The Crayon Papers

by taxations, but in the way of deposit. This might be effected in different modes, either by inspiring confidence or by exerting authority. One mode, he observed, had already been in use. Each time that a state makes a recoinage, it becomes momentarily the depositary of all the money called in, belonging to the subjects of that state. His bank was to effect the same purpose; that is to say, to receive in deposit all the coin of the kingdom, but to give in exchange its bills, which, being of an invariable value, bearing an interest, and being payable on demand, would not only supply the place of coin, but prove a better and more profitable currency.
    The regent caught with avidity at the scheme. It suited his bold, reckless spirit, and his grasping extravagance. Not that he was altogether the dupe of Law’s specious projects; still he was apt, like many other men, unskilled in the arcana of finance, to mistake the multiplication of money for the multiplication of wealth; not understanding that it was a mere agent or instrument in the interchange of traffic, to represent the value of the various productions of industry; and that an increased circulation of coin or bank bills, in the shape of currency, only adds a proportionably increased and fictitious value to such productions. Law enlisted the vanity of the regent in his cause. He persuaded him that he saw more clearly than others into sublime theories of finance, which were quite above the ordinary apprehension. He used to declare that, excepting the regent and the Duke of Savoy, no one had thoroughly comprehended his system.
    It is certain that it met with strong opposition from the regent’s ministers, the Duke de Noailles and the Chancellor d’Anguesseau; and it was no less strenuously opposed by the Parliament of Paris. Law, however, had a potent though secret coadjutor in the Abbe Dubois, now rising, during the regency, into great political power, and who retained a baneful influence over the mind of the regent. This wily priest, as avaricious as he was ambitious, drew large sums from Law as subsidies, and aided him greatly in many of his most pernicious operations. He aided him, in the present instance, to fortify the mind of the regent against all the remonstrances of his ministers and the parliament.
    Accordingly, on the 2d of May, 1716, letters patent were granted to Law, to establish a bank of deposit, discount, and circulation, under the firm of “Law & Company,” to continue for twenty years. The capital was fixed at six millions of livres, divided into shares of five hundred livres each, which were to be sold for twenty-five per cent of the regent’s debased coin, and seventy-five per cent of the public securities; which were then at a great reduction from their nominal value, and which then amounted to nineteen hundred millions. The ostensible object of the bank, as set forth in the patent, was to encourage the commerce and manufactures of France. The louis d’ors and crowns of the bank were always to retain the same standard of value, and its bills to be payable in them on demand.
    At the outset, while the bank was limited in its operations, and while its paper really represented the specie in its vaults, it seemed to realize all that had been promised from it. It rapidly acquired public confidence, and an extended circulation, and produced an activity in commerce unknown under the baneful government of Louis XIV. As the bills of the bank bore an interest, and as it was stipulated they would be of invariable value, and as hints had been artfully circulated that the coin would experience successive diminution, everybody hastened to the bank to exchange gold and silver for paper. So great became the throng of depositors, and so intense their eagerness, that there was quite a press and struggle at the bank door, and a ludicrous panic was awakened, as if there was danger of their not being admitted. An anecdote of the time relates that one of the clerks, with an ominous smile, called out to the struggling multitude, “Have a little patience, my friends; we mean to take all your money;” an assertion disastrously verified in the sequel.
    Thus, by the simple establishment of a bank, Law and the regent obtained pledges of confidence for the consummation of further and more complicated schemes, as yet hidden from the public. In a little while, the bank shares rose enormously, and the amount of its notes in circulation exceeded one hundred and ten