To which I answer, 1. That if the coin were sent off, it would return, as has been said, while the trade of England flourishes: and 2. That this new bank paper coming in place of the coin, would no more be sent to London than coin is sent now. The debts due by the country for taxes, would be compensated by the reciprocal debts due by London for subsistence, &c. and the compensation would go on as at present by bills: but were the case otherwise, and did a change of circumstances oblige the country to make delivery in coin to London, the holders of the country notes would constantly, as is the case in Scotland, have recourse to the bank established in the district, for the coin wanted to be sent to London.
When I accidentally, as at present, happen to apply a principle to a particular case, whereby an innovation is implied, I constantly fear a secret rebuke from many impatient readers. I therefore beg a little indulgence upon account of my good intention, which is only to support ideas to be approved of, or rejected by those who have the capacity to form plans upon them, and power to put them in execution.
CHAP. XXIII.
Of the first Establishment of Mr. Law’s Bank in France, in the Year 1716.
In deducing the principles of credit, I have it chiefly in view, to set in a fair light, the security upon which paper-money is established: and as I imagine, this important branch of my subject will still be rendered more intelligible, by an example of the abuse to which this great engine of commerce is exposed, I now propose to give my reader a short account of the famous bank of circulation first established in France by Mr. Law; but afterwards prostituted (whether by design, or by fatality, I shall not here determine) to serve the worst of purposes; the defrauding the creditors of the state, and a multitude of private persons.
So dreadful a calamity brought upon that nation, by the abuse of paper credit, may be a warning to all states to beware of the like. The best way to guard against it, is to be apprised of the delusion of it, and to see through the springs and motives by which the Missisippi bank was conducted.
After the death of the late King of France, Louis XIV. the debts contracted by that Monarch were found to extend to 2000 millions of livres, that is, to upwards of 140 millions sterling.
It was proposed to the Duke of Orleans, regent of the kingdom, to expunge the debts by a total bankruptcy. This proposal he rejected nobly; and instead of it, established a commission (called the Visa) to inquire into the claims of such of the nation’s creditors as were not then properly liquidated, nor secured by the appropriation of any fund for the payment of the interest.
In the course of this commission, many exorbitant frauds were discovered; by which it appeared, that vast sums of debt had been contracted, for no adequate value paid to the King.
After many arbitrary proceedings, this commission threw the King’s debts, at last, into a kind of order.