Modern history



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.

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 pass 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 quantities 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 shivers 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’Étampes—plotted to rob a rich stockholder called Lacroix, who was known to carry quantities 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 Épée de Bois, a tavern famous for its musical entertainment, on the corner of the rue de Venise and the rue Quincampoix. D’Étampes 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 assailants jumped from a window and escaped. D’Étampes 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 noble 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’échafaud”—“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 Grève 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. Nobody 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 pass. He had failed to anticipate 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. Orléans 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 arrêt 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, Orléans 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 arrêt 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 nobody 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 multitude 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 fashion for financial fluttering. Many of them, like the “company for carrying on an undertaking of great advantage, but nobody to know what it is,” were as fictitious 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 Vendôme 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.

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