Where Millionaires Come From

Everywhere, it seems, five-year anniversary examinations of the latest financial crisis are appearing.

I thought it might be interesting to re-visit a much earlier bubble that burst: to remind us that nothing much new under the sun has occurred in a very long time.

In the first part of the 18th Century, French investors piled money into the Mississippi Company, which was set-up to control the nation’s trade in North America and the West Indies.

Financial innovation drove wild growth.

Paper money was introduced and the idea of a joint-stock company was implemented.

By 1718, the narrow, dirty Rue Quincampoix had become Paris’ Wall Street.

Greed was rampant.

Buyers and sellers of all classes- duchesses and prostitutes, Parisians, provincials, foreigners- gathered in great numbers as the excitement mounted hourly.

Conventional wisdom held that the value of French holdings in the New World would always rise.

Since only 10% of a share of Mississippi Company had to be paid for, paper “millionaires” were being created each day, from bankers to waiters.

However, in the end, the enterprise did not prosper.

Much of the territory remained unconquered wilderness. Hopes of gold or other precious stones to be mined from the colonial soil proved illusory.

By the end of 1720, the King halted trading of Mississippi Company stocks.

Most of the new millionaires went bust.

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