During the early months of 1718, accordingly, he was engaged in laying plans for the acquisition of several monopolies and companies then in existence, but, by reason of indifferent management, not productive to their fullest capacity. In the meantime, however, the public required consideration at his hands. The shares of the Western Company were at a discount of 50 per cent., and he foresaw the necessity before proceeding further of adopting measures to create a rise in their value to par at least, and if possible to a premium. His proposals would demand further appeals to investors, and their decision would inevitably be determined by the value in the open market of the stock he had already launched. The method he pursued to bring about this object was as ingenious as it was original. He offered to buy at six months’ date in practically unlimited quantities shares of the Western Company at the minimum price of par and in many cases at a price in excess of par to the extent of 20, 30, and even 40 per cent. This proceeding naturally roused intense excitement, coming as it did from the prime mover in all the great financial operations which had so recently been agitating the community and been promising so great results. The consequence was as Law had hoped. The value of the shares was revived, the public were eager to join in the speculative fever that was produced, and Law not only employed their eagerness to his own advantage but succeeded in spreading and strengthening his already marvellous influence.
While Law was publicly carrying through transactions in such a manner as to rouse enthusiasm and inspire confidence in his projects, he was also at the same time engaged in securing by every possible means the good offices of those in high places without whose favourable support his plans would not likely reach maturity. The Duc de Saint-Simon reveals the nature of the efforts by which Law endeavoured to engage the good opinion of himself and others. “Law,” he says, “often pressed me to receive some shares for nothing, offering to manage them without any trouble to me, so that I must gain to the amount of several millions. So many people had already gained enormously by their own exertions that it was not doubtful Law could gain for me even more rapidly. But I never would lend myself to it. Law addressed himself to Madame de Saint-Simon, whom he found as inflexible. He would have much preferred to enrich me than many others, so as to attach me to him by interest, intimate as he saw me with the Regent. He spoke to M. le Duc d’Orléans, even so as to vanquish me by his authority. The Regent attacked me more than once, but I always eluded him. At last, one day when we were together by appointment at Saint Cloud, seated upon the balustrade of the orangery, which covers the descent into the wood of the goulottes, the Regent spoke again to me of the Mississippi, and pressed me to receive some shares from Law.
“The more I resisted the more he pressed me and argued. At last he grew angry, and said that I was too conceited, thus to refuse what the king wished to give me (for everything was done in the king’s name), while so many of my equals in rank and dignity were running after these shares. I replied that such conduct would be that of a fool, the conduct of impertinence, rather than of conceit; that it was not mine, and that since he pressed me so much I would tell him my reasons. They were, that since the fable of Midas, I had nowhere read, still less seen, that anybody had the faculty of converting into gold all he touched; that I did not believe this virtue was given to Law, but thought that all his knowledge was a learned trick. A new and skilful juggle, which put the wealth of Peter into the pockets of Paul, and which enriched one at the expense of the other; that sooner or later the game would be played out, that an infinity of people would be ruined finally, that I abhorred to gain at the expense of others, and would in no way mix myself up with the Mississippi Scheme.
“M. le Duc d’Orléans knew only too well how to reply to me, always returning to his idea that I was refusing the bounties of the king. I said that I was so removed from such madness that I would make a proposition to him, of which assuredly I should never have spoken but for his accusation.
“I related to him the expense to which my father had been put in defending Blaye against the party of M. le Prince in years gone by; how he had paid the garrison, furnished provisions, cast cannon, stocked the place, during a blockade of eighteen months, and kept up, at his own expense, within the town, five hundred gentlemen whom he had collected together; how he had been almost ruined by the undertaking, and had never received a sou, except in warrants to the amount of five hundred thousand livres, of which not one had ever been paid, and that he had been compelled to pay yearly the interest of the debts he had contracted, debts that still hung like a millstone upon me. My proposition was—that M. le Duc d’Orléans should indemnify me for this loss, I giving up the warrants, to be burnt before him.
“This he at once agreed to. He spoke of it the very next day to Law; my warrants were burnt by degrees in the cabinet of M. le Duc d’Orléans, and it was by this means I was paid for what I had done at La Ferté. M. le Duc d’Orléans also distributed a large number of the Company’s shares to the general officers and others employed in the war against Spain.”
Law was by these means assured of the certainty of his coming proposals meeting with public approval, and the only step now remaining was to mature as speedily as circumstances would permit the arrangements he had been busily negotiating with the Regent and his advisers on the one hand and with the companies and the lessees of the various monopolies on the other.
The Tobacco monopoly was the first of the privileges to be acquired by the company. Although by no means an extensive trade, it was an important and lucrative one. The transfer was effected on 4th September, 1718, under burden of an annual charge of 4,000,000 livres payable to the king. Shortly after, arrangements were completed for the absorption of the Guinea Company, whose business was largely composed of slave-dealing on the West Coast of Africa. This was finally carried through on 15th December of the same year. Then came the fusion of the French East India Company, established in 1664 by Colbert, and also a dormant monopoly issued in 1713 conferring the sole privilege of carrying on trade with China.
The company was now assuming bulky proportions, and a re-arrangement of its capital was necessitated by the requirements of its wide and varied interests, and by the prospect of still further acquisitions under negotiation. Accordingly in May, 1719, a decree was published which conferred upon the Company the new and more pretentious title of the Company of the Indies; permission was given to increase the capital; and to the rights already possessed was added the monopoly of trade “from Guinea to the Japanese Archipelago, of colonising especially the Cape of Good Hope, the East Coast of Africa, that which is washed by the Red Sea, all the known islands on the Pacific, Persia, the Mougal Empire, the Kingdom of Siam, China, Japan, and South America.” The increase of capital was fixed at 27,500,000 livres divided into 50,000 shares of 550 livres each, payable in monthly instalments of 27½ livres per share.
The magnitude of these transactions was now so great and unprecedented as to blind the public entirely to all other considerations, and enthusiasm for the foreigner was more than ever highly pitched. A mad scramble soon ensued for possession of shares which would produce so handsome returns as those promised by the great financier. Dividends of 200 per cent. were indicated as certain to accrue from the company’s operations, and it is said that no fewer than 300,000 applications for shares were received from eager crowds of speculators. An unfortunate hitch, however, postponed the allotment to successful applicants. Parliament was still unwilling to follow Law into all his schemes. They were always ready to place obstacles in his path. Accordingly the decree authorising the issue of additional capital was refused endorsement, and six weeks elapsed before the difficulty could be removed. This untoward incident, however, by no means dampened the ardour of Law or of the general public. The previously issued shares of the company which Law had been himself under necessity of converting from a discount to a premium were now in so great demand that they rose without his interference in the market. Artificial gave way to natural inflation of value through keen competition from without, and Law with that capacity for using every advantage with quick and ready skill turned the public feeling to immediate account. On 20th June he placed an absolute condition upon the acquisition of the newly authorised shares. With the ostensible object of laying down a standard for distribution of the new shares amongst applicants, but really of maintaining and if possible of increasing the price of the old shares, he expressed his intention of allotting the new shares in the proportion of one to four of the old shares held by the applicant. The purchase of the requisite amount of the original issue was a necessary preliminary to a favourable consideration of a further subscription. A great demand for original shares at once followed the issue of this decree, and accordingly the prices rose to double their face value within a comparatively few days. These shares were popularly known as the Mothers and the shares of the new issue as the Daughters. The excitement and competition was intense. The whole business of Paris seemed to be concentrated on the purchase and sale of Indian stock. From the highest down through every grade of the community to the lowest, every one talked and thought of nothing else. Visions of untold wealth were conjured up by rash participants in the race of reckless speculation, and the good fortune of many adventurers only served to stimulate those who as yet lagged far behind.