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A Rehash of Mississippi Market Fundamentals
Should economists sum up the increasing stock prices of the Compagnie des Indes only as the “Mississippi bubble”? After all, behind the price rise lies Law’s program to revitalize the French economy through financial innovation and fiscal reform. Law’s theory was plausible and even has many modern manifestations, and he was an effective propagandist. Investors also could readily observe Law’s astounding rise to power. At each stage, as the implementation of the economic experiment became ever more likely, they had to factor the possibility of success into the share prices of the Compagnie des Indes. The downward slide of share prices is even easier to understand, given the radical shifts in monetary policy and the intimate connection of Compagnie shares to Banque Royale note emissions. The final fall to original share values was driven by Law’s fall from power and the accession of his enemies, who aimed to dismantle the Compagnie.
