Two hundred years ago, when John Law, a rich goldsmith's son, was a boy in Edinburgh, goldsmiths were dealers in coin as well as in plate, and hence were bankers and brokers as well as manufacturers. They borrowed, lent, exchanged, and assayed money, and therefore possessed whatever knowledge of finance there was current in the world. It was in his father's counting-room that John Law acquired that taste for financial theories and combinations which distinguished him even in his youth. But the sagacious and practical goldsmith died when his son was fourteen, and left him a large inheritance in land and money. The example of Louis XIV. and Charles II. having brought the low vices into high fashion throughout Europe, it is not surprising that Law's first notoriety should have been owing to a duel about a mistress. A man of fashion in Europe in Louis XIV.'s time was a creature gorgeously attired in lace and velvet, and hung about with ringlets made of horse-hair, who passed his days in showing the world how much there was in him of the goat, the monkey, and the pig. Law had the impudence to establish his mistress in a respectable lodging-house, which led to his being challenged by a gentleman who had a sister living there. Law killed his man on the field—"not fairly," as John Evelyn records—and he was convicted of murder. The king pardoned, but detained him in prison, from which he escaped, went to the Continent, and resumed his career, being at once a man of fashion, a gambler, and a connoisseur in finance. He used to attend card-parties, followed by a footman carrying two bags, each containing two thousand louis-d'ors, and once during the life-time of the old king he was ordered out of Paris on the ground that he "understood the games he had introduced into the capital too well."
Twenty years elapsed from the time of his flight from a London prison. He was forty-four years of age, possessed nearly a million and three-quarters of francs in cash, producible on the green cloth at a day's notice, and was the most plausible talker on finance in Europe. This last was a bad symptom, indeed, for it is well known that men who remain victors in finance, who really do extricate estates and countries from financial difficulties, are not apt to talk very effectively on the subject. Successful finance is little more than paying your debts and living within your income, neither of which affords material for striking rhetoric. Alexander Hamilton, for example, talked finance in a taking manner; but it was Albert Gallatin who quietly reduced the country's debt. Fifteen days after the death of the old king, Law was in Paris with all that he possessed, and in a few months he was deep in the confidence of the regent. His fine person, his winning manners, his great wealth, his constant good fortune, his fluent and plausible tongue, his popular vices, might not have sufficed to give him ascendency if he had not added to these the peculiar force that is derived from sincerity. That he believed in his own "system" is shown by his risking his whole fortune in it. And it is to his credit that the first use he made of his influence was to show that the spoliations, the debasing of the coin, and all measures that inspired terror, and thus tightened unduly the clutch upon capital, could not but aggravate financial distress.
His "system" was delightfully simple. Bear in mind that almost every one in Paris who had any property at all held the king's paper, worth one-quarter or one-fifth of its nominal value. Whatever project Law set on foot, whether a royal bank, a scheme for settling and trading with Louisiana, for commerce with the East Indies, or farming the revenues, any one could buy shares in it on terms like these: one-quarter of the price in coin, and three-quarters in paper at its nominal value.
The system was not immediately successful, and it was only in the teeth of powerful opposition that he could get his first venture, the bank, so much as authorized. Mark how clearly one of the council, the Duc de Saint-Simon, comprehended the weakness of a despotism to which he owed his personal importance. "An establishment," said he, "of the kind proposed may be in itself good; but it is so only in a republic, or in such a monarchy as England, where the finances are controlled absolutely by those who furnish the money, and who furnish only as much of it as they choose, and in the way they choose. But in a light and changing government like that of France, solidity would be necessarily wanting, since a king or, in his name, a mistress, a minister, favorites, and, still more, an extreme necessity, could overturn the bank, which would present a temptation at once too great and too easy." Law, therefore, was obliged to alter his plan, and give his bank at first a board of directors not connected with the Government.
Gradually the "system" made its way. The royal paper beginning to rise in value, the holders were in good humor, and disposed to buy into other projects on similar terms. The Louisiana scheme may serve as an example of Law's method. Six years before, a great merchant of Paris, Antoine Crozat, had bought from the old king the exclusive right to trade with a vast unknown region in North America called Louisiana; but after five years of effort and loss he became discouraged, and offered to sell his right to the creator of the bank. Law, accepting the offer, speedily launched a magnificent scheme: capital one hundred millions of francs, in shares of five hundred francs, purchasable wholly in those new treasury-notes bearing four per cent. interest, then at a discount of seventy per cent. Maps of this illimitable virgin land were published. Pictures were exhibited, in which crowds of interesting naked savages, male and female, were seen running up to welcome arriving Frenchmen; and under the engraving a gaping Paris crowd could read, "In this land are seen mountains filled with gold, silver, copper, lead, quicksilver; and the savages, not knowing their value, gladly exchange pieces of gold and silver for knives, iron pots, a small looking-glass, or even a little brandy." One picture was addressed to pious souls; for even at that early day, as at present, there was occasionally observed a curious alliance between persons engaged in the promotion of piety and those employed in the pushing of shares. This work exhibited a group of Indians kneeling before some reverend fathers of the Society of Jesus. Under it was written, "Indian Idolaters imploring Baptism."
The excitement, once kindled, was stimulated by lying announcements of the sailing of great fleets for Louisiana laden with merchandise and colonists; of the arrival of vessels with freights worth "millions;" of the establishment of a silk-factory, wherein twelve thousand women of the Natchez tribe were employed; of the bringing of Louisiana ingots to the Mint to be assayed; of the discovery in Arkansas of a great rock of emerald, and the dispatch of Captain Laharpe with a file of twenty-two men to take possession of the same. In 1718 Law sent engineers to Louisiana, who did something toward laying out its future capital, which he named New Orleans, in honor of his patron, the regent.
The royal paper rose rapidly under this new demand. Other schemes followed, until John Law, through his various companies, seemed about to "run" the kingdom of France by contract, farming all its revenues, transacting all its commerce, and, best of all, paying all its debts! Madness, ruled the hour. The depreciated paper rose, rose, and still rose; reached par; went beyond par, until gold and silver were at a discount of ten per cent. The street named Quincampoix, the centre and vortex of this whirl of business, a mere lane twenty feet wide and a quarter of a mile long, was crowded with excited people from morning till night, and far into the night, so that the inhabitants of the quarter sent to the police a formal complaint that they could get no sleep. Nobles, lackeys, bishops, monks, merchants, soldiers, women, pickpockets, foreigners, all resorted to La Rue, "panting, yelling, operating, snatching papers, counting crowns," making up a scene of noisy confusion unexampled. One man hired all the vacant houses in the street, and made a fortune by subletting offices and desk-room, even placing sentry-boxes on some of the roofs, and letting them at a good price. The excitement spread over France, reached Holland, and drew to Paris, as was estimated at the time, five hundred thousand strangers, places in the public vehicles being engaged "two months in advance," and commanding a high premium.
There were the most extraordinary acquisitions of fortune. People suddenly enriched were called Mississippiens, and they behaved as the victims of sudden wealth, unearned, usually do. Men who were lackeys one week kept lackeys the next. A garçon of a wine-shop gained twenty millions. A cobbler, who had a stall in the Rue Quincampoix made of four planks, cleared away his traps and let his boards to ladies as seats, and sold pens, paper, and ink to operators, making two hundred francs a day by both trades. Men gained money by hiring out their backs as writing-desks, bending over while operators wrote out their contracts and calculations. One little hunchback made a hundred and fifty thousand francs by thus serving as a pupitre ambulant (strolling desk), and a broad-shouldered soldier gained money enough in the same way to buy his discharge and retire to the country upon a pretty farm. The general trade of the city was stimulated to such a degree that for a while the novel spectacle was presented of a community almost every member of which was prosperous beyond his hopes; for even in the Rue Quincampoix itself, although some men gained more money than others, no one appeared to lose any thing. And all this seemed the work of one man, the great, the incomparable "Jean Lass," as he was then called in Paris. It was a social distinction to be able to say, "I have seen him!" His carriage could with difficulty force its way through the rapturous, admiring crowd. Princes and nobles thronged his antechamber, a duchess publicly kissed his hand, and the regent made him controller-general of the finances.