plus ca change


When Law’s system ramped up, everyone succumbed to speculative fever. And Law made it easy, with the masses being able to buy shares with little money down and also to speculate in what were essentially options on Mississippi Company shares. “The wider general public had never before taken part [in buying shares], nor had such rapid rises on such a scale ever been witnessed,” Gleeson explains. “Like gluttons at a Mississippi banquet, most investors ingenuously accepted the opportunity to gorge themselves and never considered the consequence.”

Just as Keynesians and financial commentators bemoan the fact that people are reacting to the current downturn and stock market crash by saving instead of spending and investing, Law did all he could to keep investors from fleeing his crashing Mississippi Company shares and battered currency. Among the first to cash in was Law’s friend the Irish banker Richard Cantillon. Gleeson suspects that Cantillon had inside information when he bought his shares cheap, and later benefited again from information that his brother provided: Bernard Cantillon had supervised the prospecting party that sailed to Louisiana, finding not the treasure that Law’s propaganda claimed, but instead disease and hostile natives.

“Cantillon realized that the bull market was based on little more than smoke and mirrors and ever-increasing quantities of paper money,” Gleeson writes. Many others ran for the cover of silver as well. Vendors were not interested in taking paper and did so only at a discount, while livestock sellers would only accept silver and gold. Price inflation was rampant, with prices rising 25 percent in just two months’ time, while the prices of some food items (like bread) soared 300 to 400 percent.

Law then resorted to despotic power, banning the export of coins and bullion. Next he prohibited the purchase or wearing of diamonds and other jewels. When this didn’t stop the exit from paper, Law outlawed the production and sale of all gold and silver artifacts with the exception of religious paraphernalia, resulting in soaring prices in crosses and chalices. Within a month Law banned the possession of more than 500 livres’ worth of silver or gold and required that all payments of more than 100 livres be made in banknotes. People were promised generous rewards if they informed on their neighbors. “The slightest suspicion that gold was being concealed illegally would be enough for any house, whether palace or hovel, to be searched,” Gleeson writes.

We can only imagine what draconian currency and financial controls will come out of the current meltdown.

If they try and raid my hovel for my gold crosses I’ll be mighty pissed. Dealing with constant disease and suffering is burden enough as it is.

Richard Cantillion what a man. the Father of modern economics.