Law was now in London, where
his personal accomplishments, fascinating manners, and devotion to gambling,
procured him admittance into some of the first circles. An affair of
gallantry, however, with another dissolute young man, led to a hostile
meeting, in which Law killed his antagonist on the spot. After a trial
before the king and queen’s commissioners in the Old Bailey, which lasted
three days, the jury found the survivor in this duel guilty of murder, and
sentence of death was accordingly passed upon him, 20th April, 1694. On a
representation of the case to the crown, Law obtained a pardon; but
was detained in the King’s Bench, in consequence of an appeal against this
extension of royal clemency towards him having been lodged by a brother of
the deceased. He found means, however, to make his escape, and got clear off
to the continent. [On this occasion the following advertisement was
published in the London Gazette of Monday, 7th January,
1695: "Captain John Law, lately a prisoner in the King’s Bench for murther,
aged 26, a very tall, black lean man, well-shaped, above six feet high,
large pock-holes in his face, big high nosed, speaks broad and loud, made
his escape from the said prison. Whoever secures him, so as he may be
delivered at the said prison, shall have fifty pounds paid immediately by
the Marshall of the King’s Bench." We may here observe, that this
description was upon the whole inaccurate, and leaves room to believe that
it was designed rather with the view of facilitating than impeding his
escape.]
Law was at this critical
period of his life in the 26th year of his age. His dissipation had not
destroyed the tone of his mind, nor enfeebled those peculiar powers which
had so early developed themselves in him. He visited France, then under the
brilliant administration of Colbert, where his inquiries were particularly
directed to the state of the public finances, and the mode of conducting
banking establishments. From France he proceeded to Holland, where the
mercantile system of those wealthy republicans, who had succeeded the
merchant princes of Venice in conducting the commerce of Europe, presented
to his mind a vast and most interesting subject of investigation. Amsterdam
was at this period the most important commercial city in Europe, and
possessed a celebrated banking establishment, on the credit of which her
citizens had been enabled to baffle the efforts of Louis XIV., to enslave
the liberties of their country; a treasury, whose coffers seemed
inexhaustible, and the whole system of which was an enigma to the political
economists of other countries. Law, with the view of penetrating into the
secret springs and mechanism of this wonderful establishment, took up his
residence for some time at Amsterdam, where he ostensibly officiated as
secretary to the British resident.
About the year 1700, he
returned to Scotland. He was now nearly thirty years of age, and had
acquired a more accurate acquaintance with the theory of commercial and
national finances, as well as with their practical details, than perhaps any
single individual in Europe possessed at this time. The contrast which
Scotland presented to those commercial countries which he had visited during
his exile now struck him forcibly, and he immediately conceived the design
of creating that capital to the want of which he attributed the depressed
state of Scottish agriculture, manufacture, and commerce. Law’s views were
not without foundation; but unfortunately, he stumbled at the outset, by
mistaking the true nature of capital. The radical delusion under which he
laboured from the outset to the close of his financial career, originated in
the idea which had got possession of his mind, that by augmenting the
circulating medium of a country we proportionally augment its capital and
productive energies. Now, money is not always convertible into capital, that
is, into something which may be employed towards further production; for the
creation of exchangeable products must, in the nature of things, precede the
creation of a general medium of commerce, and it is quite evident, that if
we double the amount of the circulating medium without doubling the products
of industry, we just depreciate the currency in the degree of the excess,
and do not increase the resources or industry of a country in the least. But
Law conceived that to her overflow of money alone Holland owed her national
prosperity; and he calculated that the increase of the circulating medium in
Scotland would be absorbed by the increase of industry, and have no other
effect than to lower the rate of interest. This view he developed in a
publication entitled "Proposals and Reasons for constituting a Council of
Trade," dated at Edinburgh, 31st December, 1700, and published at Glasgow in
the following year; and in a second and more important work, entitled "Money
and Trade considered, with a Proposal for supplying the nation with money,"
printed at Edinburgh in 1705.
In the latter work, Law
developed his views of banking and the credit system. He proposed to supply
Scotland with money by means of notes to be issued by certain commissioners
appointed by parliament; which notes were to be given out to all who
demanded them, upon the security of land. In answer to the supposition, that
they might be depreciated by excess or quantity, he observed, that "the
commissioners giving out what sums are demanded, and taking back what sums
are offered to be returned, this paper-money will keep the value, and there
will always be as much money as there is occasion or employment for, and no
more. Here his project evidently confounds the quantity of good security in
the country, and the quantity of money which people may wish to borrow at
interest, with the quantity necessary for the circulation, so as to keep
paper-money on a level with the precious metals, and the currency of
surrounding countries,—a mistake which has prevailed to a very considerable
extent in our own times. But notwithstanding of this capital error, Law has
in the latter publication developed the principles and mechanism of banking
in an astonishingly able and luminous manner for the period at which he
wrote. The court party, and the squadrone, headed by the duke of
Argyle and the marquess of Tweeddale, entered warmly into Law’s views; but
parliament passed a resolution "that to establish any kind of paper-credit,
so as to oblige it to pass, were an improper expedient for the nation."
Law now resolved to offer his
system to some of those continental states whose finances had been exhausted
by the wars of Louis XIV., and in which the principles of credit were
imperfectly understood. With this view he went to Brussels, and from that
city proceeded to Paris, where he won immense sums at play, and introduced
himself into the good graces of the young duke of Orleans. The Succession
war was at this moment occupying the attention of the French court;
Chamillart, unable to extricate himself from the difficulties of his
situation in any other manner, was about to resign his functions as minister
of finance; the moment appeared favourable to our projector, and he made
offer of his services to the French monarch. But the leading men of the day
were totally unable to comprehend the plans of the new financier, and the
name of Huguenot was no passport to the royal favour: so that the unexpected
result of this negotiation was an order from the intendant of police to quit
Paris in twenty-four hours as a state-enemy. Law, found himself in a similar
predicament at Genoa and Turin, but not before he had pursued his usual run
of luck at the gaming-tables in these cities. After visiting several other
continental cities, in all of which his fascinating manner procured
him admission to the first circles, our adventurer found himself possessed
of a tangible fortune of considerably more than £100,000,—the fruits of his
skill and success at play. The death of Louis XIV.,—the succession of the
duke of Orleans to the regency,—and the deplorable state of the French
finances, prompted Law to present himself once more to the attention of the
French ministry.
During the war of
Succession--now brought to a close—Demarest, who had succeeded Chamillart as
comptroller-general, had exhausted every possible means of raising money; he
had issued promissory notes under every conceivable name and form,—Promesses
de la caisse des emprunts, Billets de Legendre, Billets de l’ extraordinaire
des guerres, but all without success; the credit of the government was
gone, and its effets of every description had sunk from seventy to
eighty per cent in value. In this extremity, the expedient of a national
bankruptcy was proposed to and rejected by the regent, who also refused to
give a forced circulation to the royal billets, but appointed a
commission to inquire into the claims of the state-creditors. The commission
executed its duties with great ability; but after reducing the national debt
to its lowest possible form, and providing for the payment of the interest
amounting to 80,000,000 of livres, or about one half of the revenue, there
hardly remained a sum sufficient to defray the ordinary expenses of the
civil government, and that too, after having had recourse to a measure
tantamount, in its effects at least, to a breach of faith, namely, a change
in the nominal value of the currency. By the latter scheme, the government
foolishly imagined that they would pocket 200,000,000 of livres, but the sum
on which they had calculated, only went into the pockets of the Dutch and
the clandestine money-dealers. At this critical juncture, Law stepped
forward in the full confidence of being yet able to rescue the government
from bankruptcy, by the establishment of a well-regulated paper-credit. His
first proposal was to establish a national bank, into which was to be
transferred all the metallic currency of the nation, which was to be
replaced by bank-notes. Law regarded the whole nation as one grand
banking-company, and his reasoning was this:—If a bank may increase the
issue of its notes beyond the amount of its funds in bullion, without
risking its solvency, a nation may also do the same. But the private
fortunes of the individuals of a nation, it is quite evident, can never be
held as security for the notes which the sovereign authority may choose to
issue; and unless such security is to be found in the resources of the
government itself, it is equally clear that a paper-currency might sink in
the course of a few months fifty or a hundred per cent below the value of
the precious metals, and deprive individuals of half or the whole of their
fortunes. Law seems to have regarded credit as every thing,—as
intrinsic worth,—as specie itself. Still, notwithstanding this capital
delusion, the memoirs which he addressed to the regent on the subject,
contain many just observations on the peculiar facilities afforded to trade
by the existence of a paper-currency: though they failed to remove the
doubts of one sapient objector, who thought a paper-currency highly
dangerous, on account of its liability to being cut or violently destroyed!
The council of finance, however, rejected this scheme. The present
conjuncture, they thought, was not favourable for the undertaking; and this
reason, added to some particular clauses of the project, determined them to
refuse it.
Law next proposed a private
bank for the issue of notes, the funds of which should be furnished entirely
from his own fortune, and that of others who might be willing to engage with
him in the speculation. He represented the disastrous consequences which had
resulted from a fluctuating currency, the enormous rate at which discounts
were effected, the difficulties in the exchange between Paris and the
provinces, and the general want of an increased currency; and succeeded in
convincing the regent that these evils might be obviated by the adoption of
his plans even in their limited modification. The bank was accordingly
established by letters patent, bearing date the 2nd of May, 1716. Its
capital was fixed at 1200 shares of 5000 livres each, or about £300,000
sterling. The notes were payable at sight in specie of the same weight and
fineness as the money in circulation at the period of their issue; and hence
they soon bore a premium above the metallic currency itself, which had been
subjected to many violent alterations since 1689. The good faith which the
bank observed in its proceedings,—the patronage which it received from the
regent,—and the want of private credit, soon procured for it a vast run of
business. Had Law confined his attention to this single establishment, he
would justly have been considered as one of the greatest benefactors of the
country, and the creator of a beautiful system of commercial finance; but
the vastness of his own conceptions, his boundless ambition, and the
unlimited confidence which the public now reposed in him, suggested more
gigantic enterprizes, and led the way to that highly forced and unnatural
system of things which eventually entailed ruin upon all connected with it.
Law had always entertained
the idea of uniting the operations of banking with those of commerce. Every
one knows that nothing can be more hazardous than such an attempt; for the
credit of the banker cannot be made to rest upon the uncertain guarantee of
commercial speculations. But the French had yet no accurate ideas on this
subject. Law’s confidence in the resources of his own financial genius was
unbounded, and the world at this moment exhibited a theatre of tempting
enterprise to a comprehensive mind. The Spaniards had established colonies
around the gulf of Mexico,—the English were in possession of Carolina and
Virginia,—and the French held the vast province of Canada. Although the
coast lands of North America were already colonized, European enterprize had
not yet penetrated into the interior of this fertile country; but the
chevalier de Lasalle had descended the Mississippi, to the gulf of Mexico,
and, taking possession of the country through which he passed in the name of
the French monarch, gave it the appellation of Louisiana. A celebrated
merchant of the name of Crozat had obtained the privilege of trading with
this newly discovered country, and had attempted, but without success, to
establish a colony within it. Law’s imagination, however, was fired at the
boundless field of enterprise which he conceived was here presented; he
talked of its beauty, of its fertility, of the abundance and rarity of its
produce, of the richness of its mines outrivalling those of Mexico or
Peru,—and in the month of August, 1717, within five months after his
embarkation in the scheme of the bank, our projector had placed himself,
under the auspices of the regent, at the head of the famous Mississippi
scheme, or West Indian company. This company was invested with the full
sovereignty of Louisiana, on condition of doing homage for the investiture
to the king of France, and presenting a crown of gold, of thirty marcs, to
each new monarch of the French empire on his accession to the throne. It was
authorised to raise troops, to fit out ships of war, to construct forts,
institute tribunals, explore mines, and exercise all other acts of
sovereignty. The king made a present to the company of the vessels, forts,
and settlements which had been constructed by Crozat, and gave it the
monopoly of the beaver trade with Canada for twenty-five years. In December
following, the capital of the West Indian company was fixed at 100,000,000
livres, divided into 200,000 shares; and the billets d’ etat, were
taken at their full value from those wishing to purchase shares. Government
paper was at this moment vastly depreciated on account of the irregular
payment of the interest; but although 500 livres nominal value in the public
funds could not have been sold for more than 150 or 160 livres, the
billets d’ etat, by this contrivance, soon rose to par. It was evident
that these fictitious funds could not form stock for commercial enterprise;
nevertheless, the advance of the government debts to a rate so advantageous
to the holders, increased the value of the government securities that
remained in circulation, and the depreciated paper rose to full credit with
the astonished public, who now began to place implicit confidence in Law’s
schemes. The council of finance, however, looked with mistrust on these
proceedings; and its president, the duke de Noailles gave in his
resignation, and was replaced by d’ Argenson, a man far less skilled in
matters of finance. The jealousy of the parliament, too, was excited by the
increasing influence of the Scottish financier, who had been heard
imprudently to boast that he would render the court independent of
parliamentary supplies. By an aret of the 18th of August, 1717, the
parliament attempted to destroy the credit of the notes of the bank, by
prohibiting the officers of the revenue from taking them in payment
of the taxes; but the regent interposed, and Law was allowed to continue his
operations. He, however, encountered another formidable rival in d’ Argenson,
who now proposed, with the assistance of the four brothers Paris, men of
great wealth and influence in the commercial world, to form a company which,
with a capital as large as that of the West Indian company, should advance
large sums of money secured on the farms, posts, and other branches of the
public revenue. This anti-system, as it was called, soon fell to pieces for
want of the same energetic and fearless direction which characterized the
schemes of its rival.
Law now prevailed on the
regent to take the bank under royal guarantee, persuading him that it was
quite possible to draw into it the whole circulating specie of the kingdom,
and to replace it by the same amount of paper-money. The notes issued by the
royal bank, however, did not promise, as those of Law’s private
establishment had done, to pay in specie of the same weight and fineness as
the specie then in circulation, but merely to pay in silver coin. This
opened a door for all the fluctuations which might occur in the real value
of the coin called a livre, affecting the value of the paper-money. Law was
made director-general of the royal bank, which, in a few months, issued
1,000,000,000 of livres in new notes; "less," says the royal arêt, "not
being sufficient for its various operations:" although this sum was more
than all the banks of Europe could circulate, keeping good faith with their
creditors. The director-general found it extremely difficult to support the
credit of such an enormous issue, and for a while hesitated between the plan
of insensibly transforming bank-notes into a real paper-money, by giving the
latter a decided advantage over specie, which should be kept constantly
fluctuating, and by receiving it in payment of the taxes; or of creating a
new and apparently lucrative investment for this paper, so as to prevent its
returning upon the bank to be exchanged for specie. The latter plan appeared
at last the preferable one. A colossal establishment was projected with a
capital equal in amount to the public debt. This capital was to be divided
into shares, which the regent was to buy with the paper-money that he was to
manufacture; he was then to borrow this paper anew to pay the creditors of
the state; and then by selling the shares, to retire the paper-money, and
thus transfer the creditors of the state to the company.
Accordingly, in May, 1719,
the East India company, established by Richelieu, in 1664, the affairs of
which were then at a very low ebb, was incorporated with that of the West
Indies; and the conjoined companies received the name of the Company of the
Indies, "with the four quarters of the world to trade in." "Moreover," says
the edict issued on this occasion, "beside the 100,000,000 of public debts
already subscribed into the Western Company’s capital, there shall be a new
subscription of 50,000 shares of 550 livres each, payable in specie." In a
short time, the newly created company engaged, by extending its capital to
624,000 shares, to lend the king the immense sum of 1,600,000,000, at three
per cent interest, and declared itself in a condition to pay a dividend of
200 livres upon each share. The public faith being yet unshaken, the shares
hereupon rose to 5000 livres; and when the king began to pay off the
state-creditors with the loan now procured, many not knowing how to employ
their capital, a new competition for shares in the great company arose, and
shares actually rose in consequence to 10,000 livres. The slightest
consideration might have served to convince any cool speculator, that the
company had come under engagements which, in no circumstances, however
prosperous, it could fulfil. How was it possible that the company could
raise annually 124,800,000 livres for the dividend upon 624,000 shares? Or,
supposing it able to make an annual dividend of 200 livres a share, still
the rate of interest being at this time about four percent., the shareholder
who had bought in at 10,000, thus lost one-half of the revenue be might
otherwise have drawn from the employment of his capital. The truth is, the
whole scheme was designed for the sole purpose of relieving the state from
its debts by the ruin of its creditors; but the immense fortunes which were
realized by stock-jobbing at the very outset of the scheme, led on others to
engage in the same speculation; splendid fortunes were realized in the
course of a single day; men found themselves suddenly exalted as if by the
wand of an enchanter, from the lowest station in life to the command of
princely fortunes; twelve hundred new equipages appeared on the streets of
Paris in the course of six weeks; half a million of people hastened from the
country, and even from distant kingdoms to procure shares in the India
company; and happy was he who held the greatest number of these bubbles. The
negotiations for the sale and purchase of shares were at first carried on in
the Rue Quincampoix, where fortunes were made by letting lodgings to the
crowds who hastened thither for the purpose of speculating in the stocks.
The murder of a rich stock-jobber, committed here on the 22nd of March,
1720, by a young Flemish nobleman, occasioned the proscription of that
street as a place of business, and the transference of the stock-jobbing to
the Place Vendome, and finally to the hotel de Soissons, which Law is said
to have purchased from the prince of Carignan for the enormous sum of
1,400,000 livres.
Innumerable anecdotes are on
record of the extraordinary vicissitudes of fortune which took place during
this season of marvellous excitement; footmen stepped from the back to the
inside of carriages; cooks appeared at the public places with diamond
necklaces; butlers started their berlins; and men educated in poverty and of
the lowest rank suddenly exchanged the furniture and utensils of their
apartments for the richest articles which the upholsterer and silversmith
could furnish. Law himself, now arrived "summa ad vestigia rerum," shone
super-eminent above all the other attractions of the day; princes, dukes,
marshals, prelates, flocked to his levees, and counted themselves fortunate
if they could obtain a smile from the great dispenser of fortune’s favours;
peeresses of France, in the excess of their adulations, lavished compliments
upon the Scottish adventurer which set even decency at defiance; his
daughter’s hand was solicited by princes; and his lady bore herself with
hauteur towards the duchesses of the kingdom. Land in the neighbourhood of
Paris rose to eighty or a hundred year’s purchase; the ell of cloth of
fifteen livres sold for fifty; coffee rose from fifty sous to eighteen
livres; stock-jobbers were known to treat their guests to green pease at a
hundred pistoles the pint; every yard of rich cloth or velvet was bought up
for the clothing of the new élèves of fortune; and the value of the
silver plate manufactured in the course of three months for supplying the
demands of the French capital amounted to 7,200,000 pounds! The regent,
sharing in the general delusion, wished to place the wonderful foreigner at
the head of the finances of the kingdom; but then, in addition to his being
an alien, he was a protestant also; so l’Abbé de Tencin was charged with the
important duty of his conversion, and this ecclesiastic succeeded so well in
the task assigned to him, that on the 5th of January, 1720, all obstacles
being removed, Law was elevated to the comptroller-generalship of the
finances of France, and for some time after his elevation to the
premiership, governed France with almost absolute power. Law’s fame had now
reached its acme; his native city of Edinburgh hastened to transmit to her
illustrious son the freedom of citizenship in a gold box of the value of
£300; the earl of Ilay re-published some of his works with an adulatory
preface; British noblemen disdained not to pay their court to so successful
an adventurer; even the earl of Stair, then the British ambassador at Paris,
trembled at the idea of Law’s overweening influence in the affairs of
France, and viewed his boastful speeches in so serious a light, as to deem
them matter of grave communication and advice to his government,--a piece of
good faith for which the meritorious and discerning minister met with small
thanks.
The great drama, however,
which Law was now enacting before the astonished eyes of all Europe, was
soon to shift; the glittering bubble on which he had fixed the eyes and
expectations of all France was rapidly attenuating to its explosion; the
charm by which he had swayed the mind of the million lay not in the rod of
the magician, but in the implicit faith which people reposed in the skill
and the power of its master,—and, that faith once shaken, the game of
delusion was over.
We have said that the shares
of the India company had risen to 10,000 livres each in the month of
November, 1719. So long as they kept at this elevation, the credit of the
bank remained unshaken. Its notes were found so very convenient in
conducting the rapid negotiations of the Rue Quincampoix, that they were
sought after with avidity, and even bore a premium of ten percent in
exchange for specie! Notwithstanding, however, of the boundless delusion
under which men acted at this moment, it could not escape the eyes of the
vigilant financier, that a constant and enormous drain of specie was going
on, either in the way of exportation to foreign countries, or for the
consumption of the jewellers and goldsmiths. To answer the large orders of
the wealthy Mississippians, and to guard against a run upon the bank in
these circumstances, the master-projector had again recourse to forced
measures. Edicts were issued declaring the value of bank-notes to be five
per cent, above that of specie, and forbidding the use of silver for the
payment of any sum exceeding 100 livres, or of gold, in payments exceeding
300 livres. Law thought by these expedients to confine the use of specie to
small transactions alone, while those of any magnitude could still be
conducted by the fictitious currency which he had called into existence. At
the same time, to give a fresh impulse to the stock-jobbing transactions,
which had experienced a perceptible decline, he presented himself personally
in his ministerial robes, and surrounded by a number of the nobility in the
Rue Quincampoix, where his presence instantly excited a lively sensation;
and the report being industriously propagated that new edicts were about to
be issued, conferring additional privileges on the great company, the
actions which had fallen to 12,000 livres, rose to 15,000. Still the public
creditors hesitated to employ the notes now issuing in extinction of their
debts in purchasing India stock; and the enormous sum of 1,000,000,000,
remained floating in the form of bank notes, for which no species of
investment could be found.
A publication issued at this
juncture by Law, under the title of Lettre a un Créancier, failed to
satisfy their scruples, and actions again fell to 12,000 livres. Meanwhile,
specie, in spite of successive depreciations effected upon it at the
suggestion of the minister of finance, entirely disappeared; still the
government kept issuing notes to the immense amount of 1,925,000,000,
between the 1st of January, and the 20th of May, 1720, and the price of
every thing advanced in almost hourly progression. On the 11th of March, a second letter from the minister of finance appeared, in which he
employed the most ingenious sophistry in defence of the exaggerated value at
which the paper-currency was attempted to be maintained. The choice of a
standard value, the great financier contended, was wholly a matter of
opinion. To support the value of any article in the opinion of the
community, it is only necessary to decline selling it under a certain price.
Houses, lands, and other articles of property, have a certain value in the
opinion of mankind, just because some people desire to purchase them, and
others will not part with them; but if all the proprietors of houses and
land were willing to get rid of their property at one and the same time what
value would it have in the market? It is easy to answer such palpable
sophistry as this. Houses and lands are possessions fit for certain purposes
which men require; it is their fitness which constitutes their value; but in
the case of those shares whose value, Law contended, ought to be quite as
real as that of any other article of property, it is most evident that they
have no value, unless the profit to be derived from commerce in them be not
proportioned to the price at which the stock was purchased; from the moment,
in fact, that they cease to become marketable they are, stripped of their
value. A system supported by such desperate reasoning as Law had here
recourse to, must have appeared tottering to its fall in the eyes of every
rational man; the public credit of France was about to give way; the
Atlantean shoulders on which it had been hitherto supported, could no longer
prop the mighty burden. Government at last perceived that too great an
extension had been given to what Law called credit, and that to
re-establish the value of paper, it would be necessary to diminish its
amount. On the 21st of May, the death-blow was given to the whole gigantic
system of our Scottish projector, by an edict which announced that a
progressive reduction of the India company’s action, and of bank-notes, was
to take place from that day till the 1st of December, when it was declared
that the bank-notes should remain fixed at one-half of their present value,
and the actions at four-ninths. Law, whose influence with the government was
now rapidly sinking, or rather was annihilated, felt himself too weak to
resist this measure, and actually consented to announce it himself. The
public eye was now opened in one instant to the delusion which had been
practised upon it, and the next day every one was anxious to get
rid of his paper-money at any sacrifice. The catastrophe, though inevitable
in the nature of things, was hastened by the artifices of the cardinal
Dubois, who used every means to injure Law in the opinion of the regent; and
by the irritation of the finance-general, and the parliament of Paris, who
regarded the foreign projector as their bitter enemy. The united efforts of
such a powerful party appear to have made a deep impression on the mind of
the regent, who, in a letter of lord Stair’s, dated 12th March, 1720, is
represented as abusing the comptroller cruelly to his face, and even
threatening him with the Bastile. The same authority informs us that the
minister himself was at this period reeling under the weight of that
complicated and stupendous system of which he now found himself the prime
support and mover, "Law’s head is so heated," he writes, "that he does not
sleep at nights, and has formal fits of frenzy. He gets out of bed almost
every night, and runs stark-staring mad about the room making a terrible
noise,—sometimes singing and dancing,—at other times swearing, staring, and
stamping, quite out of himself. Some nights ago, his wife, who had come into
the room upon the noise he made, was forced to ring the bell for people to
come to her assistance. The officer of Law’s guard was the first that came,
and found Law in his shirt, who had set two chairs in the middle of the
room, and was dancing round them quite out of his wits."
The consequences of this rash
edict were frightful; the government was upbraided for having been the first
to impeach that credit to which it had itself given original existence, and
charged with the design to ruin the fortunes of the citizens; seditious and
inflammatory libels were posted throughout the streets; the mob assailed the
hotels of Law and other members of the cabinet; and even the life of the
regent himself was threatened. In this emergency, the parliament assembled
on the 27th of May, and terrified at the consequences of their own measures,
were about to petition the regent to revoke the unfortunate edict; but,
while yet deliberating with this purpose, an officer announced to them that
the paper had been restored to its former value, by a new proclamation.
However, if the first step had been bad, the second was little less weak and
unwary. To declare that the actions and billets had resumed their full
value, was doing nothing of real consequence to allay the ferment of the
public mind; for such a measure was founded on no principle which could
operate in the slightest degree to restore to paper-money the confidence it
had lost; it was doing nothing to recompense those who had already suffered
injury, and it was effectually securing the ruin of all others on whom the
valueless paper could now be fixed as a legal tender. And to add to all this
confusion and distress, the repositories of the bank were sealed up the same
day, under pretence of examining the books, but in reality to prevent the
specie from being paid away in exchange for notes. At last, after the first
moments of alarm and outrage were over, the regent ventured to resume those
expressions of confidence towards Law which he had been compelled to
withhold from him for a time; he received him in his own box at the opera,
and gave him a guard to protect his hotel from the insult of the exasperated
populace. The infamous Dubois, who had enriched himself by his speculations
during the height of the Mississippi madness, now united with Law to expel
Argenson from the cabinet; and the regent, whose character though intrepid
was not without its weak points, was persuaded at their instigation, to take
the seals from his faithful minister, and bestow them upon Agnesseau, who
tamely resumed the high office, from which he had been expelled by the very
men to whose influence he now beheld himself indebted for his second
elevation.
Nothing could now save the
system of the great financier; his billets and actions were for ever
stripped of their value in the eye of the public; and the most expedient
measure that could now be adopted with regard to them, was to withdraw them
as promptly as possible from circulation. To demolish in the most prudent
manner the vast structure reared by his own labour was now the highest
praise to which Law could aspire. By a series of arbitrary financial
operations, which it would be tedious here to relate, the public creditors
were reduced to the utmost distress, the national debt annihilated; and the
whole affairs of the kingdom thrown into the utmost perplexity. "Thus
ended," to use the words of Voltaire, "that astonishing game of chance
played by an unknown foreigner against a whole nation." Its original success
stimulated various individuals to attempt imitations of it,—among which the
most famous was the South Sea bubble of England, which entailed disgrace and
ruin on many thousands of families. It would be doing injustice to Law’s
character were we to view him as the sole author of these misfortunes: his
views were liberal beyond the spirit of the times in which he lived; he had
unquestionably the real commercial interests of his adopted foster-country
at heart; he did not proceed on speculation alone; on the contrary, his
principles were to a certain degree the very same as those the adoption of
which has raised Britain to her present commercial greatness, and given an
impulse to trade throughout the world, such as was never witnessed in the
transactions of ancient nations. His error lay in over-estimating the
strength and breadth of the foundation on which his gigantic superstructure
rested. Unquestionably in his cooler moments he never contemplated carrying
the principle of public credit to the enormous and fatal length to which he
was afterwards driven by circumstances; it was the unbounded confidence of
the public mind, prompted by the desire of gain and the miraculous effects
of the system in its earliest development,—the enthusiasm of that mind,
transported beyond all bounds of moderation and forbearance, by a first
success eclipsing its most sanguine expectations, realizing to thousands of
individuals the possession of wealth to an amount beyond all that they had
ever conceived in imagination,—the contagious example of the first fortunate
speculators intoxicated with success, and fired to the most extravagant and
presumptuous anticipations, by which men can be lured into acts of blinded
infatuation or thoughtless folly,—it was these circumstances we say, over
which Law had necessarily little control, that converted his projects into
the bane of those for whom they were at first calculated to serve as a
wholesome antidote.
Law was in fact more intent
on following out his idea than aggrandizing his fortunes. Riches, influence,
honours, were showered upon him in the necessity of things; the man who had
given birth to the wealth of a whole kingdom, whose schemes had for a while
invested all who entered into them with imaginary treasures,—by whose single
mind the workings of that complicated engine which had already produced such
dazzling results as seemed to justify the most extravagant anticipations of
the future, were comprehended and directed,—must have risen during the
existence of that national delusion, to the highest pinnacle of personal
wealth and influence, and might, though only endowed with a mere tithe of
the forecasting sagacity of Law, have provided for his retreat, and secured
a sufficient competency at least beyond the possibility of loss or hazard,
as thousands in fact did upon the strength of his measure. But Law, in
deluding others, laboured under still stronger delusion himself; like the
fabled Frankenstein, he had created a monster whose power he had not at
first calculated, and the measure of which he now found he could not
prescribe, and he awaited the result with mingled feelings of hope, fear,
and distrust. It was the ignorant interference of others with his own
mysterious processes, which finally determined the fatal direction of those
energies which he had called into being, and which he might have been able,
if not to restrain, at least to direct in another and less ruinous manner.
We are far from professing ourselves the unqualified apologists of our
enterprising countryman. It was criminal in him to make use of remedies of
such a desperate kind as those to which he had recourse when his system
began to stagger under its first revulsions; doubtless his temptations were
strong, but, invested as he was with authority, it was in his power to have
resisted them, and adopted a less empirical mode of treatment. In estimating
his moral character, it does not appear to us, that his renouncing
protestantism, under the circumstances in which he was placed, ought to
weigh much against the uprightness of his intentions. Religion was with him
a matter of inferior moment. In his previous life he had manifested no
symptoms of piety; an utter stranger to the faith and power of the gospel,
protestantism was superior to any other ism with him, just in as far
as it favoured his worldly policy. He believed himself possessed of means to
elevate a whole nation in the scale of wealth and power, with all their
attendant benign influences, and to give an impulse by means of the fortunes
of France to the destinies of the human species: and is it to be supposed,
that this consideration, thrown into the balance, should not have caused
that scale in which was placed a mere nominal profession of a religion--the
truth of which he neither knew nor respected—to kick the beam?
Before resuming the thread of
our biography, let us for a moment compare the financial catastrophe we have
now been considering with that of the assignats of revolutionary France, and
the celebrated crisis of the bank of England in 1797: we shall discover
striking points of resemblance in the circumstances which led to these
events, and draw from their comparison a few important truths. Credit is
founded on the supposition of future value; it is this prospective value
which is made to circulate as if it were existing value, in the form of a
bank-note. Law founded his schemes upon the great basis of credit, which
again he proposed to create by the profits arising from speculation in the
shares of his India company. The financiers of revolutionary France wished
to pay the national debt and the expenses of a universal war, with the
national funds; but finding it impossible from the want of public
confidence, or credit, to sell these funds, they anticipated their sale, and
represented their supposed future value by paper-money called assignats.
The bank of England, in return for its loans to the government, supposed
the existence of two species of value, and accepted of these species in
payment: the effects themselves, namely, of commerce, and the securities of
the state; the former a certain value, and the latter necessarily
fluctuating with the political aspect of the times. In these three cases, we
perceive three species of doubtful value; Law’s share represented a future,
but speculative and very uncertain value; the assignats represented certain
funds which might ere long pass from under the hands of their present
administrators; and the notes of the bank of England represented a value
depending upon engagements, regarding the ability of the state to fulfil
which there existed no absolute certainty. Now the crisis produced by the
fluctuation of these three species of credit corresponded to the difference
of circumstances in the three cases. The sudden displacement of an enormous
sum raised the shares of the East India company to an enormous premium; but
a rapidly established credit is exposed to an equally or still more
precipitous decline; for that true credit which is founded on the
solid basis of real success, must necessarily be as slow in its growth as
the success itself. The assignats again could not experience such a sudden
rise in value, for they represented a certain portion of land, a species of
value least of all exposed in the nature of things to rapid fluctuation. In
proportion, however, as the public confidence in the permanence of the
administration declined, the assignats declined in value; and in proportion
as they declined in value, the existing government was compelled to supply
the loss of funds by increasing the issue, which again operated to
depreciate its paper money. The notes of the bank of England, depending on
mercantile credit or the real security of responsible funds, as well as on
government security, were only slightly affected in credit by the political
aspect of the times. In all the three cases, public credit was attempted to
be supported by forcible measures, the injustice of which was just in
proportion to the degree of suspicion which attached to that false system of
credit which they were designed to support. Law fixed the value of shares in
notes, and thus forced a circulation for the latter. The French
revolutionary government punished the refusal of its assignats, at their
nominal value, with death. In England the bank was relieved of the
obligation to cash its notes at sight. Law again endeavours to drive specie
altogether out of the market, and render paper the only legal tender; the
revolutionists fix the maximum of all exchange; and the bank of England,
whose security was less questionable, threw itself on the patriotism of the
London merchants, who relieved it from its embarrassment by agreeing to
accept of its notes in payment from their debtors. Thus we see, 1st,
that every system of public credit ought to represent a certain real value,
and not to be founded on mere anticipation of a value yet to be created;
2ndly, that it is impossible, by fixed measures, to sustain an arbitrary
value; and, 3rdly, that where forced values are resorted to, they are
rejected by all who are at liberty to reject them, and are followed by the
ruin of those who are not in a condition to refuse them.
Law, at his last interview
with the duke of Orleans, is reported to have said: "My lord, I acknowledge
that I have committed great faults; I did so because I am a man, and all men
are liable to err; but I declare to your royal highness that none of them
proceeded from knavery, and that nothing of that kind will be found in the
whole course of my conduct;" a declaration which the regent and the duke of
Bourbon bore frank testimony to, at the same time that they suggested the
expediency of his leaving the kingdom, for which purpose they offered to
supply him with money, his whole property having been confiscated; but Mr
Law, though in possession of only 800 louis d’ors, the wreck of a fortune of
10,000,000 of livres, refused to receive any assistance from other funds
than his own, and on the 22nd of December, 1720, arrived at Brussels, where
he was received with the greatest respect by the governor and resident
nobility. Early in January, 1721, he appeared at Venice, under the name of
M. du Jardin, where he is said to have had a conference with the chevalier
de St George, and the famous cardinal Alberoni, minister of Spain. From
Venice he travelled through Germany to Copenhagen, where he had the honour
of an audience with prince Frederick. During his residence at the Danish
capital he received an invitation from the British ministry to return to his
native country, with which he complied, and was presented on his arrival to
George I. by Sir John Norris, the admiral of the Baltic squadron. On the
28th of November he pleaded at the bar of the king’s bench his majesty’s
pardon for the murder of Edward Wilson, and was attended on this occasion by
the duke of Argyle, the earl of Ilay, and several other friends.
Mr Law’s reappearance in
Britain excited some uneasy feelings on the part of various senators. The
earl of Coningsby, in particular, moved the house of lords for an inquiry,
whether Sir John Norris had orders to bring over a person of his dangerous
character. The affair, however, was hushed, and it is thought that he at
first received some kind of pension or allowance from the British
government. Meanwhile, he maintained a constant correspondence with the
regent of France, who caused his official salary of 20,000 livres per annum
to be regularly remitted to him, and held several consultations with the
council respecting the propriety of recalling him. The sudden death,
however, of the regent, on the 2nd of December, 1723, was a fatal blow to
the reviving hopes of the ci-devant minister of finance. His pension ceased
to be remitted, his prospect of a reversion from the sale of his property in
France was annihilated, his embarrassments at home increased, and demands
were made upon him by the India company to the enormous amount of 20,236,375
livres. On the 25th of August, 1724, we find him addressing a letter to the
duke of Bourbon, from London, in which he writes:
"Notwithstanding the
confusion in which my affairs have become involved, one hour will suffice to
put your highness in full acquaintance with them. The subjoined memoir
explains by what means I purpose to fulfill my engagements and obtain a
livelihood for myself. The means which I suggest are of the very simplest
nature. It is likewise the interest of the state that my affairs should be
wound up; for although the number of those who desire my return is not
great, their confidence in me is considerable, and must either destroy or
retard the success of those measures which have been adopted by those
persons to whom the king has been pleased to intrust the management of the
finances. If my matters were arranged, madame Law, my daughter, my brother,
and his family, would return to England, and I would fix myself here in such
a manner as should convince the public that I entertained no intention of
ever again setting foot in France.
"Those who have set
themselves to oppose me, by retarding the decision in my case, have acted
thus upon a mistaken principle altogether, and against their own view of
things; they accuse me of having done the thing which they would have done
themselves if they had been in my place; and in examining into my conduct
they are unintentionally doing me a great honour. There are few, perhaps no
instances, of a stranger having acquired the unlimited confidence of a
prince, and realized a real fortune by means perfectly honourable, and who
yet on leaving France reserved nothing for himself and his family, not even
the fortune which he had brought into the country with him.
"Your highness knows that I
never entertained the idea of making my escape from France. I had made no
provision for this purpose when it was announced to me that the regent had
ordered me to be provided with passports; for I had indeed at one time
thought of quitting the kingdom, when I requested his royal highness’s
permission to resign my office; but after that I had deliberated upon the
reasons which the prince then urged against my taking this step, I renounced
the idea altogether, although fully aware of the personal danger to which I
would expose myself, by remaining in France after having ceased to hold
office in the administration.
"I have said that my enemies
have advised no measures opposed even to their own principles; for if what
they allege had been true; if I had carried a great sum of money with me out
of the kingdom,--it would surely have been their truest policy to have
induced me to return with my son. If they had acted dispassionately in this
matter, they would have afforded me every facility in arranging my affairs;
and it is my belief that, had his highness the duke of Orleans lived, I
would have been invited back to France. A short time before the prince’s
death, he was pleased to express his approbation of my conduct; to give me
certain marks of his esteem; he was satisfied that my plans would have
completely succeeded, if the juncture of extraordinary circumstances had not
compelled others to interfere with them; he felt that he yet required my
assistance; he asked my opinion regarding the present situation of the
kingdom, and he was pleased to say that he yet counted on my aid in raising
France to her proper elevation and weight in Europe. These are facts with
which I am persuaded your highness was made acquainted by the prince
himself."
The late M. Law de Lauriston
transmitted to Mr Wood, the biographer of the Comptroller-General, a
complete copy of the memorial which accompanied this letter, and of which
only some detached fragments are published in the "OEuvres de J. Law,"
Paris, 1790. Mr Wood supplies us with the following passage from this
document: "When I retired to Guermande," says the memorialist, "I had no
hopes that the regent would have permitted me to leave the kingdom; I had
given over all thoughts thereof when your highness sent to inform me of his
intention to accord that permission; and the next day, immediately on
receiving the passports, I set off. Consider, my lord, if being in the
country, removed from any paper and books, it were in my power to put in
order affairs that required not only leisure, but also my presence in Paris,
to arrange properly; and if it is not a piece of great injustice for the
India company to wish to take advantage of the condition to which I was
reduced; and of the dishonest conduct of clerks, in requiring from me
payment of sums I do not in fact owe, and which, even though I had been
owing, were, as I have shown, expended for their service, and payable in
actions or notes, of which effects belonging to me they at that time had,
and still have, on their books, to the amount of double or treb1e the sum
they demand. No, my lord, I cannot bring myself to accuse the company of so
much as the intention to injure me. That company owes its birth to me. For
them I have sacrificed every thing, even my property and my credit, being
now bankrupt, not only in France, but also in all other countries. For them
I have sacrificed the interests of my children, whom I tenderly love, and
who are deserving of all my affections; these children, courted by the most
considerable families in France, are now destitute of fortune and of
establishments. I had it in my power to have settled my daughters in
marriage in the first houses of Italy, Germany, and England; but I refused
all offers of that nature, thinking it inconsistent with my duty to, and my
affection for, the state in whose service I had the honour to be engaged. I
do not assume to myself any merit from this conduct, and I never so much as
spoke upon the subject to the regent. But I cannot help observing, that this
mode of behaviour is diametrically opposite to the idea my enemies wish to
impute to me; and surely all Europe ought to have a good opinion of my
disinterestedness, and of the condition to which I am reduced, since I no
longer receive any proposals of marriage for my children.
"My lord, I conducted myself
with a still greater degree of delicacy: for I took care not to have my son
or my daughter married even in France, although I had the most splendid and
advantageous offers of that kind. I did not choose that any part of my
protection should be owing to alliances; but that it should depend solely
upon the intrinsic merits of my project."
These representations failed
to produce the desired effect; the India company refused to allow him credit
for the notes and actions in their hands belonging to him; while they at the
same time insisted on his making payment in specie of the sums owing to
them; the government, with equal injustice, confiscated his whole property
in France. In 1725, Mr Law bade a final adieu to Britain, and retired to
Venice, where he died in a state little removed from indigence, on the 21st
of March, 1729, in the 58th year of his age. He lies buried in one of the
churches of the city, where a monument to his memory is still to be seen.
Such is a brief outline of
the history of one of the most extraordinary projectors of modern times.
That he deceived himself is, we think, quite evident from the whole tenor of
his conduct; that he should have deceived others is not wonderful, if we
consider the spirit and circumstances of the times in which he lived, the
ignorance of the public mind respecting the great principles of credit and
currency, and the personal advantages and experience which the
master-projector possessed. He is said to have presented an uncommonly
engaging external appearance. "On peut," says the French historian of
his system," sans flatterie, is mettre au rang des hommes les mieux faits."
In Brunley’s Catalogue of British Portraits, four engravings of Law
are noticed, by Anglois, Hubert, Des Rochers, and Schmidt. The best portrait
of him was a crayon portrait by Rosalba in the earl of Oxford’s gallery. Of
his moral character we have already spoken. Lockhart of Carnwath relates
that, even before he left Scotland, he was "nicely expert in all manner of
debaucheries."
Law never composed any
treatise; his works are confined to memorials and justificatory statements,
or explanations of his views and plans. Towards the end of the year 1790,
the epoch of the creation of the assignats, there appeared at Paris an
octave volume, entitled "OEuvres de J. Law, controlleur-general des finances
de France, sous le regent." This work was ably edited by M. Senour, and is
in high estimation in France. The writings relating to Law’s system are very
numerous; Stewart, Ganilh, and Starch, have all commented with ability upon
his measures; and Duclos and Marmontel have composed very interesting
memoirs of the projector and his system. In general, however, all the French
writers of the 18th century have commented with great severity upon Law and
his proceedings. Fourbonais was the first to do justice to this great but
unfortunate man. Dutot, in his "Reflexions politiques sur le commerce et les
finances," printed at the Hague in 1738, has discussed the state of affairs
at the giving way of the system, and the effect of the famous edicts of the
5th March and 21st May, with great sagacity; Duverney’s" Histoire du Systeme
des finances, sous la minorité de Louis XV., pendant les Années 1719 et
1720," is a most valuable collection of edicts and state papers relative to
French finances in two volumes. Mr John Philip Wood’s "Memoir of the Life of
John Law of Lauriston" [Edinburgh, 1824, 12 mo, pp. 234.] is the best
account which has yet been given to the British public of this extraordinary
man, and the rise and fall of his fortunes.
Law married lady Catharine
Knollys, third daughter of Nicholas, third earl of Banbury, by whom he had
one son, John Law of Lauriston, and one daughter, Mary Catharine, who
married her first cousin, William viscount Wallingford, who was afterwards
called to the house of peers by the title of baron Althorp. Lady Wallingford
survived her husband more than half a century, and died in London on the
14th of October, 1790, leaving no issue. Her brother succeeded his father in
1729, and died a cornet of the regiment of Nassau Friesland, at Maestricht,
in 1734. William Law, third son of Jean Campbell of Lauriston, succeeded to
the entail on the extinction of the issue male of her eldest son. His eldest
son John, rose to the rank of commandant-general and president of council of
the French settlement in India, and died at Paris about 1796; and on the 21st
of May, 1808, Francis John William Law, a merchant in London, of the
reformed religion, was served nearest and legitimate heir of entail and
provision of his father John Law, and entered into the possession of the
estate of Lauriston, to the exclusion of his elder brothers, who were Roman
catholics. Law’s grandson, Count de Lauriston, was one of the generals of
Napoleon Bonaparte.