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Sources for numbers and data

John Law and the Mississippi System

John Law and the Mississippi System / 1716–1720 / France (Paris) / Composite (multiple types are essentially mixed)

Sources for numbers and data

A list of where the numbers in the figures and text come from in the source materials. Click the heading to expand.

Read moreNumerical ledger (15 entries)

500 → 1,000 → 3,600 → 5,350 → c. 10,000 → 9,000 (fixed) → 4,200 → 4,500 → 2,000 → 1,000 → 500livres tournois / shareCompagnie share price1719-05-10 → mid-July → 08-26 → 09-09 → Peak → 1720-03-05 → 06-12 → 07-15–17 → 09 → 12 → 1721-09・Face value 500・Market price. Peak period: Garber October 1719 / Velde January 1720François R. Velde 2003 pp. 18, 29, 40, 44・Fig. 4 (4,200 & 4,500 from Buvat pp. 99, 108; 2,000, 1,000 & 500 from Garber p. 46)

769,000,000 → 1,069,700,000 → 1,261,500,000 → 2,054,000,000 → 2,235,100,000 → 2,359,000,000 → 2,001,700,000livresOutstanding balance of Banque Royale notes1719-12-31 → 1720-02-29 → 03-31 → 04-30 → 05-31 → 06-30 → 09-30. Face value (excluding burned notes). The end-of-month notes in Dutot Vol. II, pp. 363–365, match for February to May. Total amount printed: 2,822,300,000 (Table 7).François R. Velde 2003 Table 4 p.25

769,000,000 → 790,520,000 → 1,069,727,990 → 1,261,530,150 → 2,054,004,870 → 2,235,083,590 → 2,380,067,660 → 2,102,745,470 → 2,017,808,880 → 2,022,762,610livresMonth-end balance of notes (contemporary table)1719-12 → 1720-01 → 02 → 03 → 04 → 05 → 06 → 07 → 08 → 09・Nominal value. Table by the author, who was the company's cashier. Read by OCR and collated with Velde's Table 4.Nicolas Dutot—Scan from Google Books 1738 T.II pp.363–365

116.1 → 203.7 → 164.2IndexParis price indexJul 1719 → Sep 1720 → Dec 1720, nominal. Original source not consulted. Velde Fig. 9 uses the same seriesPeter M. Garber 1990 p.45 (Hamilton 1936)

1.2 billion → 1.6 billion (3%)livresNominal value of public debt conversion1719-08-27 → 09-17・10-10・Denominator: 2.8 billion debt in 1715・Nominal value. The amount ordered for redemption on August 31 was 1,499.84 million. Garber states 1.5 billion.François R. Velde 2003 pp.19–20・Table 3

6 million = 5,000 × 1,200 shareslivresCapital of the Banque Générale1716, nominal value. Matches the value in the course material. Mostly paid in billets d'État, initial cash was 690 per share. Original capital clauses not consultedFrançois R. Velde 2003 p.10

100 million = 500 × 200,000 shareslivresCapital of the Compagnie d'Occident1717–1718-12-31 • Face value. Matches the value in the textbook. Paid in at face value with billets d'État. 40% held by the King.François R. Velde 2003 p.17

2 to 5timesOvervaluation of share price1720 peak・Denominator: Author's fundamental value estimate (revenue 75.5 million × multiplier 15 = 1,875 per share)・Market value / EstimateFrançois R. Velde 2003 pp.2, 47–48

9,000livres/shareFixed price of 1720-03-051720-03-05・Face value. Article 5: mutual conversion of shares and banknotes from March 20Conseil d'État du Roi— BnF Gallica 1720 Article 2 (f4)

8,000 → 7,500 → 7,000 → 6,500 → 6,000 → 5,500 → 5,000livres/shareReduction schedule of 1720-05-21 (shares)Date of promulgation → 07-01 → 08-01 → 09-01 → 10-01 → 11-01 → 12-01・Denominator: fixed price 9,000・Face value. Notes of 10,000 livres reduced from 8,000 to 5,000 at the same ratio (Article 2). Revoked on May 27Barthélemy Marmont du Hautchamp— Scan from Google Books 1739 Pièce LXXXI Article 1 pp.98

300 million・390 million・438 million・362 millionlivresIncreased issuance of notes during the peg period1720-03-25・04-05・04-19・05-01・Face value. Velde: Repurchased 27% of its own shares for 1,213.5 million from March to May (via Hautchamp 1:121).Peter M. Garber 1990 p.45

Approx. 1.2 billionlivresContemporary estimate of the total amount of specie1720-02-27 (description in the royal edict)・1 silver marc = 60 livres. Garber gives the same 1.2 billion via Harsin 1928François R. Velde 2003 Note 28 p.24

2,211.2 million → 1.7 billion (47 million in annuities)livresAmount submitted for the *visa* and restructured amountJan 1721 → Jan 1724・Denominator: total printed notes 2,822.3 million・Face value. No reduction for amounts under 500 livres (half the people, 40% of the amount). The rest reduced by 39% on averageFrançois R. Velde 2003 pp.36–37・Table 7

4 → 5 → several people → 12–15 peoplePeople crushed to death1720-06-03 → 07-05 → 07-12–13 → 07-17. A contemporary diary; Mackay reports 15 people on July 17Jean Buvat—Scan from the Internet Archive 1720 pp.97, 105–110

Principal 2,541.4 million · Interest 86.7 millionlivresDebt in 1724Oct. 1724 · Denominator June 1717: 2,321.7 million · 93.7 million · Face value. Increase during the System was about 150 million (p.39)François R. Velde 2003 Table 2 p.8

Read moreSources for the numbers in the figures

Diagram	What the figure represents	Value	Date/Period	Source and location
Fig. 1	Diagram without numbers	—	—	—
Fig. 2	Outstanding Balance of Royal Bank Banknotes	38.0	1719-04-30	François R. Velde 2003 Table 4 p.25
Fig. 2	Outstanding Balance of Royal Bank Banknotes	159.9	1719-07-31	François R. Velde 2003 Table 4 p.25
Fig. 2	Outstanding Balance of Royal Bank Banknotes	380.6	1719-08-31	François R. Velde 2003 Table 4 p.25
Fig. 2	Outstanding Balance of Royal Bank Banknotes	769.0	1719-12-31	François R. Velde 2003 Table 4 p.25
Fig. 2	Outstanding Balance of Royal Bank Banknotes	1069.7	1720-02-29	François R. Velde 2003 Table 4 p.25
Fig. 2	Outstanding Balance of Royal Bank Banknotes	1261.5	1720-03-31	François R. Velde 2003 Table 4 p.25
Fig. 2	Outstanding Balance of Royal Bank Banknotes	2054.0	1720-04-30	François R. Velde 2003 Table 4 p.25
Fig. 2	Outstanding Balance of Royal Bank Banknotes	2235.1	1720-05-31	François R. Velde 2003 Table 4 p.25
Fig. 2	Outstanding Balance of Royal Bank Banknotes	2359.0	1720-06-30	François R. Velde 2003 Table 4 p.25
Fig. 2	Outstanding Balance of Royal Bank Banknotes	2001.7	1720-09-30	François R. Velde 2003 Table 4 p.25
Fig. 2	Outstanding Balance of Royal Bank Banknotes	2069.1	1721-01-08	François R. Velde 2003 Table 4 p.25
Fig. 3	Possession of more than 500 livres in gold or silver coins prohibited	—	1720-02-27	François R. Velde 2003
Fig. 3	Decision to fix the share price at 9,000 livres and exchange shares and notes at a fixed rate	—	1720-03-05	Conseil d'État du Roi— BnF Gallica 1720
Fig. 3	Decision to devalue shares and notes monthly	—	1720-05-21	Barthélemy Marmont du Hautchamp—Scan from Google Books 1739
Fig. 3	Revocation of the devaluation decision	—	1720-05-27	Barthélemy Marmont du Hautchamp—Scan from Google Books 1739
Fig. 3	Freedom to possess gold and silver coins restored	—	1720-06-01	Barthélemy Marmont du Hautchamp—Scan from Google Books 1739
Fig. 3	4 people crushed to death in the crowd at the bank's counter	—	1720-06-03	Jean Buvat—Scan from Internet Archive 1720
Fig. 3	12 to 15 people crushed to death. Payment of notes suspended.	—	1720-07-17	Jean Buvat—Scan from Internet Archive 1720
Fig. 4	Paris Commodity Price Index (Hamilton 1936)	116.1	1719-07	Peter M. Garber 1990 p.45
Fig. 4	Paris Commodity Price Index (Hamilton 1936)	203.7	1720-09	Peter M. Garber 1990 p.45
Fig. 4	Paris Commodity Price Index (Hamilton 1936)	164.2	1720-12	Peter M. Garber 1990 p.45
Fig. 5	Possession of more than 500 livres in gold or silver coins prohibited	—	February 27, 1720	—
Fig. 5	Fixing the share price at 9,000 livres and opening a window to exchange them for notes	—	March 5, 1720	—
Fig. 5	Decision to devalue. Retracted on the 27th	—	May 21, 1720	—
Fig. 5	The visa. Paper is converted into government bonds with a principal of 1.7 billion livres	—	1721–1724	—

Read moreWhat the sources tell us

The historical sources are divided into four groups. First, official documents. I have read parts of the titles, preambles, and articles of the letters patent of May 2, 1716, the edict of August 1717, the declaration of December 4, 1718, and the Council of State decisions of March 5 and June 2, 1720, from images at the Bibliothèque nationale de France. For the texts of the May 21 devaluation decree and the May 27 retraction, I have read the transcriptions in Du Hautchamp's "Histoire du Système des Finances," published in The Hague in 1739. Second, contemporary records. The diary of Buvat, a scribe at the Royal Library, covers every day from May to July 1720, and Dutot's 1738 book, who was the company's cashier, includes a table of month-end balances of notes. Third, research. I have read Garber's (1990) overview and Velde's (2003) full text, while Velde (2007), Murphy (1997), and Hamilton (1936) were used only for bibliographic confirmation. Fourth, popular works. I read Mackay (1841) as a source for the legends.

These have biases and omissions. The System's ledgers were publicly burned in 1727, and the Visa's ledgers in 1722. Many of the figures come from the 1730s controversy (Du Tot vs. Pâris-Duverney). Du Tot was a defender of the System. Buvat also wrote down rumors, noting himself that “it was said.” The daily series of stock prices is only available from August 1719 onwards; before that, it is sporadic. The appendix by Velde, which lists securities and their prices, is a separate volume and is not included in the materials listed here. Hamilton's price index is based on the purchase records of a Paris hospital.

Scholarly positions are divided. Garber argues against calling it a bubble in the modern sense, as the price increase followed the stages of the System's implementation and the decline can be explained by the monetization of shares and Law's own deflationary measures. Velde, after calculating that the stock price was overvalued by 2 to 5 times at its peak, attributes this to Law's price support policy and concludes that since the debt was rebuilt to its original level, if it is to be called a default, it was only 5 to 10%, and not fraud. Faure marks July 17, 1720, the day of the payment suspension, as the day of “Law's bankruptcy,” while Marion wrote of “another default.” The views of these two are read within the scope cited by Velde. The timing of the peak also differs, with Garber's in October 1719 and Velde's in January 1720. Views differ among scholars, and it is not possible to determine which is correct.

Law's theory can be read in his 1705 "Money and Trade Considered." "Domestic trade depends on money. A greater quantity employs a greater number of people." His proposal was for a commission, appointed by and accountable to Parliament, to issue notes backed by land. As Velde points out, Law did not write after 1715, and the rationale for converting public debt into shares is not found in his pre-1715 works. Why he pegged the price at the high value of 9,000 remains an open question—whether it was a miscalculation or for the benefit of early insiders.

How do we know? — Types of sources

Contemporary Records

Official Documents

Institutional Accounts

Government Equity and Money: John Law's System in 1720 France

Research

Popular Books

Memoirs of Extraordinary Popular Delusions (vol. 1) Cited as the source of the common story. Not used for factual descriptions

A bubble, or a failed monetary experiment?

Mackay 1841

A greedy frenzy of the whole nation. Law himself was "more deceived than deceiving."

Charles Mackay 1841

Garber 1990

Explainable by fundamentals. Not a bubble in the modern sense.

Peter M. Garber 1990

Velde 2003

Overvaluation by a factor of 2 to 5 due to price support policy. The market price itself was Law's policy after late 1719.

François R. Velde 2003

Main cause of the collapse

Textbook

Printed more notes than could be converted into specie.

Garber

Monetization of shares (pegging on March 5) and Law's own deflationary policy (May 21).

Peter M. Garber 1990

Velde

Price support led to an increase in note issuance, the ban on specie failed to stop the fall in the exchange rate, and an orderly retreat was impossible when he backtracked in May.

François R. Velde 2003