New Orleans, The Crescent City

I didn't know this, but apparently New Orleans was founded on one of the greatest financial bubbles of all time. This comes intact from Addison Wiggin via the daily reckoning people:

“At the height of “the bubble,” just when the wheels started to come off, Mississippi John Law came up with a brilliant plan to save his company and the Banque Royale. The year was 1720. Paris, over the previous three years and by virtue of Law’s financial innovations, had become the largest and richest city in Europe.

“Law’s “innovation” was paper money. Apart from a several-hundred-year stretch in China ending in 910, the world had never seen or used paper money. At the outset of The Mississippi Scheme, Law had demanded, on the pain of death, that his banker’s not print more money than could be redeemed in gold from their own reserves. The strict backing of the currency - what was essentially the world’s first gold standard - gave investors of the day such confidence that the currency actually traded at a premium.

“But there was a problem. Law’s bank existed by virtue of a deal with the Regent of France, the Duc d’Orleans. The finances of the government in France following the reign of Louis XIV, his wars and the building of Versaille, were a mess. Seeing how much value was being placed in the new bank notes of the Banque Royale, the Regent set another precedent modern readers will recognize: he decided to print his way out of debt. He suggested Law issue currency up to 80 times what the bank held in redeemable gold reserves. Law, being rather preoccupied with the power and prestige the scheme had bestowed on him, ignored his previous warnings, and let the printing begin.

“The new notes flooded into the market and for a while held the value they had gained with solid gold backing. So many people got rich, the Aristocracy of the time coined a new term to describe them: “millionaires.” Stories of commoners making so much money fired the imaginations of thousands and thousands more investors and the frenzy got out of hand.

“New Orleans, the site of this week’s investment conference, was founded at that time, named after the Regent, and meant to become the Paris of the New World - the jumping off point for those who would mine all the gold and silver soon to be discovered in Mississippi (sic).

“When people started getting wind of the fact that there was nothing backing Law’s currency but rumors of future profits to be reaped in the New World, they started losing confidence in the new currency. Law, trying to keep up appearances just a little longer, rounded up all the beggars, bums and thieves in Paris, furnished them with picks and shovels, and marched them through Paris ostensibly on their way to New Orleans...and the mines of Mississippi. The quiet hiss of air leaking out of the bubble accelerated into a screeching “whoosh!” when the same old dirty faces began appearing in the same old dirty doorways and alleys."

New Orleans didn't become the Paris of the New World and it didn't remain in French hands that much longer (1803) as France fell on harder times. To remember that things are so transitory (paper money, the rise of empires) even when they last for generations, is a good thing in these "interesting" times.