was the case in France at the epoch of the system) it is necessary at once to double the amount of currency, by adding to its specie an equal value in notes. The credit should not exceed the amount of the specie, in order that the notes may be always convertible into specie at the will of individual holders. I will not remind you, my Lords, that in doubling the currency by emission of paper money, its value cannot be doubled, for this measure will only expel the specie from circulation. But we will suppose for a moment that the specie may circulate concurrently with the paper money, and that neither will lose its value-still it does not follow that the notes will be always convertible into specie at the pleasure of their holders. Upon what funds shall they be assigned for redemption? Upon the whole metallic currency of the nation. But is this currency in the possession of the bank which issues the notes? No-nor even the public revenues levied for other objects which form so small a portion of it. Will every individual in the nation agree, that his money shall be pledged for the credit of the bank, and be employed to redeem its notes in case of need? No. The credit of the notes must therefore be destitute of foundation-they cannot be convertible-that is to say, this credit cannot exist. The currency of any nation can never become pledged for the redemption of the notes which either its sovereign or any bank may issue. Such pledge can only be redeemed by the treasury of the sovereign or by the coffers of the bank, otherwise it is wholly illusory.

But this credit, said Law, will be rather a multiplication of specie than credit, since it will consist in the excess of notes beyond specie, and the advantages we seek can only be found in this excess. The absurdity of this doctrine is too palpable to require exposure. You perceive that Law regarded the whole nation as a banking association, and his reasoning was something like this-Since a bank may venture to issue its notes to the extent of its metallic funds without hazarding its solvency, a whole nation may do the same thing. It has only to establish a bank, transport thither the whole currency of the people, and supply its place with notes. This scheme, chimerical and gigantic as it was, did not appear so to Law and the Regent. They believed its execution possible, and they undertook it.

In 1716, Law established his famous system by a bank of circulation, for which he had procured the privilege from the government. The funds of this bank were obtained by shares, and its notes were payable at sight in specie of the same weight and denomination as the money then in circulation. This clause made them sought for. From 1689, the money of France had undergone continual alterations. The clause in the bank notes protected their holders against such arbitrary proceedings; and as the bank executed its promise, this soon gave them a preference above specie, and they bore a premium of one per cent. above metallic money. The good management of the bank in the issue of its paper, its fidelity in performing its engagements, and finally the general want of credit, gave it universal confidence and inclined the whole nation to regard its founder as a man of extraordinary genius, capable of reviving the credit and commerce of France, which at that epoch were in a most languishing condition.

The following year, 1717, Law procured to be assigned to him the exclusive privilege of a commercial company, established under Richelieu, called the Company of the West, or of the West Indies, which had been long prostrate. The bank created two hundred thousand shares of five hundred livres each, payable in the obligations of the state, upon which the Government stipulated to pay a perpetual interest at 4 per cent. This was a mode of absorbing one hundred millions of the most depreciated of the public paper-but this paper could not form the capital in a commercial enterprise. From the failure of the payment of the interest, its price had fallen so much, that five hundred livres of its nominal value could only be sold for one hundred and sixty, or one hundred and seventy livres; yet the bank received it at its face. Besides, this combination of banking operations with commercial speculations, was essentially vicious. These two descriptions of business are absolutely incompatible in their nature. The hazards incident to commerce, must compromit that cer

tainty which is indispensable for the advantage of a bank; and at any rate must weaken its credit. A bank of circulation maintains its credit, only by holding funds sufficient for the redemption of its notes, under the belief that it will not issue notes except upon assured values which are sufficient to pay them. But whenever any bank issues notes for the purpose of carrying on commercial enterprises, often unfortunate and uncertain, these notes resting upon a doubtful pledge must place its credit in a condition of uncertainty.

No one, however, was influenced by the danger or the vices which this union of two kinds of business must produce upon the operations of the bank. On the one hand, the French were far from possessing precise notions of the nature and constitution of banks—and on the other, the confidence which they reposed in the abilities of Law blinded them. This confidence was increased by a circumstance purely accidental-the interest upon the one hundred millions of the obligations of the State, which the bank had acquired by the sale of its shares, being more regularly paid to the bank than it had been to the individual holders, these shares which had been bought for one third part of their nominal value soon rose to par. The investment of this portion of the paper of the State, at a rate so advantageous to its holders, gave a new value to that which remained. This effect was wholly attributed to the oper ations of Law, since to him alone it was owing that the interest was regularly paid. The French, astonished at the sudden rise of this depreciated paper, exclaimed that a miracle had been performed; their illusion kept no bounds, and henceforward, the most puerile confidence was placed in all the mystifications which this cunning charlatan invented for them.

The Regent having seen that the notes of the bank were sought with avidity, and that great quantities of specie were carried to the bank to be exchanged for them, it was easy for Law to persuade him that he could draw thither the whole currency, and replace it throughout the kingdom by an equal amount in paper; that he would be able by this means to pay off nearly half the national debt; and that the credit of the bank would be perfectly sustained by its paying such notes in specie as should be returned for that purpose. In consequence of this extravagant project, the bank was taken on the account of the King, on the first of January, 1719. The Regent paid off the share-holders, took the establishment into his hands, and called it the Royal Bank.

Up to this time its notes had been paid at sight. Though they hoped to be able to continue this payment, notwithstanding the immense extension which had been made to what Law called credit, they nevertheless took precautions for the possibility of the failure of such payment. The notes which were issued by the Royal Bank contained no promise to pay in specie of the same weight and denomination as that in circulation, but only to pay in money. This alteration, so trifling in appearance, was fundamental. The original notes stipulated for that fixed quantity of specie which was known by the denomination of Livre, at the date of their issue. The subsequent notes only stipulating for livres, allowed for any change which arbitrary power might choose to introduce into the actual value of what was called a livre. This alteration was professed to be made to establish the value of paper-moneybut, on the contrary, its value was thus rendered deplorably uncertain.

In procuring the bank to be declared a royal establishment, Law flattered himself that the public would continue to bring thither specie for the purpose of exchange of its notes-but this expectation failed. Whether the tenor of the new notes induced distrust, or the channels of its operation had become full, the demand for notes ceased, and Law found himself obliged to change his tactics for drawing specie to the bank, as well as to sustain the circulation of its notes, of which he intended to issue such immense amounts.

He accordingly concerted with the Regent another scheme for assuming the debts of the State a scheme of banking and brokerage the most extravagant and criminal that the world has ever witnessed. Two great methods presented themselves to his imagination for sustaining the credit of the notes even in the midst of the vast issues.

The first was to insensibly change the bank-notes into a true and irredeemable paper-money. For this object they undertook to give a preeminence to paper above specie, by declaring the value of the former fixed and immutable, while the other, by continual and arbitrary changes, should be made of uncertain and variable value; to require the payment of all taxes in bank-notes; to introduce them by degrees into all transactions; and, finally, to proscribe the use of specie entirely as soon as the nation should become sufficiently disgusted with its use. The second method was to arrange an investment for the immense sums of paper which the reimbursement of the creditors of the State would throw into circulation; to offer to its holders an apparently lucrative employment for this paper, in order to prevent its return to the bank to be exchanged for specie. It was with this design that Law undertook to unite with the Company of the West, of which he still held the control, several other commercial and financial enterprizes, which should form a single colossal establishment, of which he created shares to an amount equalling the whole of the public debt. The Regent undertook to purchase these shares with the paper-money of the bank, then to borrow this paper for the purpose of paying the public creditors; and finally, to sell the shares, in order to withdraw the paper-money from circulation. This plan promised far greater success than the first. The combination of a great number of lucrative enterprises, under the direction of a man whose knowledge and talents inspired the highest confidence, would naturally give the most elevated views of the profit to be realized by the company, and cause its shares to be eagerly sought. The Government, by appearing to participate in these advantages, encouraged these views; and as the company made no objection against accepting of the Government bank-notes in payment for shares, this manœuvre gave increased credit to paper money. Had the scheme succeeded, the State would have been freed at once from its immense debt, excepting the interest payable to the company; and its creditors, become share-holders of the company, would have followed its fortune. Hence the object of the system was not only to inundate the kingdom with paper-money, but to relieve the State from its debts, and transfer them to the company, that is, to change fixed capital into a hazardous stock, and settled incomes into those which were uncertain.

After having settled this plan, they immediately devoted themselves to its accomplishment. In May, 1719, the East India Company, also founded by Richelieu, and equally languishing with that of the West Indies, was incorporated with the latter, under the name of the Company of the Indies; fifty thousand new shares were created, of five hundred and fifty livres each, payable in specie. These shares, in fact, were an obligation upon the company for only five hundred livres each, like those previously issued, but the public had become so fully impressed with the enormous profits which would be realized, that shares were sold at a much higher price. The sum realized from the sale of these fifty thousand shares, realized twenty-seven millions five hundred thousand livres in specie, a very small portion of which was applied to the construction of a few vessels. These trifling preparations increased the hopes of the public to such a degree, that they clamored for more shares, and a month afterwards fifty thousand more were created, which readily sold at one thousand livres each.

The Government omitted no step which would infuse into the nation an exalted notion of the profits to be exalted by the company. It had already purchased, the preceding year, the tobacco monopoly; the Regent now conveyed to it the exclusive right of coinage for fifty millions of livres; he assigned to it the collection of the indirect taxes, upon condition that it should loan to the King, whenever required, the immense amount of sixteen millions of livres, at three per cent. interest; and finally, the company obtained the general collection of all the revenues of the State. It then declared to its share-holders that it was able and ready to pay a dividend of two hundred livres upon each share. As at the time the rate of interest was four per cent., this dividend was equivalent to the interest of a capital of five thousand livres, supposing such dividend to be assured and permanent; and as the public entertained

no doubt, either as to the certainty or permanence of this dividend, the price of shares rose to five thousand livres.

The original share-holders, who better understood the true condition of the company than the others, endeavoured to make their fortunes solid by selling a portion of their shares, and employing the proceeds in the purchase of real estate and other property. The opulence so suddenly acquired by these share-holders held out new seductions to the public. Every body rushed to buy shares; a general delirium pervaded the whole country; all professions were at once abandoned for the business of brokerage; the people of the provinces, and strangers from other countries, all flocked to Paris to enrich themselves by the traffic of shares. This traffic opened the door to immediate opulence; the brokers continually excited variations in the price of shares; and by skilfully availing themselves of these variations, for purchase at one moment and sale at the next, individuals the most obscure and miserable in the whole community rapidly acquired the most brilliant fortunes.

The shares having been issued at four successive periods to their full number, namely, six hundred and twenty-four thousand, the King directed the creditors of the State to be paid in notes of the Bank. Such immense sums were at once thrown into circulation that they could not have been employed but by the purchase of shares; thus the public creditors were in a great measure compelled to employ these notes in this mode. In consequence of the plentifulness of paper by this concurrence, the price of shares rose to ten thousand livres.

The creditors of the State found themselves led by the manœuvres of Law to the pitch of paying ten thousand livres per share in the Company of the Indies, if they wished to realize any revenue. But what was a share? It was a portion of capital hazarded in a commercial enterprize, and was entitled to a determined part of the uncertain profits of this enterprize. Nothing could be less solid than a share in an infant company. These shares were originally five hundred livres each, and could not produce more than twenty livres per year. The system had induced the public creditor to exchange a debt of ten thousand livres for a share of five hundred livres for an investment which could not produce more than twenty livres annually, admitting that the net profits of the company would regularly reach twelve million four hundred and eighty thousand livres every year. The company, in fact, had promised a dividend annually of two hundred livres on each share, but taking this promise to have been serious and practicable in performance, it inevitably resulted that the public creditor who employed ten thousand livres in the purchase of a share, lost one-half of his revenue. But where were the company to find every year one hundred and twenty-six millions eight hundred thousand livres for their dividend on six hundred and twenty-four thousand shares? This undertaking was so much beyond its power, that even the apologists of the system could not sustain it.

It is therefore obvious that the system contemplated the relief of the State from its debts by the ruin of its creditors. The higher the price of the shares the greater amount of public debt was absorbed in a share; hence the excessive price to which the shares were enhanced was a part of Law's plan. But from the enormous elevation of price to which the shares were raised, a circumstance resulted which alone brought on the downfal of the system; this was the prodigious gain of the original share-holders. It was natural that they should endeavour to realize the gifts which fortune had showered upon them. The great number of shares sold by the holders lessened their price, and made the company, or the Regent, unwilling to sell more. The Bank soon felt the consequences of this check. Immense crowds rushed to it for the purpose of getting gold and silver for the notes.

In this crisis Law determined to adopt the most violent means to save his system; that is, to fill the empty coffers of the Bank, and to force the currency of its notes. By his advice the Government affected to hold specie in the greatest contempt. It not only permitted, but in effect ordered its transportation from the kingdom. It prohibited the importation of gold and silver coin and bullion. It directed the Bank to receive neither in exchange for notes. All creditors were permitted to require

their debtors to make payment in notes, even where the latter might gain by paying in specie. The company were held to discharge in notes their various payments on public account, in order that they might require from consumers and others payment in notes. Legal tenders of payment which had not been offered in notes were declared void. Small notes were introduced, and finally, to debase specie, and to wean the nation from its use as currency, a new coinage was ordered of less weight and value than the former. Paper currency was legally fixed at a value of five per cent. above specie, and it was ordered that the latter should neither be offered nor received in payment-silver for larger sums than ten livres-gold for three hundred livres, and that all bills of exchange should be paid in notes. Changes in the value of money succeeded each other with inconceivable rapidity; the name of livre was given successively to a twenty-eighth, a fortieth, a sixtieth, an eightieth, an oue hundred and twentieth, a seventieth, and a sixty-fifth, part of a mark of fine silver. Law did not produce these convulsive movements in the value of specie so much to fill the coffers of the Bank, as for a precaution to individuals who, having enriched themselves by the system, now run upon it with as much zeal as they had before encouraged confidence in it. He contrived so many plans to establish a preference for notes over gold and silver, only that he might wholly interdict the use of these two metals. This was done by the arrêt of the twentieth of February, 1720.

It was ordered by this celebrated arrêt, that no individual of whatever condition, nor any religious community, should keep more than five hundred livres in specie, under the pain of confiscation of all above that sum, besides a fine of ten thousand livres. All persons were also prohibited, under a similar penalty, from having in possession any gold or silver bullion, or plate. Injunctions were issued to all officers of justice, to enter into all houses, establishments and privileged places, even into the royal palaces, for the purpose of examination; and the king declared all specie and materials of gold and silver seized therein, to be confiscated for the profit of the informers. Finally, it prohibited, under the penalty of three thousand livres, any payment, for a sum above one hundred livres, to be made in any currency excepting bank notes.

The novelty and rigor of such a law spread alarm throughout the nation. Several induced by fear carried to the bank the gold and silver in their possession; others, and a greater number, hazarded disobedience. Searches were made, however in all houses; informers were encouraged, domestics became formidable to their masters, brothers suspected brothers, and even fathers their sons, distrust invaded the family union, and citizens watched each other. Terror was increased by condemnation. During an interval of three weeks, the bank received nearly forty-four millions; but its coffers were like the buckets of the Danaides-it was impossible to fill them. The declaration of the eleventh of March, 1720, wholly proscribed the use of gold as currency, as well as silver crowns, and reduced the specie in circulation exclusively to small change.

Between the first of January, 1719, and the twentieth of May, 1720, within the short space of five hundred and five days, the bank had issued notes for the immense sum of two thousand two hundred and thirty-five millions, with which the creditors of the State had been paid. The consequences of this unheard of abuse of paper-money were not immediately perceived, because, throughout the whole year 1719, the issues had been moderate; but when in four months of 1720, the sum of one thousand nine hundred and twenty-five millions was manufactured at once, nothing could arrest their decline. Sound currency wholly disappeared. Paper-money which alone remained in circulation, and with which all channels were inundated, because depreciated; the price of every thing was enhanced from day to day in a frightful progression. The Government at last understood, that too much extension had been given to what Law termed credit. He perceived, that to retrieve the value of paper, it was necessary to diminish the amount; but as he neither possessed the desire, nor the means of redeeming it, he contented himself with reducing its nominal value one half. The arrêt of the twenty-first of May, which ordered this reduction, was the de