ISSUE: Summer 1993
New Orleans, America’s most colorful city, was founded by one of history’s most colorful characters. Known over much of its past for pleasure-seeking and a gaudy carnival, for gambling, duels, and pursuit of fair women, New Orleans embodied many of the attributes of its founder. It was as if John Law, that magician of finance, had waved a wand over the newborn city to instill in it his passion for adventure and wealth, for dreams that out of mud and swamp might arise a glittering new society, with “every man a king, but no man wears a crown.”
For, in essence, this was what John Law proposed to do for the bankrupt exhausted realm of France. At the death of the Sun King, Louis XIV, in 1715, an appalled minister peered into the state’s empty cupboard and reported: “We have found matters in a more terrible disarray than can be described, both the King and his subjects ruined, nothing paid for years and confidence utterly gone.”
In this crisis, Philippe d’Orleans, nephew of Louis and the Regent for the infant Louis XV, received a letter from a Scotsman who promised a miraculous rescue. “Sire, I will create something which will astonish Europe by the changes it will bring about in favor of France—changes more profound than any resulting from the discovery of the Indies. . . .
John Law had appeared. This Scottish Midas with a golden touch would become the most famed man in Europe, the inspired genius whose “System” would introduce the first nationwide methods of banking and credit and who would ignite one of the great stock market booms of all time, rousing an entire nation to a pitch of frenzy.
Son of an Edinburgh goldsmith—goldsmiths were the primitive bankers of the time—Law was a man of 45 in 1716 who had knocked about Europe for years, studying the elementary financial practices of the early 18th century and trying to sell his own ideas. Born in April 1671, under the Sign of the Bull, Law was creative, optimistic, and materialistic, all attributes of his Sign. Tall, with elegant dress and manners, “Beau Law,” as he was known, was smooth— perhaps too smooth. For men listened and shrugged, when this goldsmith’s son spoke of “turning paper into gold.”
And there were other reasons for distrust. Law was on the run from British justice for provoking a quarrel with the brother of his mistress. In the subsequent duel in Bloomsbury Square, then as suitable a place for settling differences as later would be the Dueling Oaks in New Orleans, the skilled fencer Beau Law mortally wounded his opponent. He was also out of favor with the French because he had eloped with another man’s wife during a previous visit to that country.
He always seemed to land on his feet, no matter how many warrants were out for him. Arriving in Venice, with his errant Catherine, Law employed his skill in gambling at the casino. He had made a study of the odds in hazard, the dice game taken over in America as “craps,” and was consistently successful. He had in fact been barred from a London gambling club because of his spectacular winnings, in cards as well as in dice.
Law’s avowals fell like music on the ears of the harassed regent. Was this Scotsman for real? The regent proposed to find out. Law had proclaimed that a nation’s wealth lay not in its bullion hoard but in its flourishing commerce which was nourished by credit. To create this credit, Law intended to issue paper currency. “Money,” he wrote in his principal work, Trade and Money Considered, “is not the value for which goods are exchanged but the value by which they are exchanged.”
Money was simply a convenient device. Law illustrated this principle at the gaming tables; one lackey staggered in with a sack of coins, while another trotted up with a bag of coloured counters of different values. At Law’s table, everyone used the counters, to be cashed in at the end of play.
As Law outlined his scheme to the regent, he envisaged setting up a national bank which would issue banknotes of various denominations backed by specie and redeemable at sight at the value of the date of issue. The bank would make loans at fixed rates of interest, keeping a specie reserve of three-fourths of the value of the notes in circulation. Law viewed his project as the opening move in an intricate game for the highest stakes. Like a brilliant chess player, he charted his moves far in advance.
To the regent, Law declared: “A nation provided with firearms has not a greater advantage over one equipped with bows and arrows than have the English over the French in matters of commerce.” His sword was finance, which he proposed to put at the service of France whose armies had recently been sorely humiliated by the English.
In the regent, Law had found the ideal patron. Philippe d’Orl6ans possessed every attribute for an excellent ruler save one: character. He understood the problems of state better than any minister, but he ruined his health and acute perceptions by his notorious “suppers” at the Palais-Royal, where the guests disported themselves in complete abandon. Promptly at 6 p. m. all business was shut down and the regent retired to his private chambers, accompanied by some exuberant sots and his dissolute daughter Francoise, with dancing girls from the Opera, then a part of the Palais-Royal.
The regent was still able to manage affairs of the realm during office hours. He agreed to sponsor Law’s proposal at the Royal Council, an unwieldy body of 16 peers, military chiefs, and conservative financiers on whom the regent employed his wit but was forced to take more seriously in questions of finance. During deliberations one day, a cat sneaked into the council chamber and jumped on the table, to the members’ indignation. “Oh, let him stay,” the due de Saint-Simon advised. “He will be our seventeenth councillor.” The regent laughed heartily.
Though Saint-Simon was the regent’s close friend, he opposed Law’s project on the ground that in an absolute monarchy like France where, unlike England, everything depended on the king’s will, the proposed bank could be misused and credit undermined by royal edict. The council was of the same opinion.
With the rejection of Law’s plan, the council was forced to come up with alternatives. To economize, interest on state bonds was slashed from 7 percent to 4 percent; the coinage was again debased; an inquiry was begun in all commercial transactions going back 27 years, with informers to be rewarded by 10 percent of all sums recovered.
Far from rectifying matters, the council’s program was a disaster. Bonds fell to 20 percent of face value, inflation shot up, while trade was paralyzed. Business failures totalled 1500 as fear and poverty now stalked the land. At an Opera masked ball, the regent encountered a girl, barefoot, in rags. “And whom do you represent, poor little wretch?” he inquired.
“France!” the girl cried and disappeared into the throng.
Law’s hour had come. Answering previous objections, he offered a plan for a private bank capitalized at 6 million livres, its 1200 shares open to public subscription and payable in banknotes. The real attraction was Law’s guaranty to accept the almost worthless state bonds at par value in exchange for the new banknotes. The regent buttonholed every Council member to urge acceptance.
On May 15, 1716, the Banque Generale obtained a royal charter granting a 25-year monopoly, with Law as managing director. Law was launched, empowered to introduce his “System” in the greatest state of Europe. With a fine mansion in the Place Louis-le-Grand (now the Place Vendome), which would also serve as the bank’s office, the new director was lionized. He dined out frequently, his charm compensating for its lack in his haughty ill-favoured Catherine, with the wine-coloured birthmark. His high-crowned peruke with chestnut curls that flowed to his shoulders was of course seen at the gaming tables; a British observer remarked, “His incomparable readiness in numbers made him a perfect judge of the hazards and advantages of all plays, so he usually came out a winner.”
“Monsieur Las,” as he was known to the French, danced attendance on Madame Elizabeth, the regent’s Bavarian mother, rightly calculating that she was devoted to her son’s interest. “Monsieur Las is very nice,” she commented. “I was greatly taken with him and he does all he can to please me.”
The scene being Paris, rumor had it that Law’s homage to the spritely widow went beyond mere affability. Certainly, she remained one of Law’s strongest supporters until the roof fell in. “Monsieur Las is worthy of praise because of his cleverness,” she declared. “My son is charmed by his skill in business.”
Law also took to dropping in on Saint-Simon. The eagleeyed little duke whose Memoirs of human quirks and follies amid the splendors of Versailles would entertain posterity, perceived that his visitor hoped to gain not enlightenment on finance but a useful ally at the council. Their talks on money matters sometimes stretched more than two hours. Though bored by the subject and scarcely able to master arithmetic, as he had confessed, Saint-Simon persevered because, “The Bank being in action and flourishing, I believed it my duty to sustain it.”
At first, the bank’s affairs moved rather slowly. To boost confidence, the regent sent over for deposit one million livres in specie, to be ostentatiously unloaded in the Place Louisle-Grand and carted into the Bank’s vault. He also directed that tax collectors should accept payment in banknotes and make remittances to the treasury in notes. Law set up branches in Tours, Orleans, Amiens, Lyons, and La Rochelle, while the bank acted as middleman in commercial transactions up to 30, 000 livres. A merchant in Amiens who had a bill of 10, 000 livres for goods shipped to Paris could send it through the Amiens branch, receiving his money promptly, while the bank took a commission of 4 percent on the transaction instead of the customary 6 percent.
As confidence grew, prices stabilized. No longer did a harassed merchant tremble for the value of his money; he knew that the banknotes he would receive would remain exactly the same value in specie as at the time of sale. In another historic first, depositors were issued a form of cheque to simplify transfers from one account to another. At the end of 1717, Law marked his triumph by declaring a 7 percent dividend.
Such success, and by a non-Catholic foreigner to boot, aroused resentment and envy on the part of the nobility. Moreover, Law’s patron, the regent, had to contend with a venomous cabal, but he shrugged off canards about his incest with his daughter and murders. “The perfect courtier,” he remarked of one who came fawning after a virulent attack in private, “neither honour nor brains nor sense of humour!”
Law was more vulnerable. Banknotes to the value of 50 million livres were in circulation, an amount easily absorbed by the business community. Usual requests for redemption were readily met. However, two noblemen appeared one day at the bank with stacks of notes totalling several million livres. They demanded gold on the spot. If this demand was not promptly met, confidence in the currency would be badly shaken if not destroyed—the object of this strategy.
In practice, the specie reserve was stored in various branches about the country and transfers involved laborious trips by horse and wagon, with an armed escort. Scornfully, the two peers allowed Law 24 hours—but not a minute more. He went straight to the regent’s finance minister, who handed over the required sum in gold from the state treasury. For more than two years, the bank provided credit for French commerce, answering a need acute all over Europe. In a report to the regent, Law listed his three major achievements: restoration of business confidence resulting in a large expansion of trade; complete security for the bank’s depositors; creation of a reliable universal currency freely circulating throughout the realm and abroad. Law could with justice claim to be a singular benefactor of France.
CONVERSION TABLE (Beau Law) 20 sols, copper, equal 1 livre, silver = l/8d or 400 3 livres, silver, equal 1 crown silver = 5s or $1. 25 11 livres, silver, equal 1 louis d’or = 18/4d or $4. 40 Note: Other Tables make the livre equal to the franc, so that the conversion comes out by chance to a rate of exchange of 5 livres = $1. 00
II
Yet, this great work which for most men would suffice for a lifetime was for Law but a fine beginning. At heart, he was a gambler, an adventurer of genius. Money came so easily to him that he had long since shed any awe of it. The power that came from manipulating money—that was Law’s fixed aim. So far, he had operated with foresight and acumen. Limitless horizons of speculation now opened.
Law turned his attention to the vast territory of Louisiana. The Mississippi Valley had first been explored from the Great Lakes to the Gulf by the Chevalier de La Salle in 1682. This remarkable exploit formed the basis of the French claim to the whole area, 3000 miles up the Mississippi south to north, while bounded east and west by the Alleghenies and the Rockies.
In September 1717, Law proposed to float a joint-stock company, capitalized at 100 million livres, to take over the exploitation of Louisiana. Backed by the regent, Law’s new Company of the West, the “Mississippi Company,” obtained a royal charter, with a 25-year monopoly in Louisiana.
Shares of 500 livres par value were offered to the public. As with the Bank stock, the company accepted payment in government bonds, now risen to 40 percent efface value; the actual capital, therefore, was slightly more than one-third of the par value, while the 4 percent interest on the bonds, 4 million livres a year, provided the company’s only liquid asset. With his flair for alluring finance, Law announced that the bonds, on being paid up, would be converted into annuities bearing 4 percent interest; thus, the bondholders would enjoy the same return while their investment was put to active use by the company.
Unlike the flourishing British colonies on the Eastern Seaboard, Louisiana was very sparsely populated by the French. Such hardy souls as dared to venture out were concentrated in the Delta around the Bay of Biloxi, governed by two brothers, Le Moyne d’lberville and Le Moyne de Bienville. With the death of the former in 1702, Bienville was the only person to hold the little colony together, to endure floods, famine, and fear of Indian raids.
Oddly, Frenchmen at home let their fancies roam in creating a quite different picture of the distant land. Everyone knew about the incredible luck of the Spanish in stumbling on the riches of the Indies, with the wanderings of the hapless navigator Christoforo Columbo. As a result, Spain had been the mightiest power in the West for almost 200 years, and now it was the turn of the French. The “Indies” had proved to be America, and Louisiana, too, was a part of that vast continent, beyond the Spanish conquest. In Louisiana might be found gold and silver for the taking, lush savannahs tilled by docile natives, and somewhere along the Mississippi were superb emeralds.
Law played upon these fancies. One of the first and the most visionary of developers, Law depicted his colony as a paradise, with fortunes awaiting Frenchmen who emigrated. The Indians were a simple people, easily won by a few trinkets. Prices for land were incredibly cheap; a splendid tract could be had for a few hundred livres.
With such snake-oil publicity, Law persuaded some men of means to sell property in France and to invest in Louisiana.
He decided also to establish the settlement further downstream, near the mouth of the river. Bienville found a site that had been used as a portage by the Indians, where by dragging a canoe inland for a mile one could reach a navigable stream called the Bayou St. -Jean. The bayou flowed into Lake Pontchartrain (named for the comte de Pontchartrain, former Minister of Marine) and thence into the Gulf of Mexico.
This waterway offered a channel to the great river that was comparatively safe. Both Law and Bienville foresaw that the Mississippi would become of vital importance in years to come. Their chosen site provided a good passage for river commerce as well as command of the river’s mouth.
What to name the new settlement? What indeed but after the man who had made it possible: Philippe due d’Orleans, regent of France. In February 1718, Bienville formally founded the city and baptized it La Nouvelle Orleans. The straggling little settlement, threatening often to disappear in Mississippi mud, began its long and unique career, to become noted, among other attributes, for cuisine and carnivals, and a racial mix of French, Spanish, German, and Anglo-American, with a dash of color.
Jealous and obstructive by nature, the new finance minister, the marquis d’Argenson, tried to circumvent Law by fanning out collection of the state taxes to the four Paris brothers, private bankers eager to challenge the Scotsman. Stock in the Paris company took off and soon rivaled that of the Mississippi Company.
Law mounted a counter-attack by persuading the regent to nationalize the Banque Generale, which became the Banque Royale in December 1718. Shareholders were bought out with a golden handshake in specie, but for the Banque Royale Law dropped the key proviso of redemption of notes in specie of the value of the date of issue.
Law asserted that gold and especially silver had important limitations as a medium of exchange. The silver content in coinage was often altered, the demand for and availability of silver varied widely, and the Spanish had a virtual monopoly on production. Somewhat similar considerations applied to gold. Paper currency had none of these problems.
The master of finance had included the redemption feature to establish the credit of the banknotes; that achieved, the notes would now be backed by the state’s good faith. To investors burned countless times by that same state, he offered a guaranty in the climax of his grand design—the effective merger of the bank and the Mississippi Company.
To boost Mississippi stock, Law announced the first ever deal in “futures”—a contract to purchase a block of shares at a set price within a certain period. The director himself was first off the mark; he contracted to buy 200 shares at par within 6 months and put up a guaranty of 40, 000 livres. This daring gamble amazed investors who flocked in and in a few weeks the stock rose from 300 livres to par.
Law expanded. In the spring of 1719, Mississippi took over several moribund companies with trading rights in Africa, Asia, and Oceania; the company had earlier purchased the state tobacco monopoly for 4 million livres. Law was in the process of assembling one of the great conglomerates of all time, with worldwide monopoly.
But news from Louisiana, the supposed golden promise for all this financial legerdemain, was hardly encouraging. Reports came back of attacks by Indians and alligators, of levees crumbling before rising waters, of the fatal malaria. There were not enough women to go around and no gold or emeralds.
The director had to do something—fast. It was time for the blue bandoliers, company press-gangs with broad blue sashes worn diagonally from shoulder to hip, sent out to round up colonists. They scoured the jails and seized honest citizens on flimsy pretexts, a rare chance to get rid of troublesome relatives and unwanted husbands. One flagrant case involved a butcher whose wife had taken a lover. With her husband dozing before the fire downstairs, the wife was upstairs with her lover, waiting her chance. When the bandoliers passed, she rushed to the window, crying, “Au secours! Un voleur!”
On the edge of discovery by a spouse who had arrived unexpectedly, Madame had kept her head. She knew the ways of the company’s men, that they seized prospects without bothering about possible errors. The blue bandoliers broke in and found wife and lover naked but the butcher was fully clad, with a large bloodstained knife at his belt. Ignoring his bewildered protests, they dragged him away—destined for Louisiana.
Young single women suitable as wives presented a problem. Seduced by the company’s publicity, some gentry and artisans had gone out with their families, but daughters or sisters were insufficient. In any case, many transported colonists could hardly hope for wives of good family.
The director solved the difficulty in his own way. He took quite a few “correction girls,” that is, girls who had gone astray and ended up in a House of Correction. Law also pressed poor girls of meager hopes. A consignment of several hundred girls “of moderate virtue” was loaded on carts and driven through Paris, going to the transports at La Rochelle.
Realizing perhaps that this sad sight scarcely accorded with the company’s grandiose claims, Law staged a mass wedding of 180 girls to as many lads just out of jail, afterward parading the Louisiana-bound couples through Paris, chained together. The director still had not got it quite right and this display drew criticism. Future bridal pairs were linked by chains of flowers.
Law’s zest for stunts reached a climax when he brought over a complete Missouri Indian village with braves in war paint and feathers, smoking the company’s tobacco. The program featured a stag hunt in the Bois de Boulogne and war dances to throbbing tom-toms. The fascinated Parisians thronged Notre Dame as the grand finale united an Indian princess and a French army sergeant, who became a chief of these (presumably) Christianized tribesmen. Unfortunately, on returning to their wigwams in Missouri, the Redskins reverted to native ways and tomahawked the white chief.
Law’s efforts sent several transports loaded with girls for the single colonists. As a letter dated April 25, 1721, from Bienville relates, “Eighty-eight girls arrived by La Baleine. Since the fourth of March, nineteen of them have been married off. . . . So that fifty-nine girls are still to be provided for (ten have died). This will be difficult as these girls were not well selected. . . . Whatever the vigilance exercised upon them, they could not be restrained.” By June, the governor had managed to dispose of 31 girls, a number to sailors who agreed to settle in the colony with their wives.
Another contemporary was more optimistic about the correction girls. Penicaut described the dower each girl brought with her for her marriage: two pairs of coats, two shirts and undershirts, six head-dresses and other furnishings. Such a hope chest was hardly up to Parisian standards, but it sufficed for the wilderness. Penicaut adds: “The merchandise (the girls!) was soon disposed of, so great was the want.”
Among the correction girls was a certain Manon whose adventures would inspire the celebrated romance Manon Lescaut by the Abbe Antoine Francois Prevost, published in 1731.
She was also the heroine of two 19th-century operas, Manon by Jules Massenet and Manon Lescaut by Giacomo Puccini.
In the novel, Manon Lescaut is vowed to the Chevalier Des Grieux, who follows his love to Louisiana. Later, however, they are forced to flee into the wilderness to escape the passion of the governor’s young nephew for Manon. Although she cannot withstand the hardships of the flight, the lovers had known blissful hours in this Arcadia. Des Grieux evokes that passionate adventure: “Whoever would taste the true delights of love should come to New Orleans. . . . Others have come to seek gold; they know not that we have found here a far greater treasure.”
The company’s director, in his zeal for colonists, could not have said it better. However, according to the records, the real Manon was no angel. Arrested in Paris for “scandalous debauchery,” she was then scourged and branded on the shoulder with the letter “V” for Voleuse. Yet, like her fictional counterpart, this Manon had inflamed a young nobleman, the Chevalier de La Varenne, who accompanied his love to Louisiana. As with Manon Lescaut, trouble with the authorities would cut short the idyl. After raising some hell in the colony, this turbulent correction girl made it back to France, with her devoted chevalier—to Bienville’s relief.
Another pair of star-crossed lovers who would find bliss in the New World were the Chevalier d’Aubant and Princess Charlotte, daughter of the Duke of Brunswick. Their romance began in Brunswick, where Charlotte’s love for the dashing officer was frustrated by her forced marriage to the Czarevitch Alexis, son of Peter the Great. The chevalier departed for the New World, while the unhappy Charlotte endured the buffets of her splenetic spouse. One day, “heated by the fumes of his deep potations,” as the 19th-century historian of New Orleans, Charles Gayarre, vividly comments, Alexis knocked his wife flat. She was left “senseless and cold, in apparent death.”
Charlotte feigned death to elude her dreadful consort. With the aid of friends, she escaped to France, where in March 1721 she joined a convoy of 200 girls bound for Louisiana. Her wretched marriage was terminated by the Czar. Though very mistrustful, Alexis was no match for his father, who sent one of his most artful courtiers to Brunswick. This man lured Alexis into a closed carriage; the treacherous prince was seized, the carriage horses set off at a gallop for Russia where Alexis perished in Peter’s torture chamber.
Charlotte found her chevalier living on the banks of the Bayou St. -Jean. Gayarre pulls out all stops in describing their reunion. “Suddenly, the dead was alive again, confronting him with eyes so sweet and sad, so moist with rapturous tears and with such an expression of concentrated love as can only be from the abode of bliss!”
The lovers were married the next day, but, as befell Manon and her chevalier, they excited so much speculation and prying in the colony that they had to return to France. In the romantic lore of La Nouvelle Orleans, twin oaks on the bayou, said to have been planted by Charlotte’s chevalier as a symbol, were long cherished.
Harsh rather than romantic living was usually the experience of colonists sent by Law. With the support of the Regent’s Bavarian mother, Law shipped out 10, 000 hardy Germans. Like the French, the Germans were deceived by the colony’s primitive state and demanded return passage by the company back to Germany.
III
Extraordinary events were transpiring in France and the fate of the German emigrants was the least of Law’s concerns. So far, the Company’s only visible assets had been 60 trading vessels, with shipments of furs and hides. This was very small beer compared to the director’s vision of an idylic Louisiana with happy industrious natives, bustling towns, fields, and orchards groaning with produce. Such a dream would one day come true, but Law and his goggle-eyed investors wanted it now. It was an axiom of Law’s that a plentiful supply of money and credit created prosperity and from that would emerge the promised Eden.
Law now acquired control of the country’s entire financial machinery. In July 1719, he had purchased from the government the right of coinage. In August, he outbid the Paris brothers for the rights to collect taxes, assuming as part of the deal the total national debt of one and a half billion livres and reducing the interest from 4 percent to 3 percent. He obtained the funds to liquidate the national debt by persuading the government bondholders to invest in Mississippi shares—a perfect circular operation in which the money handed over to Law for shares was loaned by him to the government to pay off the bondholders. The creditors in effect paid off themselves and received in exchange paper for their specie!
Law had no thought of meeting his obligations with buffalo hides and Wild West shows in the Bois. Having aroused interest to fever pitch, he flooded the market with new issues. By pyramiding on previous issues, that is, requiring subscribers to possess at least four original shares or “mothers” plus one share of the second issue or a “daughter,” Law ignited a frenzy of speculation. Shares were selling at 5000 livres or ten times the par value.
Most of the action transpired in the rue Quincampoix, a true curb exchange, in the old medieval quarter of goldsmiths and bankers, with a tradition of money-lending and speculation. Into this dark festering alleyway, a dozen feet wide, stormed the Mississippi high-rollers, the uproar so disturbing the quarter that the street was closed by night. At 8 a. m. , to the sound of drum and trumpet, the gates were opened and the traders rushed in, aristocrats at one end, commoners at the other. The master magician added to the tumult by visiting the scene from time to time and scattering gold louis among the crowd.
“Mississippians” from the due de Bourbon, the premier peer of France after the regent, to the Widow Chaumont made incredible gains. Bourbon renovated his chateau of Chantilly and acquired a stable of blooded stock. The poor widow had put her life savings in government bonds; with despair, she had seen them fall to 20 percent of their value. She invested the bonds in Mississippi shares and three years later her holdings were worth 100 million livres. The widow cashed in and bought a magnificant chateau, where champagne flowed nightly.
Lesser fry did handsomely. A lackey was sent to rue Quincampoix to sell 250 shares at 8000. When he arrived, shares were going at 10, 000. The lackey kept the 500, 000 difference; he began dealing in his own right and became a “millionnaire”—a term originating in those hectic days. Even a miserable hunchback reaped a golden harvest by renting his hump as a desk on which transactions could be hastily recorded—and became a successful trader on his own.
Unlike many Mississippians, with their diamonds and gold chamberpots, Law’s own tastes were conservative. Friends found his home as having “more order and cleanliness than luxury.” He did splurge on property and out of his profits acquired 20 landed estates in France. His personal library had more than 45, 000 volumes. He purchased the office of King’s Secretary, giving him the rank of a nobleman, and he was elected to the Academic frangaise.
Noblewomen besieged Law for market tips. A marquise arranged to have her coach upset outside his house. She cried for help and, when Law rushed out the lady coyly begged for Mississippi shares. Another lady, too eager for shares and meaning to say, “Make me a little concession, please,” burst out: “Make me a little conception, please!”
Beau Law smiled as he replied, “Alas, madame, you come too late. I have no means at present!”
Law was the toast of Paris. He primed the pump by a tax cut on necessities, made lavish contributions to charity, and was converted to Catholicism. He got rid of petty bureaucrats whose fees greatly inflated prices and, in an innovation far ahead of his time, abolished onerous feudal imposts in favour of a single tax on income for everyone.
Madame Elizabeth, the regent’s mother, acclaimed Law: “He pays the late King’s dreadful debts and lessens taxation . . . wood costs only half of what it did and the duties on wine, meat and everything consumed in Paris have been suppressed. This causes great joy. . . .”
On his conversion, a lady said to Law: “What happiness for you, Monsieur Law. Now you can be saved.”
Law rejoined: “A trifle, madame. What matters is that I have saved France!”
As a headquarters for the company’s freewheeling operations, Law had purchased the majestic Palais Mazarin on the rue Richelieu. He also moved the bank to the same location, which students would one day know as the site of the Bibliotheque Nationale.
Only Saint-Simon viewed the soaring bull market with scorn. When urged by Law to take a piece of the action, the duke replied that he did not believe in the Midas touch, that the “Mississippi Bubble” was a gigantic juggling trick which enriched Peter at the expense of Paul, that the game would soon be played out and investors ruined.
Saint-Simon was absolutely right. The huge supply of the paper money in circulation, the result of speculation and the regent’s wild spending, and the demand for products drove prices sharply higher. Shrewd investors redeemed their banknotes and unloaded stock, putting proceeds into property, jewels, and art treasures. Among them was the due de Bourbon who struck the system a stunning blow by demanding instant payment in gold for notes and shares worth 18 million livres.
Law tried to shore up the market by announcing on March 5, 1720 that the company would redeem at 9000 livres per share all shares rendered. “I shall turn paper into gold!” he had proclaimed, but he now ignored the vital matter of confidence. The new policy was doubly disastrous: a rush to unload precipitated further issues of currency and consequent devaluation, with another rush to redeem.
Law thought to stem the rout by forbidding redemption in specie of all notes above 100 livres and private hoarding of gold and silver. Then an edict prohibited all specie as a medium of exchange. “I will compel confidence,” Law asserted. His actions had precisely the contrary effect: horrendous inflation, with shopkeepers refusing to accept banknotes.
In a final fatal edict, Law decreed a progressive reduction of the face value of both notes and shares up to 50 percent by the end of 1720. This completed the debacle. Shares went into a spin, while hordes redeemed 10-livre notes—the best offer possible as the Bank’s own reserves were under 2 percent of notes in circulation. On July 17, mob fury erupted about the Palais Mazarin as 15, 000 note-holders fought for a few coins and 16 persons died of suffocation.
Law was hooted in the streets and his coach was smashed to bits. Guarded night and day, he fell into hysteria. Unable to sleep, he would leap from his bed to dance alone, a ghostly figure, about the empty ballroom of his mansion where only shadows evoked the former fetes.
The court and nobility, “insiders,” so to speak, had cashed in before the bubble burst, while their rank protected them from confiscation of their gold. But the merchant class suffered severely. The cry was heard: “Law has enriched a thousand beggars and beggared a hundred thousand honest men!” Law himself was ruined. His properties were seized to pay the company’s enormous debts, and he departed posthaste for Venice. The notes and shares were collected and burned in a holocaust of paper dreams as the investments of 80, 000 families went up in smoke. Ironically, Bourbon, who had profited vastly from the Mississippi mania, presided over the flames.
La Nouvelle Orleans survived its benefactor’s fall and would prove his most enduring memorial. Governor Bienville had laid out the town corresponding to the present French Quarter. From the Place d’Armes, now Jackson Square, radiated streets which still bear the original names: Chartres, Royal, Dauphine, Bourbon, Toulouse, Bienville.
About a thousand resolute colonists, with their servants and black slaves, plus 40 plantations outside the town limits, would constitute the beginning of the great city of the future. The slaves arrived with their masters from the French Antilles and these colonists brought the Black Code of Santo Domingo for treatment of slaves. The Code, applied to Louisiana by Bienville, enjoined some basic education of the slaves and their conversion to Catholicism.
Education and religion would be the charge of the Ursulines, whose arrival contrasted with the image of the colony as the haunt of runaway lovers, correction girls, and harddrinking planters with bullwhips. The “Gray Sisters” established Louisiana’s first orphanage, hospital, and school, where they taught Choctaw Indian and black girls as well as whites.
The disgruntled Germans made the best of their fate, and from their settlements on the “German Coast” upriver many drifted down to La Nouvelle Orleans. They were ancestors of some of the city’s esteemed families.
In its dramatic history, the “Crescent City,” located at a sharp bend in the Mississippi, would change its flag six times: French, Spanish, French, American, Confederate, and Federal Union. From this very cosmopolitan experience, unmatched by any metropolis in the world save Paris, ensued New Orleans’ reputation as the most sophisticated and exotic city of North America.
While La Nouvelle Orleans was coping in the New World, Beau Law in Venice was contriving to mend his own fortunes. Of all his riches, he had escaped with but one diamond, which he would pledge when his luck turned at the green baize tables. However, he was not forgotten by his patron, the regent, who had always appreciated Law’s wit and shrewdness. When matters calmed down in France, Law was set to stage a comeback. He had his bags packed and expected word from the regent.
That prince’s furious pace was about to reach an abrupt climax. He was dallying with his mistress one day, when, in his piquant way, he asked her if she believed in heaven and hell. She replied that she did. “Then,” said the regent, smiling, “you are most unfortunate to lead the life that you do!” A moment later, he fell forward in the lady’s arms, stricken by apoplexy.
Law himself was carried off by pneumonia not long afterward. He was buried appropriately near his favorite casino. His daring adventure in money management, which indeed had introduced financial operations in common use today, had spectacularly failed in France of the time. Yet Beau Law had left a more lasting legacy than he ever knew or, always the gambler, perhaps he would not have been surprised to have drawn a winning hand in La Nouvelle Orleans.
