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Stock market history / Historical milestones / Paris, 1720

Paris, 1720

The fraudulent practices of the Pacific Company in Great Britain, speculation against the Ostend Company (Compagnie d’Ostende) in what is now Belgium and above all the bankruptcy of the Mississippi Company and its owner, John Law, in France: the market for shares was very turbulent in the 18th century and featured massive speculation in shares (superseding commodity speculation).

Rue Quincampoix en l’année 1720
From the Michel Hennin collection. Prints depicting the History of France. Volume 89, items 7748-7847, period: 1720 (Bibliothèque Nationale de France)

Precursor and…

In 1716, Law received permission from the Regent of France to set up a private bank, La Banque générale. It was backed by The Mississippi Company, a company holding the trade monopoly for Louisiana, the French-owned territory in America. The first share issue (at a price of 500 French livres) in 1717 was hardly a success. This led to Law coming up with what could be called “stock market information”. Pamphlets, posters and books were published, full of fabulous stories about the French colony in the New World. In them, Law described himself as a financial genius: the share price soared, reaching 750 livres in early 1719. The same year, the Mississippi Company purchased from the State the right to mint coins, a money machine for the Banque générale. The share price rocketed, reaching 5,000 livres in late 1719 and 8,000 livres in early 1720.

Portrait of John Law

Portrait of John Law (1671 – 1729)
by Casimir Balthasar (1811-1875)
Versailles. Musée Du Château. © Leemage / Corbis

… Crook!

Potential investors flocked to the Rue Quincampoix in Paris, where shares changed hands under chaotic conditions. Futures speculation, allowed in France, was at its peak.

However, a number of people soon realised that the Company was not making very much profit. And travellers returning from Louisiana described it as not holding any of the riches promised: there was no gold there, no silver and no precious stones! Investors panicked; in July, a riot broke out among Rue Quincampoix shareholders, ending with 15 people killed. The share price plummeted to 150 livres in September 1720, and the value of paper money issued by the Banque gÈnÈrale followed suit!

Many investors were ruined, and Law had to flee France, taking refuge first in Brussels and then in Venice, where he died in 1729, having lived by his wits and from gaming.

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