Millionaire - Janet Gleeson [67]
In a foreshadowing of the laissez-faire economic policies of Coolidge, Harding, and Hoover in the 1920s, Law had always held that markets should be allowed to develop freely, with a minimum of bureaucratic intervention. “Constraint is contrary to the principles upon which credit must be built,” he had once written. In other words, bureaucratic restrictions only hinder public confidence in credit economies. Now the tune changed. “Despotic power, to which we are beholden for it [the system], will also sustain it,” he decided. The time had come for intervention. Turning to strong-arm legislation, he moved swiftly and devastatingly.
To curtail the export of coins and to discourage hoarders, on January 28, a little over three weeks after assuming his office, he passed an edict banning the export of coins and bullion. But again the theory was flawed: faced with unpopular regulations, humankind tends to seek an escape route. Prevented from salting away coins in Amsterdam or England, the public looked for alternatives or defied the ruling altogether. The wiliest turned to diamonds and other jewels, which they hastily sent abroad. Others, more daringly, smuggled money over the border. Vermalet, a prosperous stock dealer, was said to have placed his stash of a million livres in coins in a farmer’s cart and covered it with manure. Then he donned a peasant’s smock and drove himself to Belgium, from where he sent his money on to Amsterdam.
Law retaliated even more dramatically than anyone expected. On February 4, the purchase and wearing of diamonds, pearls, and other precious gems, emblem of every Mississippi millionaire, were prohibited. But the ban did not succeed in halting the stampede away from paper. In place of diamonds, pearls, and rubies, investors turned instead to silver and gold: candelabra, tureens, dishes, plates, even furniture made from precious metal, were hunted out and bought for vastly inflated sums. Two weeks later this escape route was also blocked: a new law prohibited the production and sale of all gold or silver artifacts with the exception of religious paraphernalia. Within days the price of crosses and chalices soared.
The bloated share price and overexpanded money supply still awaited Law’s remedial scalpel. He called an extraordinary meeting of shareholders. Some two hundred of the wealthiest Mississippi millionaires attended, clad, according to one account, in such finery that they completely outshone the regent, the Duc de Bourbon, and the Prince de Conti, who were also there. Law announced that the royal bank was being taken over by the Mississippi Company. This apparent formality—he already directed both institutions—facilitated a further significant change. The royal holding of 100,000 Mississippi shares would be bought back by the company for 300 million livres—the entire sum recently raised from the sale of primes—with a guaranteed additional payment of 5 million livres a month over the next ten years.
Law justified this acquisition by arguing that reducing the number of shares on which he would have to pay a dividend would help the company’s balance sheet and curb the money supply. But some wondered whether in attempting to stop the flood of departing investors Law was not quietly encouraging the Crown to follow suit. Having paid the equivalent of 9,000 livres a share into the royal coffers, Law closed down the company sales offices and withdrew official support of the share price.
This was bad news for investors.