasionally, as if overburdened by responsibility, he withdrew totally. Remembering such a day spent in solitude in his apartment at the Palais Royal, when members of the royal family were out of town and staff had been instructed to admit no one, he wrote, “The idea came to me then, that one would be less unhappy to be enclosed in a town infested, like Marseille, than to be in Paris overwhelmed with people—as I usually was.”

He threw himself frenetically into work. Six hundred workmen were employed to build a new mint—presumably in the expectation that by the time it was complete there would be metal enough to make coin. The share market, which had reopened in the Place Vendôme, was now moved to the gardens of the Hôtel de Soissons, which was renamed the Bourse. The official opening took place on August 1, to a musical accompaniment of kettledrums and trumpets. As at some latter-day Field of the Cloth of Gold, the dealers, food sellers, jugglers, fire eaters, tricksters, prostitutes, pickpockets, and throngs of investors glided through a forest of streamered pavilions, embodying not royal puissance but the waning power of paper.

To bolster his reputation he published an anonymous defense of his system. When he came to France, he said, the country had been 2 billion livres in debt. Now, thanks to the Mississippi Company and other reforms, France was far stronger financially. But readers of this slickly argued pamphlet were infuriated by the fact that it skirted the current economic problems. Inflation, the fall in value of banknotes and shares, the shortage of coin, and the damage to investors were completely ignored. In short, said Pulteney, it was “very ill-timed as it pretends to show that people are richer and happier, while they complain with reason of want and ruin.”

Law meanwhile turned quietly for help to the one man whose financial acumen he deeply respected: his old friend Richard Cantillon. Since Cantillon had been banished from France under threat of incarceration in the Bastille, the two men had patched up their differences, and Law had been using Cantillon’s brokering services in Amsterdam to buy copper, probably with the intention of minting it into coins to help the ailing French economy. Now, with his system crumbling, Law tempted Cantillon, “with great offers of preferment,” to come and help him sort out the financial morass. The precise nature of the carrot Law tendered remains mysterious, but it was alluring enough for Cantillon to weigh it up carefully and ask his friends’ advice. Eventually, realizing the precariousness of Law’s situation, he refused. Law was not at first put off by the rebuff. More persuasive letters were dispatched to Holland, but when Cantillon declined to change his mind, Law’s amiability changed to an overtly threatening tone: “If he [Cantillon] does not comply with the offers they will not pay some bills to the value of £20,000 which he had drawn for copper he bought in Holland by commission for the company and has sent here,” reported Pulteney. It is a measure of the pressure Law was under in France that he felt impelled to act with such uncustomary lack of scruple. In fact, menacing a wily bird like Cantillon was self-defeating—if anything, it only made him even more determined to keep well away.

Law was rapidly becoming an embarrassment Orléans could ill-afford. He too was tainted by Law’s bad press and he felt uncharacteristically sensitive to the deluge of criticism and malice. Death threats and accusations of incest and of murder had been directed against him; his mother had been threatened and advised to poison her own son. In the past he had shrugged off the slanders. Now they began to hit home. The anonymous publication of one particularly vicious play riled him so much that he offered a reward of 100,000 livres for the name of the culprit. The only response this elicited was another cheeky couplet:

Tu promets beaucoup, O Régent.
Est-ce en papier ou en argent?

You promise much, O Regent.
Is it in paper or in silver?

Real economic recovery, the regent now felt, would never take place while the people were determined that Law and his paper system were untrustworthy, and while the Parlement, the financiers, and the wealthy elite were so determined to oppose him. Behind the scenes he began to make discreet overtures for assistance, appealing to private bankers and financiers in the hope they would offer his stranded regime hard money. Their response was not what he hoped. Though keen to ingratiate themselves with the Crown, they were aware that any loan might help save Law. They volunteered no tangible assistance, only the well-worn advice that all the problems would be swiftly solved with a return to the old metallic system of money and the abandonment of paper credit. The seed that had been scattered many times before now began to take root.

On September 15 Law’s career plunged to new depths with the publication of one of his most detested edicts. “The pen falls from one’s hands and words fail to explain the measures of this decree, which withdrew all the horrors of the dying system. Poison was in its tail,” wrote the lawyer Marais as he mulled over the new regulations, which stipulated that high-denomination notes would soon cease to be legal currency; that, with immediate effect, all banknotes could only be used if 50 percent of the payment was in coin; that bank accounts, compulsory since August, were to be reduced to a quarter of their present value, and shares were to be pegged at 2,000 livres. In sum, said Marais, painfully picking over each clause, it was a bankruptcy of three-quarters of the bank and five-sixths of the Mississippi Company.

Economic historians still quibble over whether the edict was in fact the brainchild of Law or whether, as seems likely, it was the outcome of the regent’s consultations with the private financiers. What is not in doubt is that the public perceived the ideas as Law’s and blamed him for their suffering. “The desolation,” wrote Marais, “is in every family. They have to pay for half of everything in coins and there aren’t any; and moreover everything is going up in price instead of coming down.”

Soaring inflation was worsened by profiteering merchants and members of the aristocracy who formed cartels, stockpiled staples, and then charged extortionate rates for them. Some of the worst offenders were Law’s supporters: “The distress people are under by the excessive prices of all things is very much increased by certain monopolies which some of the great favourites of the system have got; the Maréchal d’Estrées has the coffee, Mr. William Law the lead, others have the sugars, the Duc de la Force has the wax and tallow,” wrote Pulteney. Law must have known that racketeering was going on but, terrified to risk losing his few remaining allies, turned a blind eye. The regent was similarly partisan, volubly intolerant of outsiders’ scams, mute when it came to his favorites’ ruses. When a deputation of merchants came to grumble about the reduction of their bank accounts, the regent denounced them coldly as charlatans who had charged exorbitant sums for the past year. He told one scornfully, “My friend, are you so stupid as not to understand that this quarter you have is worth more than the total?” The man replied that his business would be destroyed, to which Orléans answered, “So much the better, I am delighted.”

The edict was painful not only to French citizens but also to countless foreigners who traded with France. There were deputations from merchants of Savoy, Piedmont, and Brussels, who supplied vast quantities of silk and lace and, having been paid in French banknotes of diminishing value and desirability, were particularly badly affected. For English investors, developments were even more tragic. London was by now reeling from the effects of the collapse in South Sea shares which, from a June high of £1,050, had plummeted at the end of August, and by mid-September were trading at £380. Investors who had borrowed heavily to invest in South Sea stock at high prices, expecting that the value would continue to rise, were now forced to sell other investments to repay outstanding loans. European markets in France, Holland, and elsewhere buckled from the effect of the London stock-market collapse.

Throughout the tangle of confusion, anger, and distress, Law and his family were viewed ever more stonily. The oncefeted celebrities who had danced at Versailles and had their hands kissed by international dignitaries now lived in the perpetual shadow of danger. The lawyer Barbier, strolling in the Étoile, saw Law’s wife and ten-year-old daughter Kate returning from the fair in Bezons in a carriage drawn by six horses. Law’s livery was recognized and the carriage was surrounded by a mob screeching obscenities at Law’s refusal to pay out for banknotes and pelting the women with manure and stones. Before the coachman could whip up the terrified horses and drive away, Kate was struck by a missile and injured.

In the malicious ferment anyone who vaguely resembled a member of the Law family could find themselves in grave peril. Madame de Torcy, wife of the foreign secretary, was mistaken for Katherine and half drowned in a pond before she convinced her assailants that she was not the person they believed her to be. During an argument between two coachmen over right of way in the rue St. Antoine, one untruthfully alleged that the passenger inside the other’s coach was Law, knowing that this would cause a distraction in which he might triumph. Within minutes a mob had descended and attacked the innocent passenger, who escaped with his life by sprinting for sanctuary to a nearby church.

There is frustratingly little to tell us of how Katherine reacted to the dramatic reversal in Law’s fortune. We can only surmise, from the affectionate reassurances that Law later wrote to her, that she remained supportive but increasingly frightened by the volatile political situation that threatened her family’s safety. After the scare with her daughter she rarely went out, and then often disguised as a pregnant woman—a significant come-down for a woman who had always been noted for her elegance. Social calls were not only hazardous but could often be humiliating. Growing numbers of doors closed in her face. When she visited the Duchesse de Lauzun, an aging courtesan famous for her sarcasm, she was callously mocked. “My God, Madame, you have done us a great favor with this visit. We know the risks you run exposing yourself to a populace who is mutinying against you
for no reason.
” A few friends remained steadfast. The Duc de Bourbon continued to offer the family refuge at his country residence in St. Maur when it was feared the mob might invade their home. The artist Rosalba Carriera still visited long after most fashionable callers had left and, unlike her relative Pellegrini, who had been part paid for the ceiling of the bank but wanted more, Rosalba never hounded the Laws for money.

The final decisive blow to Law’s debilitated empire came on October 10 with another stinging, but by this stage predictable, ruling. In view of the still depreciated paper-money system, in which no one any longer had faith, from November 1 France would depend once again entirely upon metal coins. Holders of banknotes were obliged to convert them into annuities. Law’s rivals had finally won over the regent. On hearing the news Voltaire remarked sardonically that paper was now back to its intrinsic value, but Marais’s response was more emotional: “Thus ends the system of paper money, which has enriched a thousand beggars and impoverished a hundred thousand honest men,” he wrote. When the bank finally closed its doors on November 27, few mourned its passing.