The reaction was not long in manifesting itself. Usually in such matters there is a pause before the great driving-wheels reverse their motion, and the backward motion, beginning slowly, gathers way as it progresses. But in this case human intelligence and not soulless machinery was the propulsive force of reaction. The speculators had begun to work before the onward movement had come to an end or even begun to slacken. They were loaded up with a vast amount of stocks whose value, even if there had been money to redeem them, was severely limited, whereas they had purchased at prices varying between the first rise above nominal value and that reached by the last desperate speculator. It is not wise to hold such inflated stock too long, and in a crisis sailing-master Wisdom orders Quarter-master Caution to take a trick at the helm. When the bare idea of unification of financial interests was mooted, the wise holders of stock commenced to unload. When this movement began its progress was rapid—so long as there was anything to be moved. The first class to feel it were the bankers. The specie ran out like the pent-up water from a burst reservoir, till in an incredibly short time there was not sufficient remaining to afford the money-change needed in daily life. The advisers and officials of the State, seriously alarmed, began at once to take strong measures supported by royal decrees. Then as ruin began to stare the whole nation in the face more and more with every hour, desperate expedients were resorted to. The value of the currency was made by every stratagem, dishonest trick, and unscrupulous exercise of power, to fluctuate so that such differences or margins as arose might be grasped forthwith for national use. Payments in bullion, except for very small amounts, were forbidden. The possession of anything over five hundred livres in specie was deemed an offence punishable by confiscation, partial or wholesale, and by fine. Domiciliary visits were paid to seek evidence of offence and to enforce the new laws, and informers in this connection were well paid.
Then began a war, between public oppression and individual trickery, to defend acquired rights and evade unjust demands. The holders of paper money, unable to realise in specie, tried to protect themselves by purchasing goods of intrinsic value. Precious metals, jewels, and such like were bought in such quantities that the supplies diminished and the prices grew, until to avoid immediate ruin, such purchases were proclaimed illegal and prohibited. Then ordinary commodities of lesser values were tried as means of barter, till their prices too rose to such an extent that trade was paralysed. In order to meet the growing danger a still more desperate expedient was resorted to. A decree was issued the effect of which would be to reduce—gradually it was hoped—the obligation of bank notes to one-half their nominal value. This completed the panic, for here was a position which could not be guarded against by any prudence or wisdom. No one could henceforth by any possibility be financially safe. The speculators who had already realised were alone safe. Bona fide investors, if not already overwhelmed by disaster, saw the tide of ruin rising rapidly around them. Nothing within the power of the state could now be done to check or even lessen the state of panic; not even the reversal of the late decree in ten days after its issue. To make matters still worse the Banque at this very time suspended payment. Probably in a wild endeavour to do something which would avert odium from itself by saddling the responsibility on someone else, the Government procured the dismissal of Law from the Controller-Generalship of Finance. However—strange to say—he was very soon appointed by the Regent as Intendant-General of Commerce and Director of the ruined bank. The much-vaunted, idolised, and believed-in “System” had now fallen hopelessly and was ruined forever. Law was everywhere attacked and insulted with such unmitigated rancour that he had to leave the country. He had invested the bulk of the great fortune which he had by now acquired, in estates in France; and these together with everything else that he had were now confiscated.
At the end of the same year, 1720, whilst he was at Brussels he was asked by the command of the Czar (Peter), to administer the finances of Russia, but declined. After this episode, grateful to a broken man, he spent a couple of years wandering about Italy and Germany and probably gaming a fluctuating income through gambling. Next he was to be found in Copenhagen where he had sought sanctuary from his creditors. Next year there was an outward change in his status, when he went to England, on a ship of war, at the invitation of the Government. There he was presented to George I. Somewhat to his chagrin he was denounced in the House of Lords as a Catholic—(he had abjured his old belief of Protestantism before accepting the high office of Controller-General of Finances in 1720)—and an adherent of the Pretender. He pleaded in the King’s Bench the Royal pardon for the murder of Beau Austin which had been sent to him in 1719. He spent the succeeding few years in England whence he corresponded with the Duke of Orleans. He expected to be recalled to France but his hope was never realised. He wished to go to the Continent but was practically a prisoner in England, fearing to leave it lest he should be arrested by his creditors, amongst whom was the new French East India Company which had been reconstructed on the ruins of the old. In 1725 Sir Robert Walpole, then Prime Minister, asked Lord Townshend, the Secretary of State, to give Law a King’s commission of some sort, so that such might serve for his protection. In the same year he went to Italy. He died in Venice in 1729, in what, compared with his former state, was poverty. To the last he was a gambler, always ready to take long risks for a prospect, however remote, of large gain. A story is told that in his last years he wagered his last thousand pounds to a shilling (20,000 to 1) against the throwing of double sixes six consecutive times. The law of chances was with him and naturally he won. He renewed his wager but the authorities would not allow the further gamble to take place.
John Law married, quite early in life, the daughter of the Earl of Banbury and widow of Mr. Seignior. His widow died in 1747. Some of the members of his family were not undistinguished; his son died a Colonel in the Austrian service; and one of his nephews became Comte de Lauriston and rose to be a General in the French army and Aide-de-Camp to the first Napoleon. He was made a Marshal of France by Louis XVIII.
John Law was a handsome and distinguished-looking man, blonde, with small dark grey eyes and fresh complexion. He made an agreeable impression on strangers. Saint-Simon, the social historian, gave him a good character: “innocent of greed and knavery, a mild good man whom fortune had not spoilt.” Others of his time regarded him as a pioneer of modern statesmanship.
How is it then that such a man must be set down an impostor? In historical perspective as an impostor he must be regarded, though not as such in the narrowest view. The answer is that his very prominence sits amongst his judges. Lesser men, and greater men of lesser position, might well stand excused in matters wherein he is accorded condemnation.
“That in the Captain’s but a choleric word
Which in the soldier is flat blasphemy.”
If, when a man plays a game wherein life and death and the fortunes of many thousands are involved, it behoves him to be at least careful, much greater is his responsibility where the prosperity and happiness of nations are at stake. Had Law merely started new theories of finance, and had they gone wrong, he might well claim, and be accorded, excuse. But his were inventions of what, in modern slang, is called “get-rich-quick” principles. Not only did Law not enrich human life—with one exception, that of enlarging the currency in use—or add to the sum total of human well-being and happiness; he even neglected to show that forethought and consideration for others which in all honour ought to be exercised by the deviser and controller of great risks. He was a gambler, and a gambler only. He merely put into the pockets of some persons that which he had taken out of the pockets of others; and in doing so showed no consideration for the poor, the thrifty, the needy—for any of those whose contentment and happiness depend on such as are in high places and dowered in some way with productive powers. The soulless uneducated churl who does an honest day’s work does more for humanity than the genius who merely shifts about the already garnered wealth of ages. John Law posed as a benefactor and accepted all the benefits that accrued to him from the praises of those who followed in his wake and gleaned the rich wastage of his empire-moving theories and schemes. Financiers of Law’s type no more benefit a country or enrich a people than do the hordes of wasters and “tape”-betting men who prey on labour as locusts do on the crops. If they wish not to do unnecessary harm—which is putting their duty at the lowest possible estimate—they should at least try to avoid repeating the errors which have wrecked others. A brief glance at the wreckage which lay well within the Scotch gambler’s vision, will show how he shut his eyes deliberately not only to facts, but to the many correlations of cause and effect. Before his Mississippi Scheme was formulated, there had been experience of banking enterprises, of schemes for mercantile combination and for the exploitation of capital, of adventurous dealings in the developments of countries new and more or less savage, East and West and South.
The following list will typify. Of all these John Law had knowledge sufficient to judge of difficulties to be encountered in the early stages, of dangers not only incidental to the things themselves, but based deep in human nature.