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John Law

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.