Millionaire_ The Philanderer, Gambler, and Duelist Who Invented Modern Finance Part 5

Law was condemned mercilessly for his actions. Amba.s.sador Stair commented sarcastically that it was impossible now to doubt his sincerity in converting to Catholicism, since he had established the Inquisition after having revealed his faith in transubstantiation by turning so much gold to paper. Public opprobrium extended also to his supporters. Bourbon was heckled in the street, and his manservant was pelted with stones when he attempted to remonstrate. Even the usually aloof Saint-Simon was aghast: "Never was sovereign power soviolently attempted; never did it meddle with any matter so sensitively felt or so vitally connected with the temporal well-being of the community."

At the Palais Royal the unfolding turmoil was monitored anxiously by the regent. Always inclined to take the route of least resistance, Orleans feared that widespread hatred of Law would affect his own standing. When he sensed that his mentor's faith was wavering, Law's self-confidence slipped. Humiliating tales circulated by his opponents added to his distress. According to Stair, when Law arrived at the Palais Royal for an audience, the regent admitted him while relieving himself "upon his close stool." Orleans was, said Stair, "in such a pa.s.sion, that he run to Law with his breeches about his heels" and threatened him with the Bastille if matters did not quickly improve. Even if Stair fabricated this crude incident, it seems certain that the worry of losing Orleans's favor, upon which Law's political survival and his family's future depended, had a profoundly adverse effect on Law. Under the barrage of reproach his nerve failed, and the combined reports of servants, enemies, and friends suggest that he had a nervous breakdown. His servants reported that he suffered from insomnia and anxiety at-tacks, that he was p.r.o.ne to sudden angry outbursts, and that his mood, even with his close family, became volatile and unreasonable. "He gets out of bed almost every night, and runs, stark staring mad, about the room making a terrible noise, sometimes singing and dancing, at other times swearing, staring and stamping, quite out of himself," said Stair, who had heard the account from one of Law's footmen. "Some nights ago, his wife, who had come into the room upon the noise he made, was forced to ring the bell for people to come to her a.s.sistance. The officer of Law's guard was the first that came, who found Law in his s.h.i.+rt, who had set two chairs in the middle of the room and was dancing round them, quite out of his wits." The usually poised Katherine must have been alarmed.

The burdens on Law's shoulders were great indeed. Pressured by the regent and debilitated by his failing stamina, his resolve faltered. He backtracked.

14.

THE STORMSOF FATE.

At length corruption, like a general flood, Shall deluge all, and av'rice creeping on (So long by watchful ministers withstood) Spread, like a low-born mist, and blot the sun.

Statesman and patriot ply alike the stocks, Peeress and butler share alike the box; The judge shall job, the bishops bite the town, And mighty Dukes pack cards for half-a-crown: See Britain sunk in Lucre's sordid charms.

Alexander Pope, Epistle to Lord Bathurst

AFORTNIGHT AFTER WITHDRAWING SUPPORT FOR THE shares, Law reversed the decision. He announced that the share-sales office would reopen and pegged the share price at 9,000 livres. The gesture temporarily appeased his critics but in reality made an already dire situation worse. Crowds frightened by the sudden changes in policy and sensing the precariousness of the financial situation, rushed to the bank to cash in their shares, and the printing presses went into overdrive to pay for them. shares, Law reversed the decision. He announced that the share-sales office would reopen and pegged the share price at 9,000 livres. The gesture temporarily appeased his critics but in reality made an already dire situation worse. Crowds frightened by the sudden changes in policy and sensing the precariousness of the financial situation, rushed to the bank to cash in their shares, and the printing presses went into overdrive to pay for them.

As the crush at the bank exceeded all expectation, Law reached the most radical decision of his career thus far. If the balance between paper and coins could not be redressed, he concluded, his only alternative was to abolish gold and silver coins entirely. While paper notes would remain invariable, coin made from precious metals would be gradually reduced in value against the livre, then phased out. Within two months in the case of gold, and nine months in the case of silver, they would cease to exist as currency within France. France would depend entirely upon paper.

It was a step too far. In a country noted for its financial conservatism, a monetary system based on anything other than gold and silver was inconceivable. Law was suspected of tampering with the foundations on which society was built and depended for its stability. As Saint-Simon ranted,

They tried to convince the nation that from the days when Abraham paid four hundred shekels of silver, current coin, for Sarah's sepulchre to the present day, the wisest nations of the earth had been under the grossest error and delusion as to money and the metals of which it was made; that paper was the only profitable and necessary medium, and that we could not do a greater harm to foreign nations, jealous of our grandeur and our advantages, than to pa.s.s over all our silver and gold and precious stones to them.

Even the regent's mother, who until now had admired Law, was averse to the move: "I think it hard lines that there is no more gold to be seen, because for forty-eight years now I have never been without some beautiful gold pieces in my pocket. . . . Monsieur Law is certainly terribly hated."

Others interpreted a more sinister reason for Law's apparent madness: "The silver is to be employed in such foreign trades as cannot be carried on without it, or as Mr. Law may propose to beat us and the Dutch out of it by that means. . . . Mr. Law has said he will drain us of all our silver," mused Daniel Pulteney. Opinion was divided then, and still is, over what Law was trying to achieve. Pulteney believed he was reducing the value of gold and silver to draw it into the bank, and that he would use the gold to buy up Europe's silver, and then would bring it back to France. "I am told that Mr. Middleton, the goldsmith in the Strand who is Mr. Law's agent and banker, has already heaped up in his house very considerable quant.i.ties of silver," he affirmed. Law's enemies believed he was forming silver caches for his personal use rather than for the national good. Later biographers, bearing in mind his fragile mental state, felt he had lost his way and saw this as a drowning man grasping at a straw.

The unfurling financial maelstrom had a further insidious consequence for which Law was also held responsible. Paris was engulfed in a crime wave. The unprecedented epidemic of holdups, kidnappings, violent robberies, and grisly murders was widely blamed on the avarice, envy, uncertainty, big wins, and big losses that Law had generated. In one particularly horrific incident, the watch discovered the body of a woman hacked into small pieces inside an overturned carriage. It was said that she had been murdered after being robbed of 300,000 livres in banknotes. Even Daniel Defoe was astounded by the scale of the villainy, reporting in early April, "No less than 25 bodies have been taken out of the filets of St. Cloud in about ten days. This is a net that's put across a narrow part of the river Seine, from one side to the other . . . into which the murther'd bodies are carried by the stream that are thrown over the bridges in the city."

By far the most notorious of all the horror stories to send s.h.i.+vers through Europe was that of a dissipated and unprincipled young aristocrat, Count Antoine Joseph de Horn. Greedy for money to gamble on shares, de Horn, in league with two others-Laurent de Mille, a Piedmontese soldier, and a courtier named d'etampes-plotted to rob a rich stockholder called Lacroix, who was known to carry quant.i.ties of shares and large sums of money about with him. On the pretext of buying his shares de Horn agreed to meet Lacroix in the epee de Bois, a tavern famous for its musical entertainment, on the corner of the rue de Venise and the rue Quincampoix. D'etampes stood guard while the others lured the broker into a back room, threw a tablecloth over his head, and stabbed him several times in the chest. But hearing his cries, one of the tavern staff realized what was taking place and locked the attackers in the room. Despite his efforts, however, the a.s.sailants jumped from a window and escaped. D'etampes ran to a nearby street where horses were waiting and got away. De Mille headed for the crowds of the rue Quincampoix but was quickly arrested. De Horn, who had sprained an ankle in his flight, tried to bluff his way out of trouble by saying that he was one of the victims, but when de Mille was brought to the tavern he was identified and arrested. The next day both men were tried, found guilty, and condemned to death by being broken on the wheel.

This particularly gruesome method of execution (later immortalized by Hogarth in his satirical engraving of the South Sea Company, which shows Self-Interest breaking Honesty on the wheel), usually reserved for common criminals, involved being spreadeagled on a wooden wheel and bludgeoned to death, limb by limb. A seventeenth-century visitor to France described the spectacle: "A place of execution made of timber, at the top whereof there is a wheel, whereon the bodies of murderers only are tormented and broken to pieces with certain iron instruments, with which they break their arms first, then their legs and thighs, and after their breast. That blow on their breast is called the blow of mercy because it does quickly bereave them of their life."

Understandably distraught at the thought of their kinsman suffering such a death, de Horn's n.o.ble family pleaded with the regent for leniency. As a distant relation of the royal family, they claimed, he should be spared, or at least executed in a more fitting way. Unusually, the regent remained resolute and, according to several accounts, replied, with the words of Corneille, "Le crime fait la honte, et non pas l'echafaud "Le crime fait la honte, et non pas l'echafaud"-"It is the crime that is the dishonor, not the scaffold." There was no reprieve.

Four days after the murder, on March 26, 1720, at four in the afternoon, a ghoulish crowd gathered in the Place de Greve to witness the spectacle of de Horn and his accomplice being broken on the wheel as sentenced. De Horn, the first to be executed, took three-quarters of an hour to die after receiving the executioner's blows.

Law capitalized rapidly on the publicity surrounding the crime. He had always detested the seediness, hysteria, and double dealing stirred up in the frenetic atmosphere of the rue Quincampoix. Now he had cause to eliminate it. Shortly after de Horn's execution a ruling was issued prohibiting crowds from congregating in the rue Quincampoix and outlawing any dealing in shares or primes other than through official company offices.

Amid the ongoing financial malaise, the printing presses rolled on. By May 1720, more than 2.6 billion livres in banknotes had been issued, doubling the amount circulating since January. The country was awash with paper. Fearing that his system was on the brink of disintegration, Law made his most desperate and, many would later argue, most drastically misguided move.

On May 21, a holiday weekend, when most of his opponents were conveniently out of town, he announced that by December shares presently pegged at 9,000 livres would be worth only 5,000. The value of banknotes would also be reduced gradually until they were worth 50 percent of their present value. The moves, he argued, were for the national good, to redress the balance between paper and the coin reserves on which France relied for foreign trade. n.o.body would suffer. The same share dividend would be paid, and the balance between the value of paper notes and silver would return to what it had been before the devaluations announced in March.

No one believed him. In the last five months the long-suffering public had witnessed multiple changes in the value of their currency; their coinage had been outlawed; wearing jewelry had been prohibited, even crucifixes were banned. He had left them only with paper. Throughout every vacillation, every turn and twist of financial policy, he had maintained, adamantly, its immunity to change. As far as the public was concerned, by casting aside this fundamental tenet he had revealed himself as a charlatan. Distress ripened to civil unrest as the almost unbelievable news spread. Everyone felt they were about to be robbed of half of what they had and, as Pulteney put it, Law had effected "the most notorious cheat that ever was committed, and it is very plain now that Mr. Law has as little capacity as integrity."

The day after the announcement a disaffected mob gravitated to the bank. When they found it closed they began to pelt it with stones. For three days riots erupted in the streets of Paris. Crowds gathered each day outside the bank, throwing missiles, shattering windows, chanting their dissent, while inside officials struggled to cope with the throng of investors exchanging banknotes at the new rate.

The widespread hatred with which Law was regarded inevitably spilled over to jeopardize his family. On an outing with her daughter, with only her maid and a footman for protection, Katherine found herself in the midst of the menacing rabble and was forced to take refuge in a nearby house. The burden of realizing that his actions were gravely endangering his family's safety can only have added to Law's misery. From now on the children spent much time exiled to the country homes of their father's supporters, such as the Duc de Bourbon. Katherine, who was increasingly concerned for Law's mental resilience, remained staunchly in Paris.

At the Palais Royal, the regent tried to remain calm and wait for the storm to pa.s.s. He had failed to antic.i.p.ate the fury unleashed by the edict of May 21 and now regretted his decision to agree to it. Sensing his unease, Law's enemies grasped the chance to promote their own interests. On the following Monday an emergency session of the Parlement was called and "in one moment the nation was carried from extreme trust to extreme distrust." Denouncing Law and his fellow directors as corrupt, bankrupt, and deserving of the death sentence, the Parlement demanded that the regent revoke the edict. Orleans had never felt so intimidated. Terrified that his rule might be terminated, he privately admitted to feeling "very sorry he had ever engaged in any of Mr. Law's schemes" and capitulated. Law was duly summoned before a meeting of the regency council to explain himself. He faced the members with dignity while both his erstwhile ally the Duc de Bourbon and his long-standing adversary d'Argenson attacked him. The regent merely commented, "A single pillar cannot withstand a torrent."

The betrayal struck Law to his heart. Years later he wrote of this moment:

When M. le D [Bourbon] demanded the revocation of the arret of 21 May with such rage, he believed he was acting for the public good. When M. le D harangued me in the council, he did not believe that he was acting against his own interests. When the different parties joined together to rid themselves of me, the old court, the keeper of seals etc., each believed their own business would benefit. They were wrong. The Regent, who knew the situation better than anyone and who in his heart wanted to be fair to me, yielded out of fear of a greater ill. But he was wrong.

The battle was lost. Conscious that if he remained in office, the Parlement's defiance would escalate, Law tendered his resignation. The regent did not accept it. A week later, however, yielding to the anti-Law cabal, Orleans ordered that the legislation reducing the value of paper and shares be revoked, and both were restored to their former worth. Law knew such a reversal would destroy public confidence even further. "Happy for France if those who forced the revocation of this arret arret had given the same time as the Regent and to themselves to reflect on the consequences of what they asked," he wrote despairingly. A few days later all the earlier limits on owning silver and gold were lifted. But as one wag wryly commented, "The permission comes when n.o.body has any left." had given the same time as the Regent and to themselves to reflect on the consequences of what they asked," he wrote despairingly. A few days later all the earlier limits on owning silver and gold were lifted. But as one wag wryly commented, "The permission comes when n.o.body has any left."

Terrified by the seesawing developments, investors scrambled to sell Mississippi shares and put their money somewhere safer, even if it meant sustaining hefty losses to do so. Prices went into free fall, plunging within a week to 4,000 livres. Defoe reported from Paris that "Country people run with as much precipitancy from Paris as ever they flocked to it."

France's ruin was England's gain. Numerous bruised Mississippi shareholders chose to reinvest in English South Sea shares. The previous month, with a weather eye to developments in France, the South Sea Company managed to beat its rival the Bank of England and secure a second lucrative deal with the government whereby it took over a further $48 million of national debt and launched a new issue of shares. A mult.i.tude of English and foreign investors were now descending on London as they had flocked less than a year earlier to Paris "with as much as they can carry and subscribing for or buying shares." In Exchange Alley-London's rue Quincampoix-the sudden surge of new money also bubbled a plethora of alternative companies launched to capitalize on the new fas.h.i.+on for financial fluttering. Many of them, like the "company for carrying on an undertaking of great advantage, but n.o.body to know what it is," were as fict.i.tious as the emerald mountain of Mississippi.

In Paris, euphoria vanished and the atmosphere was sinister. By the end of the month, the regent's secretary of state, Claude Le Blanc, accompanied by sixteen Swiss Guards, informed Law that the regent had decided to dismiss him from his position as France's controller general. Law was ordered not to leave his house. The guards were to remain outside the Place Vendome mansion for his own protection. Or so Le Blanc said. It was clear, however, that to all intents and purposes Law was under house arrest.

Sensing the net drawing closer, Law blanched but retained his composure. Privately, though, he was immobilized by the real fear that his enemies' next move would be to demand his execution-and that should they do so, the regent would not stand in their way.

15.

REPRIEVE.

Lundi j'achetai des actions; Mardi je gagnai des millions; Mercredi j'arrangeai mon menage; Jeudi je pris un equipage; Vendredi je m'en fus au bal; Et samedi a l'Hopital.

My shares which on Monday I bought Were worth millions on Tuesday, I thought.

So on Wednesday I chose my abode; In my carriage on Thursday I rode; To the ballroom on Friday I went; To the workhouse next day I was sent.

LARGELY THROUGH DRAWING ON THE OLD GAMBLING strategies-masking emotion, following a set plan-Law overcame his dread and resisted the challenge. His victory was typically audacious. The morning after his dismissal from office, with a contingent of guards camped outside his door and sundry investigators nosing through his private papers at the bank, he had sent word via Lord Peterborough requesting an urgent audience with the regent. The response was swift: the Duc de la Force had been sent to escort him to the Palais Royal, where he was left to wait in a small gallery. Eventually, after several hours, an equerry informed him that the regent was unable to see him. Law returned to his house, aware that the public humiliation had been intentional-and that his critics were exultant. strategies-masking emotion, following a set plan-Law overcame his dread and resisted the challenge. His victory was typically audacious. The morning after his dismissal from office, with a contingent of guards camped outside his door and sundry investigators nosing through his private papers at the bank, he had sent word via Lord Peterborough requesting an urgent audience with the regent. The response was swift: the Duc de la Force had been sent to escort him to the Palais Royal, where he was left to wait in a small gallery. Eventually, after several hours, an equerry informed him that the regent was unable to see him. Law returned to his house, aware that the public humiliation had been intentional-and that his critics were exultant.

Yet the regent, despite appearances to the contrary, had not forsaken him. Public unrest had allowed Law's enemies-most notably d'Argenson, whom Law had so spectacularly trounced on numerous occasions, and the Paris brothers, deprived by Law of their lucrative tax farms-to pressure him to abandon Law and his system. Only three years of his regency remained to Orleans before Louis XV came of age, and the Parlement was whispering that they might try to oust him sooner. Fearful for his own survival, he had decided to play them along, to give them rope and watch them become ensnared in it. His rejection of Law, even though Law failed to realize it, was part of the charade. He had invested too much in his protege's ideas to abandon them without a fight. Only if all else failed would Orleans sacrifice Law.

For Law a resurgence of hope, and an inkling of the regent's underlying regard for him, came late that night when he was summoned clandestinely to the Palais Royal where Orleans greeted him warmly, according to Law with "mille amities," "mille amities," and listened approvingly to a torrent of ideas for resolving the problems of the bank and company. and listened approvingly to a torrent of ideas for resolving the problems of the bank and company.

The next day, the guards were withdrawn, and Law's allies felt bold enough to champion him as "the only man capable of getting them out of the maze they were in." Law, under secret instruction to return to duty, worked continuously for the next forty-eight hours, returning to his original idea of maintaining credit but placing it under firm control. At a council meeting two days later, much to the astonishment of those a.s.sembled, Law entered as if the drama of the past days had never happened. His strategy, he announced, was ready.

Law's adversaries were flabbergasted. Somehow he had evaded confinement, emerged from disgrace, and, moreover, the regent airily informed them, was about to return to high office-as intendant general du commerce and managing director of the bank and the Mississippi Company. The Duc d'Antin testified to the general astonishment of such a turnaround: his diary entry for June 2 reads, "We saw this day a rare thing: a minister deposed for several days, who had been placed under arrest by a major of the Swiss Guards, returned on Sunday to council to propose a policy and to be approved by the entire a.s.sembly."

But return to royal favor, though welcome, did not mean that Law's worries were over. Loyalties ebbed and flowed daily amid s.h.i.+fting tides of political ascendancy. Bourbon, Conti, and de la Force, aware of how much they had gained, fearful of how much they could lose, usually rallied round him, but their support vacillated according to their appraisal of the current political situation. No one wanted to be a.s.sociated with failure and thus jeopardize his own position.

Law's return to grace was bad news for his enemies. D'Argenson, who had done most to undermine the regent's trust in Law, and whom one critic famously described as having "a soul as black as his peruke," was dismissed as keeper of the seals and sent into retirement. The Paris brothers were banished to the provinces. But the changes in Law's favor were limited: the Parlement was still hostile, and most of his critics in the council retained their posts.

Meanwhile, within the grandiose offices of the bank, an investigation into the accounts was drawing to a close amid murmurings that it was no more than a token gesture, intended to endorse the regent's support of Law. "It is thought he [the regent] will influence the commissaries a point to take Mr. Law's accounts to make a report in his favour," Pulteney observed perceptively. A week later, when the commissioners reported that they had found no evidence of irregularities, few believed them. Their skepticism was later justified: the inquiry had discovered that large unauthorized issues of notes had been circulated but to save the regent embarra.s.sment the matter was glossed over.

Elsewhere in Europe the speculative boom was still gathering pace. By the summer of 1720, in the fetid pa.s.sages of London's Exchange Alley, the skin on the South Sea bubble was perilously overstretched. Shares that in January had traded for 130 were changing hands for 1050 at the end of June. As in France, every echelon of society-country parsons, impoverished widows, kings, princes, courtesans, yeoman farmers, eminent scientists, philosophers, writers, artists-caught the contagion, and with loans easily available, they joined the mult.i.tude, though few fully comprehended its shady complexities. Even Isaac Newton blindly took part and when asked for advice on the subject is said to have responded that while he could calculate the motions of the heavenly bodies, he could not do the same for the madness of the people. "Our South Sea Equipages increase every day," wrote Daniel Defoe in early August. "The city ladies buy South Sea jewels, hire South Sea maids, and take new country South Sea houses; the gentlemen set up South Sea coaches, and buy South Sea estates." The boom in London's other bubble companies continued equally frenziedly. "The hurry of our stock-jobbing bubblers has been so great this week that it has exceeded all that was ever known. There has been nothing but running about from one coffee-house to another and from one tavern to another, to subscribe without examining what the proposals were. The general cry has been, 'For G.o.d's sake, let us subscribe to something, we don't care what it is,'" reported the London Journal London Journal on June 11, 1720. Mainland Europe was similarly sucked into the craving for effortless fortune. The stock markets of Amsterdam and Hamburg boomed as never before. Dealers jostled for Dutch West India stock, which by midsummer had doubled in price since the beginning of the year; Dutch East India was similarly coveted and rose from 800 to 1000; prices of insurance shares in at least half a dozen Dutch cities also rose. on June 11, 1720. Mainland Europe was similarly sucked into the craving for effortless fortune. The stock markets of Amsterdam and Hamburg boomed as never before. Dealers jostled for Dutch West India stock, which by midsummer had doubled in price since the beginning of the year; Dutch East India was similarly coveted and rose from 800 to 1000; prices of insurance shares in at least half a dozen Dutch cities also rose.

In Paris, the story was very different. Law returned to the bank's offices in early June to find himself confronted by the pitiful sight of hordes congregating outside in the sweltering summer heat in the hope of exchanging their banknotes for coins. Such visible evidence of vanished confidence-a run on the bank-represented, and represents still, every banker's worst fear. Law had always been a man of high ideals. The desire to do good, to bring happiness and prosperity, had, he always claimed, spurred him more than the desire for personal wealth or status. Now, witnessing people's suffering, he must have been stung more profoundly than by any criticisms from his peers. He had had to find an answer. to find an answer.

Only about 2 percent of the money now in circulation was in silver and gold. To eke out the dwindling supply as fairly as possible and to ensure that the neediest had access to coin, he decided on a system of rationing. From early June, only a single 10-livre note per person could be exchanged, and the bank opened twice a week for the conversion of 100-livre notes into smaller denominations. Financial stability could return, he decided, if the numbers of shares and banknotes were reduced and the value of coins was boosted. Immersed in redressing this balance, Law failed to spot his enemies' quiet resolution that he was to be tolerated but manipulated. Once enough paper was withdrawn and the system was sufficiently weakened, they would step in. Law was hammering nails into his own scaffold.

The withdrawal of banknotes and shares from circulation began with more than a touch of melodrama, with vast public bonfires witnessed by thousands of astonished onlookers. The first burning of 100,000 shares owned by the Crown and 300,000 belonging to the company took place outside the Hotel de Ville. In the following weeks thousands of livres' worth of notes and shares were crammed into iron cages and similarly ignited, as an array of ingenious schemes, each aimed at pruning the paper system and partially restoring the metallic one, was set in train. The regent's mother shook her head over the irony of it all: while no one in France had a sou, she quipped, they had toilet paper in plenty.

But confidence once lost is hard to regain, and burning vast quant.i.ties of money and shares was not the way to restore it. Every smoldering bonfire further sapped the credibility of paper, and the press for coins grew more insistent. The poor could only scour the street for coins, or barter to feed themselves. The most basic necessities of life were affected by the crisis. Coins had to be specially dispatched to the bakers of Gonesse, who supplied Paris with bread, so that they could buy wheat: corn merchants refused any form of payment in paper.

While the poor scavenged, the privileged inhabitants of the grand hotels hotels and and palais palais danced on. Coc.o.o.ned by credit, which no supplier dared deny them, they reveled in ever more conspicuous excess, as if by an orgy of spending they could hold the menace at bay. Just as during the 1930s depression the Waldorf Astoria was fully booked, in 1720 ten times more was spent at the opera than in the previous year; theatrical productions were more lavish than ever; people dressed with ever more extravagant ostentation and gorged themselves at banquets with scores of exotic courses. "There is still a great deal of money in France," wrote the Princess Palatine in August 1720. "They are very fond of luxury, which has never been indulged in to such an extent as it is at present." danced on. Coc.o.o.ned by credit, which no supplier dared deny them, they reveled in ever more conspicuous excess, as if by an orgy of spending they could hold the menace at bay. Just as during the 1930s depression the Waldorf Astoria was fully booked, in 1720 ten times more was spent at the opera than in the previous year; theatrical productions were more lavish than ever; people dressed with ever more extravagant ostentation and gorged themselves at banquets with scores of exotic courses. "There is still a great deal of money in France," wrote the Princess Palatine in August 1720. "They are very fond of luxury, which has never been indulged in to such an extent as it is at present."

For foreign investors who held French banknotes the situation was particularly dire. Their losses were amplified when the French exchange rate plummeted even more dramatically than the share price. A pound sterling, worth 39 livres in May, was fetching 92 livres by September, and was unquoted for the next three months. One expatriate who managed to profit from the falling value of French currency was Law's friend and sometime business partner Richard Cantillon, who had returned to Paris in search of further investment opportunities. With a foresight that sets him apart from every other financial pundit of the day, he antic.i.p.ated the downward slide in French currency and by various currency dealings-advancing loans in one currency while taking deposits in another, fixing French currency loans in sterling, then waiting for the livre's value to fall-made a second fortune. The size of some of these deals, sufficient further to depress the livre and worsen the shortage of coins, inevitably drew Law's attention. Legend has it that he paid a visit to Cantillon's office and presented him with a curt ultimatum: "If we were in England we would be able to talk and reach an agreement, but in France, as you know, I can tell you that you will be in the Bastille this evening if you do not give me your word to leave the country in forty-eight hours." Cantillon, who understood the importance of quitting while ahead, left Paris for London, where he turned his attention to South Sea shares-and a similarly spectacular fortune.

At the bank, the bonfires and rationings had done nothing to improve matters. Coin supplies could not keep pace even after the restrictions were imposed. Reserves ran so low that vast quant.i.ties of copper coins were minted, but there was still a hopeless insufficiency. Bank openings became briefer and more sporadic, and the queues continued to grow. When the doors did open, the compet.i.tion to get to the front of the line was frenzied. "The demand is so prodigiously great for the money, and the notion that everyone has in their heads that they will stop payment again in a few days, is such as makes people even mad to get their money, and hazard their lives to come at it," wrote Defoe, referring to an incident in which armed guards were forced to fire on the crowd, killing three people, to preserve order. It was just a prelude.

On July 17, at 3 A.M. A.M., a crowd of around 15,000 had gravitated from distant suburbs to congregate in the streets outside the bank. Word had spread that for the first time in over a week 10-livre notes would be converted into coins between nine and one that day. Wooden barricades had been erected in antic.i.p.ation of a throng, but a mult.i.tude this size was unexpected, unprecedented, and, it turned out, uncontrollable. At five o'clock several workmen, exasperated by the wait and fired up by alcohol, vaulted the barricades and launched themselves into the crowd on the other side. At the entrance in rue Vivienne there were similar scenes. Men picked their way over the ruins of the houses Law had demolished to make way for the new exchange, mounted the garden wall, and swung themselves through the chestnut trees to jump the queue. From every direction a hysterical mult.i.tude funneled toward the bank and those at the front found themselves defenseless against panicked surges from the throng behind.

By dawn a dozen or more people had perished, crushed to death against the barricades, trampled underfoot by the stampede, their cries pitifully audible above the rabble's roar. Buvat, the diarist, who left one of the most gripping accounts of the day, found himself caught in the melee when five or six men hurled themselves off a barricade and only narrowly escaped being crushed or suffocated to death. Defoe was moved by witnesses' accounts: "It is impossible to describe the pressing and thronging for money at the bank, the outcries of those who were almost killed were most affrighting."

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 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. 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 Vendome 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 a.s.sault 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 equipage, and it is observed that the Swiss guards are dispersed about the streets he is to pa.s.s 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 La.s.s 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, banis.h.i.+ng 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 Ma.r.s.eille when crew members of a merchant s.h.i.+p 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 succ.u.mbed in the insanitary shanties surrounding the port. Slowly and insidiously the disease spread through the crowded dockside slums to the s.p.a.cious 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 s.h.i.+vering, 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 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 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 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." 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 compa.s.sionately 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 Ma.r.s.eille and other places," reported Defoe, who singled out for special mention the city of Genoa, which sent both money and a s.h.i.+p 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. s.h.i.+ps were liable to weeks of delay: in one particularly extreme example in Holland, three s.h.i.+ps arriving from the Levant were burned while their crews were forced to wade ash.o.r.e 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 pa.s.sed, and in certain areas such as Tyrol were still liable to be held in quarantine for weeks if they were known to have pa.s.sed 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 Ma.r.s.eille and Toulon shut down, trade with Africa and the rest of the Mediterranean, until now flouris.h.i.+ng, drew to a standstill. "Not a s.h.i.+p comes in to Ma.r.s.eille 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.

16.

THE W WHIRLIGIGOF T TIME.

Cy git cet Ecossais celebre, Ce calculateur sans egal, Qui par les regles de l'algebre, A mis la France a l'hopital.

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

Anonymous, Paris (1720)