THE PROSPERITY BIBLE - Ultimate Collection. Thorstein Veblen
These might be bought as before, with Government securities at par. Law was so bold as to promise annual dividends of $20 per share, which, as the Government funds stood, was one hundred and twenty per cent. per annum.! Everybody believed him. More than three hundred thousand applications were made for the new shares. Law was besieged in his house by more than twice as many people as General Grant had to help him take Richmond. The Great Humbug was at last in full buzz. The street where the wonderful Scotchman lived was busy, filled, crowded, jammed, choked. Dangerous accidents happened in it every day, from the excessive pressure. From the princes of the blood down to cobblers and lackeys, all men and all women crowded and crowded to subscribe their money, and to pay their money, and to know how many shares they had gotten. Law moved to a roomier street, and the crazy mob crowded harder than ever; so that the Chancellor, who held his court of law hard by, could not hear his lawyers.
A tremendous uproar surely, that could drown the voices of those gentlemen! And so he moved again, to the great Hotel de Soissons, a vast palace, with a garden of some acres. Fantastic circumstances variegated the wild rush of speculation. The haughtiest of the nobility rented mean rooms near Law’s abode, to be able to get at him. Rents in his neighborhood rose to twelve and sixteen times their usual amount. A cobbler, whose lines had fallen in those pleasant places, made $40 a day by letting his stall and furnishing writing materials to speculators. Thieves and disreputable characters of all sorts flocked to this concourse. There were riots and quarrels all the time. They often had to send a troop of cavalry to clear the street at night. Gamblers posted themselves with their implements among the speculators, who gambled harder than the gamblers, and took an occasional turn at roulette by way of slackening the excitement; as people go to sleep, or go into the country. A hunchback fellow made a good deal of money by letting people write on his back. When Law had moved into the Hotel de Soissons, the former owner, the Prince de Carignan, reserved the gardens, procured an edict confining all stock-dealings to that place; put up five hundred tents there, leased them at five hundred livres a month each, and thus made money at the rate of $50,000 a month. There were just two of the aristocracy who were sensible and resolute enough not to speculate in the stock—the Duke de St. Simon and the old Marshal Villars.
Law became infinitely the most important person in the kingdom. Great and small, male and female, high and low, haunted his offices and ante-chambers, hunted him down, plagued his very life out, to get a moment’s speech with him, and get him to enter their names as buyers of stock. The highest nobles would wait half a day for the chance. His servants received great sums to announce some visitor’s name. Ladies of the highest rank gave him anything he would ask of them for leave to buy stock. One of them made her coachmen upset her out of her carriage as Law came by, to get a word with him. He helped her up; she got the word, and bought some stock. Another lady ran into the house where he was at dinner, and raised a cry of fire. The rest ran out, but she ran further in to reach Law, who saw what she was at, and like a pecuniary Joseph, ran away as fast as he could.
As the frenzy rose toward its height, and the Regent took advantage of it to issue stock enough to pay the whole national debt, namely, three hundred thousand new shares, at $1,000 each, or a thousand per cent. in the par value. They were instantly taken. Three times as many would have been instantly taken. So violent were the changes of the market, that shares rose or fell twenty per cent. within a few hours. A servant was sent to sell two hundred and fifty shares of stock; found on reaching the gardens of the Hotel de Soissons, that since he left his master’s house the price had risen from $1,600 (par value $100 remember) to $2,000. The servant sold, gave his master the proceeds at $1,600 a share, put the remaining $100,000 in his own pocket, and left France that evening. Law’s coachman became so rich that he left service, and set up his own coach; and when his master asked him to find a successor, he brought two candidates, and told Law to choose, and he would take the other himself. There were many absurd cases of vulgarians made rich. There were also many robberies and murders. That committed by the Count de Horn, one of the higher nobility and two accomplices, is a famous case. The Count, a dissipated rascal, poniarded a broker in a tavern for the money the broker carried with him. But he was taken, and, in spite of the utmost and most determined exertions of the nobility, the Regent had him broken on the wheel in public, like any other murderer.
The stock of the Company of the Indies, though it dashed up and down ten and twenty per cent. from day to day, was from the first immensely inflated. In August 1719, it sold at 610 per cent.; in a few weeks more it arose to 1,200 per cent. All winter it still went up until, in April 1720, it stood at 2,050 per cent. That is, one one-hundred dollar share would sell for two thousand and fifty dollars.
At this extreme point of inflation, the bubble stood a little, shining splendidly as bubbles do when they are nearest bursting, and then it received two or three quiet pricks. The Prince de Conti, enraged because Law would not send him some shares on his own terms, sent three wagon-loads of bills to Law’s bank, demanding specie. Law paid it, and complained to the Regent, who made him put two-thirds of it back again. A shrewd stock-gambler drew specie by small sums until he had about $200,000 in coin, and lest he should be forced to return it, he packed it in a cart, covered it with manure, put on a peasant’s disguise, and carted his fortune over the frontiers into Belgium. Some others quietly realized their means in like manner by driblets and funded them abroad.
By such means coin gradually grew very scarce, and signs of a panic appeared. The Regent tried to adjust matters by a decree that coin should be five per cent. less than paper; as much as to say, It is hereby enacted that there is a great deal more coin than there is! This did not serve, and the Regent decreed again, that coin should be worth ten per cent. less than paper. Then he decreed that the bank must not pay more than $22 at once in specie; and, finally, by a bold stretch of his authority, he issued an edict that no person should have over $100 in coin, on pain of fine and confiscation. These odious laws made a great deal of trouble, spying, and distress, and rapidly aggravated the difficulty they were meant to cure. The price of shares in the great company began to fall steadily and rapidly. Law and the Regent began to be universally hated, cursed, and threatened. Various foolish and vain attempts were made to stay the coming ruin, by renewing the stories about Louisiana sending out a lot of conscripted laborers, ordering that all payments must be made in paper, and printing a new batch of notes, to the amount of another $300,000,000. Law’s two corporations were also doctored in several ways. The distress and fright grew worse. An edict was issued that Law’s notes and shares should depreciate gradually by law for a year, and then be worth but half their face. This made such a tumult and outcry that the Regent had to retract it in seven days. On this seventh day, Law’s bank stopped paying specie. Law was turned out of his public employments, but still well treated by the Regent in private. He was, however, mobbed and stoned in his coach in the street, had to have a company of Swiss Guards in his house, and at last had to flee to the Regent’s own palace.
I have not space to describe in detail the ruin, misery, tumults, loss and confusion which attended the speedy descent of Law’s paper and shares to entire worthlessness. Thousands of families were made paupers, and trade and commerce destroyed by the painful process. Law himself escaped out of France poor; and, after another obscure and disreputable career of gambling, died in poverty at Venice, in 1729.
Thus this enormous business-humbug first raised a whole nation into a fool’s paradise of imaginary wealth, and then exploded, leaving its projector and many thousands of victims ruined, the country disturbed and distressed, long-enduring consequences, in vicious and lawless and unsteady habits, contracted while the delusion lasted, and no single benefit except one more most dearly-bought lesson of the wicked folly of mere speculation without a real business basis and a real business method. Let not this lesson be lost on the rampant and half-crazed speculators of the present day. Those who buy gold or flour, leather, butter, dry goods, groceries, hardware, or anything else on speculation, when prices are inflated far beyond the ordinary standard, are taking upon themselves great risks, for the bubble must eventually be pricked; and whoever is the “holder” when that time comes, must necessarily be the loser.
V. MEDICINE AND QUACKS.