The beginning of Law’s difficulties.--The Bank’s reserve of specie
begins to be depleted.--Law attempts a remedy by altering
the standard of the coinage, and restricting the currency of
specie.--Temporary success of remedy.--Domiciliary visits
resorted to for detection of hoarded specie.--Bank and
Company United.--Discharge of National Debt.--Use of the Rue
Quincampoix prohibited as a stock market.--The assassination of
a stock-jobber by the Comte de Horn, and the latter’s execution.
[Illustration]
Events now very rapidly developed in the history of the Bank and of
the West India Company. Law’s accession to power marked the beginning
of his difficulties--difficulties which taxed his judgment to the
utmost and forced him into the employment of expedients which he
himself foresaw could not permanently ward off injury to his schemes.
He thought, however, they might serve their purpose until his schemes
assumed a less fluid condition, and that their establishment in good
working order would render them proof against attack from such outside
forces as might array themselves against him.
The first indications of danger were becoming apparent in December, and
by the following month had assumed an alarming aspect. Shares had been
selling at the very high price of 10,000 livres each, but by concerted
action amongst several large holders and speculators that price was
gradually forced up until it reached the unprecedented figure of 20,000
livres. This was now their opportunity. Artificial inflation could not
be carried to greater lengths, and accordingly a process of extensive
unloading commenced. These speculators, however, suspicious of the
stability of the new system, were not satisfied with holding notes,
the value of which might depreciate at any moment, and immediately
presented them at the Bank for their equivalent in specie. Law
perceived that such a process if allowed to run unchecked would soon
deplete the Bank of all its available resources. Refusal to exchange
would be suicidal, and if public confidence could not be maintained
without recourse to artificial means, the currency of the notes would
require to be forced directly or indirectly.
One of the chief offenders was the Prince de Conti, a near relative of
the Regent. This nobleman had amassed great wealth through engaging
in speculation under Law’s guidance, but had alienated the latter by
his insatiable appetite for still greater fortune. Unable again to
enlist the services of Law in his interests, he evinced towards him
that bitterest form of ingratitude, the ingratitude of the man who
is favoured to him who does the favour. He attacked Law in his most
sensitive part by realising great quantities of stock, and converting
the notes he received in payment into money at the Bank, an operation
which required the aid of three waggons. Many speculators who had
preferred specie to paper transmitted their money abroad for safe
investment, and in the course of a few weeks several hundred millions
of livres were sent out of the country. A few also hoarded their wealth
in secret places until the time would come when they could without fear
employ it openly.
The first step taken by Law with a view to placing a check upon this
continuous drain on the reserves of the Bank was the issue of a decree
on 28th January, depreciating the coinage by raising the price of
the silver marc to 54 livres. At the same time the interest of money
was reduced from 4 to 2 per cent. Many people refused to bring their
specie to the Bank for recoinage, and then commenced that system of
domiciliary visits which under subsequent decrees worked with so much
tyranny and for a time absolutely destroyed not only public but also
domestic confidence.
The result of the decree was not so satisfactory as had been
anticipated, and in quick succession other decrees were issued
introducing alterations in the standard of the coinage. The purpose
of this was to discredit specie as far as possible as a medium of
exchange, and by giving the note the appearance of fixity in value
to raise its credit for currency purposes. Payments in specie were
only allowed to the extent of 300 livres in gold, and of 10 livres
of silver, sums respectively equivalent to £12 10s. and 8s. 4d.
in our money. Public offices could only receive payments in bank
notes, except where the amounts of these or the balances were less
than the lowest denomination of the note. And then the employment
of gold and silver for other than coinage purposes was strictly
prohibited without the royal license. These measures, however, were
still unequal to restoring public confidence in the paper of the
Bank, although in addition to those already specified, decrees were
published fixing the value of paper at five per cent. and then at ten
per cent. above the corresponding nominal value of specie. Trade was
now beginning to experience the bad effects of a restricted currency,
and representations were strongly made to Law and to the Regent to
restore the currency to its previous position. This of course Law was
unable to do without facing the consequences of seeing the bulk of the
specie withdrawn altogether not only from circulation but from the
country. A financial and industrial crisis would have at once been
precipitated. To meet the situation, Law resolved upon bold and extreme
measures. On the pretext that there were 1,200,000,000 livres in specie
lying idle in the hands of financiers and successful speculators, an
edict of Council was published on 27th February, which ordered “that
no person, of whatever estate or condition, not even any religious
or ecclesiastical community, should keep more than 500 livres in
coined money or ingots, under pain of confiscation of the excess, and
of a fine of 10,000 livres.” All payments exceeding 100 livres in
amount were to be made without exception in paper, and the purchase
of jewellery, plate and precious stones was declared illegal if made
for purposes of investment. To provide against concealment of specie
informers were promised a reward of half the sums disclosed, and all
government officials were ordered to make search wherever ordered by
the directors of the Bank. This decree was followed on 5th March by one
which further debased the currency by raising the price of the silver
marc to 85 livres, and on 11th March by a third, by which gold specie
was to be withdrawn from the currency from and after 1st May following,
and silver specie, except the smaller pieces which were necessary for
odd change, from and after 1st August following.
These various decrees wrought a revolution in the fiscal arrangements
of the country. No one appreciated more fully their danger than Law
himself, but extraordinary circumstances such as those with which
he was forced demanded the employment of extraordinary methods to
counteract them. He was presented with the alternative of certain
collapse of his schemes if he did not resort to arbitrary measures,
or of a possible chance of saving the situation if he could force
the currency of paper by withdrawing all the specie from circulation
and holding it in the hands of the Bank. Had he succeeded in doing
this, confidence in the notes of the Bank would undoubtedly have
largely been restored since that depends entirely upon the knowledge
of the public that behind them there are liquid reserves available for
conversion whenever required. It is questionable if any other methods
could have been devised than those followed by Law, and in judging
their character it is necessary to bear in mind the ultimate object he
had in view.
It was natural that these tyrannical steps should have had the
immediate effect of rousing a storm of opposition amongst the public
towards Law, and if we are to believe Lord Stair, they also prejudiced
him in the eyes of the Regent, to whom the hostile attitude of the
people was a matter of grave concern. On the day following the issue of
the decree of 11th March, he wrote to Craggs, “The rage of the people
is so violent, that, in the course of one month, he will be pulled to
pieces; or his master will deliver him up to the rage of the people.
You may depend upon it that he is mightily shaken in his master’s
good opinion, who, within these few days last past, has used him most
cruelly to his face, and called him all the names that can be thought
of, ‘Knave and madman,’ &c. He told him he did not know what hindered
him to send him to the Bastille; and that there never was anyone sent
thither deserved it half so well. To make matters better, Law’s head is
so heated that he does not sleep at nights, and he has formal fits of
phrenzy. 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, who
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. This scene
the officer of the guard told Le Blanc, from whom it came to me by a
very sure conveyance. Le Blanc is in despair about the state of Law’s
health and discredit in which he stands with the Regent. At the same
time, there is a most formidable party formed against him, and almost
everyone who held their tongues out of fear, now take courage to speak
to the Regent upon his character; so that they believe the Regent is
only withheld by shame from sacrificing him to the resentment of the
nation. Law, on the other hand, says, that if they will give him but a
little time, he will set everything to rights; that he will raise the
credit of the stocks; turn the course of the exchange; sink the stocks
in England, and put everything in that country into such disorder that
it shall plainly appear that he can do everything in that country he
pleases. In order to that, he has prevailed with Croisset, André,
and several other people, who had very great sums in our stocks, to
withdraw their money and to remit the greater part of it back into
France; with the rest, he proposes to turn the course of the exchange
and to carry on his other designs. He proposes further, in order to
alter the course of the exchange, to lower the value of the specie in
France, till the crown is brought down by degrees to three livres; and
this _arret_ is to come out in a few days.”
Law’s object was to a large extent gained so far as it aimed at
replenishing the reserves of coin at the Bank. During the month
of March no less than 300,000,000 livres were deposited, a sum
undoubtedly large but still short of being an adequate security
against the enormous mass of paper afloat, which has been estimated at
2,600,000,000 livres. These deposits were at the same time maintained
in full strength by the operation of the decree of 27th February,
which relieved the Bank of the necessity of repaying at any time more
than 500 livres in specie. Success however limited as it was, was only
secured at considerable cost to Law’s reputation. The domiciliary
visits which were made use of for detecting hoarded coin created
widespread and bitter resentment. A feeling of deep distrust, of
insecurity, and of fear crept through the community. The reward for
information was so great that sons betrayed their parents, brothers
their sisters, servants their masters. Friend betrayed friend, and
enemies had an effective instrument of revenge. “Never before had
sovereign power been so violently exercised, never had it attacked in
such a manner the temporal interests of the community. Therefore was
it by a prodigy, rather than by any effort or act of the government,
that these terribly new ordinances failed to produce the saddest and
most complete revolutions; but there was not even talk of them; and
although there were so many millions of people, either absolutely
ruined or dying of hunger, and of the direst want, without means to
procure their daily subsistence, nothing more than complaints and
groans was heard.”
Among those who were ruined in their fortunes at this time was one of
the directors of the Bank itself. A domiciliary visit, prompted by
one of his enemies, resulted in the discovery of 10,000 crowns, which
were confiscated. For failure to declare his hoard and deposit it in
the Bank he was fined 10,000 livres and lost his appointment. The
brothers Pâris were also among the sufferers. They were detected in
the act of conveying 7,000,000 livres into Lorraine, and a visit to
their residences brought into the coffers of the Bank an additional sum
of like amount. These confiscations and many others of more or less
substantial sums were published abroad in order to induce others to
conform to the edict from fear, and in many cases the prospect of loss
of fortune was regarded a less evil than possibility of discovery with
all its attendant penalties. There is in fact every reason to believe
that neither Law nor the Regent anticipated recourse to harsh measures
in carrying out their decree. They relied upon the fear which would be
created by its publication serving their purpose, and in order the
better to accomplish it arranged with several well-known prominent men
to allow themselves to become apparent victims. Thus were many of the
courtiers and public officials intimidated into divesting themselves of
their accumulated wealth, and into exchanging it for paper which was so
soon to lose its value. The largest capture which was made was that of
ex-Chancellor Pontchartrain whose cellars disgorged the enormous sum of
57,000 louis d’or or considerably over £10,000,000. The deep dislike
the Regent had for his own decree is also evinced by his conduct
towards the President Lambert de Vernon, who had sought an interview
for the purpose of informing against some one who was possessed of
500,000 livres in gold. On hearing his message, the Regent in horror
enquired, “What d--d sort of a trade have you taken to?” The President
replied, “Sir, I do nothing more than obey the law, and it is that
which you indirectly treat with such an appellation. As for the rest,
your Royal Highness need not be alarmed, and may do me more justice.
It is myself I come to inform against, in the hope of being allowed to
keep at least a part of this sum, which I prefer to all the bills of
the Bank.” As a result of his appeal, the President was allowed the
reward of an informer and permitted to retain half his fortune.
Law himself was the victim of a somewhat amusing result of his own
methods about this time. Some months before he negotiated with the
President of Novion the purchase of his estates for £400,000 francs.
The President required payment to be made in silver, and Law, who was
anxious to impress everyone with the advantages to be gained by the use
of paper alone, could not of course refuse, declaring that he preferred
to be rid of a metal which was to him a burden on account of its bulk,
and of the embarrassment it caused him. Unfortunately Law was compelled
afterwards to re-transfer the estates to the President’s son to whom
the right of pre-emption had been reserved, and received back the price
in notes which he was bound to accept according to his own decree. Nor
could Law complain of the advantage that had been taken of him without
depreciating the value of his own paper.
A measure of vastly greater importance and destined to lead to much
graver consequences than even those already mentioned was the union
of the Royal Bank and the Indian Company. A meeting was held on
22nd February at the Bank to which had been called the principal
shareholders of the Company, the proposal being formally made and
agreed to. Since the General Bank had been converted, in December,
1718, into a Royal institution, it had carried on its business for
the benefit of the Royal revenues alone. The notes in circulation
carried the guarantee of the King, a guarantee which was still to
remain notwithstanding the amalgamation. For the ostensible purpose
of preventing unlimited issue of additional notes it was provided
that authority must in all cases be first obtained from the Council.
Since the Council was in all its deliberations under the influence
of the Regent, it will be seen later how worthless such a provision
proved as an effective check to arbitrary fabrication of paper. During
the period of the Bank’s existence as a Royal establishment, it had
carried on business with great success, its balance sheet showing on
paper a profit 120,000,000 livres of profit. This profit it was also
arranged should be transferred intact to the company for the benefit
of its shareholders. The object which Law had in view in bringing
about the union could only have been one of expediency. It contained
no feature which promised permanent success to the undertaking, and
showed a singular lack of foresight and real business capacity.
Undoubtedly it gave encouragement to speculators, who were carried
away by the apparent increase of stability given to the Company by the
amalgamation. But even this was of short duration. It was impossible
to conceal for long the elusory nature of the transaction, and it soon
became clear that a false step had been taken inasmuch as the fortunes
of the Bank were now altogether bound up with those of the Company.
Previously to the date of the incorporation of the Bank and the
Company, the note issue in circulation amounted to about 600,000,000
livres. Within three months after that date, an additional
2,000,000,000 livres were fabricated and set afloat. The bulk of the
fresh issues was utilised for the purpose of discharging the national
debt, one of the great objects which Law had in view at the initiation
of his financial schemes. The national creditors were now become
creditors of the Company in respect of the notes they held; and the
state had now nominally discharged her debts in full.
One of the difficulties created by the publication of the various
decrees limiting the currency of coin was that of scarcity of notes of
small denomination. On 19th April, accordingly, a decree was registered
by which no less than 438,000,000 livres in notes of 10 to 1000 livres
each were issued in order to facilitate the changing of notes of
greater value and the carrying out of transactions of small amounts.
Although all these expedients failed in their object, the extent to
which speculation was carried was very little affected. The time for
suddenly made fortunes had now gone, but sufficient excitement remained
to render the purchase and sale of shares an occupation attractive to
thousands of speculators. The tendency of the market was distinctly
downwards, but there were intervening fluctuations, which maintained
the mania in almost all its former strength. The Rue Quincampoix was
still crowded from morning till evening. So great were the crowds on
many occasions that scenes of confusion were frequent and sometimes
developed into scenes of violence. It formed a happy hunting ground
for the lowest classes in the community. Robberies and even murders
took place so often that special precautions had necessarily to be
taken by those who carried money on their person. So dangerous had
the street and its environs become that on 22nd March, the council
published an edict prohibiting its use as a stock market, and requiring
all houses and offices wherein share transactions had been hitherto
usually negotiated to be closed in future for such business. No other
locality was assigned to the speculators, and for two months they had
no recognised place of meeting. The wisdom of this decree was dictated
by an unhappy occurrence that took place on the morning of the day of
its issue, in which was involved a young foreigner of noble family,
Comte de Horn, son of Prince Philippe Emmanuel who had served in France
at the sieges of Brizac and of Landau, and at the battles of Spire
and of Ramillies. According to the account given of the incident by
Duclos, it appears that the Count, who had been living a riotous life
in Paris for some time and had contracted extensive debts, along with
two companions, Laurent de Mille, and a sham knight named Lestang,
plotted the assassination of a rich stock-jobber and the theft of his
pocket-book in which he was known to carry large sums of money in
paper. They resorted to the Rue Quincampoix, and under the pretext of
negotiating the purchase of 100,000 crowns worth of shares, took the
stock-jobber to a tavern in the Rue de Venise and stabbed him there.
The unfortunate stock-jobber, in defending himself, made sufficient
noise to attract the attention of a waiter, who, passing at the moment
the door of the room, opened it. Seeing a man lying in a pool of blood,
he immediately closed and locked the door and shouted murder.
The assassins, finding retreat closed against them, escaped through
the window. Lestang, who had been keeping watch on the staircase,
rushed off on hearing the shouts of the waiter to the lodging house
in the Rue de Tournon, where the three of them boarded, took the most
portable luggage and fled. Mille dashed through the crowds in the Rue
Quincampoix, but followed by the people, was at last arrested at the
markets. The Comte de Horn was seized on jumping from the window.
Believing his two accomplices to have succeeded in saving themselves,
he had enough presence of mind to say that he feared he himself would
also have been murdered in trying to defend the stock-jobber. His ruse,
however, proved valueless by the arrest of Mille, who, having been
brought back to the tavern, confessed all. The Comte declared to no
purpose he did not know Mille; and the Commissary of Police took him
to prison. The crime being fully established, the trial did not last
long, and on 26th March both were broken alive on the wheel in the
Place du Grève. The Comte was apparently the author of the plot; for,
while he was still breathing on the wheel, he demanded pardon for his
accomplice, who was executed last.
Before the execution had been carried out, the strongest efforts had
been made to influence the Regent to grant a pardon, or at least a
commutation of the punishment. The crime was so atrocious that they
did not insist on the first, but redoubled their solicitations for
the latter. They represented that the execution by the wheel was so
ignominious, that no daughter of the house of Horn could, until the
third generation, enter any convent. The Regent rejected all prayers
for pardon. They appealed to him on the ground that the culprit was
allied to him, but he replied,--“I shall partake of the shame. That
ought to console the other relatives.” He repeated the words of
Corneille: “The shame is in the crime, not in the scaffold.” The Regent
was inclined however to commute the punishment, but Law and the Abbé
Dubois impressed him with the necessity of preserving the public safety
at a time when everyone carried his wealth about with him. They pointed
out to him that the people would not be satisfied, and would consider
themselves humiliated by a distinction of punishment for a crime so
atrocious.
When his parents lost all hope of pardon from the Regent, the Prince de
Robec Montmorency, and the Marechal d’Isenghen, found means of securing
admission to the prison. They brought poison with them and exhorted
him to take it in order to avoid the shame of the execution, but he
refused. “You wretch,” they declared, leaving him with indignation,
“you are only worthy to die by the hands of the executioner.”