This celebrated financial projector was born at Edinburgh, in April,
1671. His father was a goldsmith, and gave him a liberal education. He
made considerable progress in polite literature, but his favorite study
was finance as connected with national prosperity.
In 1694, he visited London, where his talents and accomplishments gained
him access to the first circles. He possessed an easy address, with an
elegant person, and being a favorite with the fair, he acquired some
notoriety in fashionable life. He became involved in a duel, in which he
killed his antagonist, and was consequently committed to prison. He
contrived, however, to escape, and took refuge on the continent.
In 1700, he returned to Edinburgh, where he broached a scheme for
removing the difficulties which then existed in consequence of the
scarcity of money and the failure of the banks. Having confounded
currency with credit, he adopted the notion that paper money, equal to
the whole property of the nation, might safely be issued. Upon this
egregious error, his project was founded, and was, of course, rejected
by his wary and sagacious countrymen.
Law now visited the principal cities of Europe; his address gaining him
admittance to the highest circles in all countries. He finally settled
in Paris, and was there during the regency of the Duke of Orleans, as
guardian of Louis XV. The government of France was then on the verge of
bankruptcy, in consequence of the enormous expenditures of Louis XIV.
Law now brought forward his schemes for a free supply of money, and they
were seized upon with avidity.
He established a bank, for which, a royal charter was granted in 1718.
It was first composed of twelve hundred shares, of three thousand livres
each, but the number was afterwards increased and the price reduced.
This bank became the office at which all public moneys were received. A
Mississippi company was also attached to it, which had grants of land in
Louisiana, and which was expected to realize immense sums by planting
and commerce. One privilege after another was granted, until the
prospects of advantage appeared to be so great that crowds came forward
to make investments in the stock of what was called the Mississippi
Company.
Thousands embarked in the scheme with enthusiasm. The shares were
greedily bought up, and such was the rage for speculation, that even the
unimproved parts of the new colony were actually sold for thirty
thousand livres the square league! But the delusion did not stop here.
In consequence of the company promising an annual dividend of two
hundred livres per share, the price rose from five hundred and fifty to
five thousand livres, and the mania for purchasing the stock spread over
the nation like a tempest. Every class, clergy and laity, peers and
plebeians, statesmen and princes,--nay, even ladies, who had, or could
produce money for that purpose, turned stock-jobbers, outbidding each
other with such avidity, that, in November, 1719, after some
fluctuations, the price of shares rose to more than sixty times the sum
for which they were originally sold!
Law was now at the pinnacle of his fame. He was considered a man of so
great consequence, that his levee was constantly crowded by persons of
eminence, who flocked to Paris to partake of the golden shower. On one
occasion, he was taken sick, and such was the feverish state of the
public mind, that the shares of the company immediately fell nearly
eight per cent., and, upon the rumor of his convalescence, immediately
rose, even beyond their former price.
But the mighty bubble, now inflated to the utmost, was about to burst.
On the 21st of April, 1719, a royal order, under pretence of a previous
depreciation of the value of coin, declared it necessary to reduce the
nominal value of bank notes to one half, and the shares of the
Mississippi Company from nine thousand to five thousand livres. It is
not possible to describe the calamitous effects which immediately
followed, throughout France. The bank notes could not be circulated for
more than one tenth of their nominal value. Another order was issued,
intended to counteract the effect of the first; but the charm was
broken, and nothing could restore the confidence of the public. All was
panic and confusion. Bank notes were refused in all transactions of
business, and even a royal order, commanding their acceptance, was of no
avail. The public alarm was carried to its height, and at last the bank
suspended the payment of its notes.
The splendid scheme had now exploded; the institution was bankrupt, and
the shares were utterly worthless. Thousands of families, once wealthy,
were suddenly reduced to indigence. The indignation of the public was
speedily turned against the chief instrument of these delusions, and Law
found it necessary to seek safety by flight. He resided, for some time,
in different places in Germany, and settled at length in Venice, where
he died, in 1729.
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