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
