"I Am Not Master of Events"

"I Am Not Master of Events": The Speculations of John Law and Lord Londonderry in the Mississippi and South Sea Bubbles

Larry Neal
Copyright Date: 2012
Published by: Yale University Press
Pages: 224
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  • Book Info
    "I Am Not Master of Events"
    Book Description:

    Two of the greatest financial fiascos of all time took place at the same time and were instigated by two acquaintances: the Mississippi Bubble, on which John Law at first made a vast fortune and gained sway over French finances; and the South Sea Bubble, launched by Law and Thomas Pitt, Jr., Lord Londonderry, his main partner in England. This book tells the story of these two financial schemes from the letters and accounts of two leading personalities. Larry Neal, a distinguished economic historian, highlights the rationality of each person and also finds that the primitive exchanges of the day, though informal and completely unregulated, actually performed reasonably well.

    eISBN: 978-0-300-15317-0
    Subjects: Economics, History

Table of Contents

  1. Front Matter
    (pp. i-iv)
  2. Table of Contents
    (pp. v-vi)
  3. Preface
    (pp. vii-xii)
  4. Cast of Characters
    (pp. xiii-xiv)
  5. Chapter 1 Storms in the Caribbean Sea and the Life of Lord Londonderry
    (pp. 1-22)

    The HMSPearl, a fourth-rate man-of-war of the British Royal Navy, had difficulty locating the small island of Antigua in the Caribbean, where it was supposed to deliver the new governor of the Leeward Islands, Lord Londonderry.¹ At 10 a.m. on August 17, 1728, O.S., the first lieutenant reported that the island was sighted, but as the ship approached St. John’s harbor, a severe squall struck the stern, and by 8 p.m. thePearlwas in the midst of a hurricane. Cutting loose their first anchor, the crew moved the ship to safer moorage, where they were able to re-anchor,...

  6. Chapter 2 The War of the Spanish Succession and the Jacobite Rebellion
    (pp. 23-39)

    The personal, financial, and ultimately political relationship between John Law and Lord Londonderry that arose over the period 1715–29 gives us a unique insight into many aspects of European history at this time. Law was the architect of a novel fiscal and monetary system in France that culminated in the collapse of the Mississippi bubble in 1720; Londonderry was the manager of the finances for the emerging political dynasty created by his father, Gov. Thomas “Diamond” Pitt, which included five members of Parliament in 1720 during the South Sea bubble in England. The dynamics of their personal relationship also...

  7. Chapter 3 The Diamond Deal
    (pp. 40-54)

    Among the letters written to Lord Londonderry that arrived after his death in the Caribbean was one that described John Law’s repeated use of a large diamond in his possession in Venice. Whenever he was losing at the gambling tables he would put down the diamond as a pledge against credit from the house and continue until his winnings enabled him to redeem the diamond for use another day. Diamonds were certainly part of Law’s continued allure to his contemporaries at the end of his illustrious career. They may also have been critical in his rise to the pinnacle of...

  8. Chapter 4 Learning by Doing: Law and Londonderry Before the Bet
    (pp. 55-74)

    At the time of the wager Lord Londonderry and John Law made at their dinner in Paris in August 1719, Law was about to launch his most ambitious scheme yet to refinance French government debt and to reorganize French public finances. In previous years Law had learned the intricacies of French court politics so that he could implement his ideas for rationalizing the national finances of France. His theories for improving state finances had developed from variants on land bank schemes proposed in Scotland and England to marketing annuities in Italy to insuring lotteries in Amsterdam over the past twenty...

  9. Chapter 5 The Bet of the Bubbles
    (pp. 75-93)

    According to the official report of the British ambassador, John Law’s motive in making the bet was to intimidate not only Londonderry, but evidently the British as well. Lord Stair emphasized Law’s arrogance when he reported Law’s boast that “there was but one great kingdom in Europe and one great town, and that was France and Paris.” Law’s assertion “that he can ruin the trade and credit of England and Holland, whenever he pleases; that he can break, whenever he has a mind our East India Company” was the point driven home by Stair.¹ Significantly, the ambassador made no mention...

  10. Chapter 6 The Blowing and Bursting of Bubbles
    (pp. 94-106)

    By March 1720 the prices of all stocks in London were starting to rise, and the South Sea bubble was beginning to inflate as well. The price of East India Company stock had stayed above £200 since the first of January and in a burst of spring fever had even touched £250 on March 21. Londonderry had returned to London from Paris, where he had arranged by means of dozens of contracts to extricate himself from the Compagnie des Indes and realize his profits there. Given the opportunities now available in London for such an experienced speculator as himself, Londonderry...

  11. Chapter 7 The Workout
    (pp. 107-122)

    It took Col. James Otway longer to reach Venice than it did John Law. Traveling by sea on a British man-of-war, Otway was required to stay at Port Mahon longer than expected owing to a quarantine placed on ships in order to contain the spread of the plague that had broken out in Marseilles in late summer 1720. Letters from Londonderry did follow Law overland, however, and Law responded regularly. Law’s letters from Venice, found in the archive at Méjanes in southern France, are a combination of placating his French colleagues, particularly his brother, William; pleading his case for his...

  12. Chapter 8 Family Problems
    (pp. 123-140)

    The sudden death of James Lord Stanhope in February 1721 broke the personal and political connection that had previously linked Law and Londonderry above and beyond the terms of the East India contract. Stanhope had apparently suffered a seizure while speaking in the House of Lords, responding furiously to the insinuations of corruption made against him by the young Lord Wharton. In an eerie foreshadowing of the later collapse of William Pitt the Elder in 1778, also while speaking in the House of Lords, Stanhope had to be helped from the House. At home, he endured various medical attentions that...

  13. Chapter 9 Did the Speculations of Law and Londonderry Matter?
    (pp. 141-157)

    John Law and Thomas Pitt, Jr., Lord Londonderry, were two mortals caught up in the financial turmoil created by the realignment of Europe’s political architecture following the War of the Spanish Succession, each trying to the best of his ability to deal with the aftershocks of the collapse of the twin bubbles. Intense as the relationship between Law and Londonderry was during the height of the two bubbles, it lasted for only a dozen years, 1717–29, and ended unresolved. The Pitt-Regent Diamond was never paid for in full, the result of the collapse of Law’s System for French finances...

  14. Chapter 10 Epilogue
    (pp. 158-164)

    Neither Law nor Londonderry left a legacy of note in terms of their children. Law had a son and a daughter by Katherine Knollys, but when he departed from France in December 1720 he left Katherine and his daughter, Mary Catherine, in Paris and took with him only his teenage son, William. He never rejoined his wife or daughter, who remained in Paris while he was in Venice and England and when he was traveling on the Continent on his way between Venice and England. His son was with him when he died in Venice and was immediately the object...

  15. Appendix: Preliminary Catalogue of the Londonderry Papers
    (pp. 165-176)
  16. Notes
    (pp. 177-202)
  17. References
    (pp. 203-206)
  18. Index
    (pp. 207-214)