France and the Mississippi Bubble

The fact that this bubble was contemporaneous with the English South Sea Bubble and the lesser-known Dutch Wind bubble is just amazing.
More on the latter coming up.

From Winton's Longer View:

The Mississippi Bubble
Money for nothing: A history of mania in John Law's Mississippi Company stock.

When the Scottish financier John Law claimed to be able to transmute paper into money, France’s Regent allowed him to conduct an experiment on the French economy. Law ’s unalloyed successes quickly enlivened the mercurial temperaments of Parisian speculators, but when the bubbling stock overflowed in January 1720, liquidations rapidly occurred and the economy sank into inertia.

"There can be no doubt of John Law ’s catholicity since he has
proved transubstantiation by changing paper into money."
—John Dalrymple, 1720

The Philosopher’s Stone
John Law, a financial theorist, gambler and convicted murderer, originally from Edinburgh, presented the new regent in 1716 with a system which, he claimed, would restore France’s prosperity and revolutionise her monetary and fiscal systems.

Given that France had been left virtually bankrupt by the prodigality of its last king (Louis XIV), the regent was open to any suggestions for getting the economy back on track and bade Law proceed.

Law’s ultimate ambition was to replace the metallic currency with a paper currency based on government debt that had been converted into company shares. This circulating debt would provide companies with a ‘fund of credit’ which could be used as equity against commercial ventures.

He also considered paper a better medium of exchange than metal, being easier to handle and quick to print. This monetary system would take time to realise, so in the interim, he established the Banque Générale in May 1716, whose more limited remit was to issue paper notes which would be redeemable in gold or silver.

The notes gained immediate popularity and stimulated commerce throughout France, convincing the regent of the genius of Law and the soundness of his scheme. Law sought also to restore France’s commercial vigour by developing trading links with her colonies and overhauling her fiscal system.
In August 1717, having secured a trading monopoly over Louisiana and French Canada, Law founded the Mississippi Company.

Rumours of precious metals in Louisiana, generous dividends and Law’s personal celebrity guaranteed the company investor interest from the outset and when the regent granted Law further monopolies in the East Indies, China and the South Seas in early 1719 and Law issued 50,000 new shares, his hand was almost bitten off.

Stirring the Cauldron Such was the enthusiasm for the first issue that the regent authorised a much larger issue of 300,000 shares, whose proceeds could be used to pay off the whole of the national debt.

Taking advantage of the Banque Royale’s stock loans, investors descended upon Law’s residence in Rue de Quincampoix and started a piranha-like feeding frenzy upon the Mississippi shares, where commoners jostled with the nobility for a scrap of succulent stock.

Aristocrats who would not have waited half an hour for the Regent waited six hours for a moment’s word with Law.

Those who could afford it took apartments in the neighbourhood, where rents increased sixteen-fold: indeed, space was at such a premium that an elderly hunch-backed man was able to make substantial sums by lending his hump as a writing-desk to speculators. 

Soon the crowds became so riotous and the congestion so intolerable – soldiers were needed to clear the street each night – that Law was compelled to move to the more palatial environs of the Hôtel de Soissons.

Even there, the seething multitudes of investors stuck to him and encamped in its gardens, erecting hundreds of tents along with refreshment stalls and such varied amusements as roulette wheels....

....MUCH MORE