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Fall of John Law
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King’s Bench prison in the 1690s) preceded him.
The following year Law sought an audience with Louis XIV in France, where a severe specie shortage, repeated military engagements, and a mounting state debt combined to put Europe’s most populous nation on increasingly precarious financial footing. In “Memoire touchant les monoies et le commerce” Law proposed the creation of a French national bank that would issue paper money, increase available credit, and promote trade (objectives known collectively as Law’s “System”), but he failed to get the proposal past the king’s controller-general. In 1707 two more submissions were rejected. Not until Law took up permanent residence in Paris were any of his proposals entertained in earnest by the king and his ministers. But just as Law faced the unfamiliar prospect of seeing his financial plans adopted, Louis XIV died, on September 1, 1715.
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LETTRES PATENTES EN FORME D’EDIT,
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LOUIS par la gtaee de Dieu Roy de France 4r de Uivuie : A tout prefetu Sc i »nur , Salut. Now aronj depais noflre areneroem a U Couronne travaiilf ucilcmeot a refliblir le bon ordrc daot nos 6nance« Sc a reformer Im abut que In longues Guetrn a?oienl donni occalion d'v introiuue, Se Nou» n'avon* pat eu moiaj d'attcntion au rcftaMiflcnwni du commerce de no« Supn, qui contnbue autanU leur bonheorque U bonne admuuftration de nos financei ■, mail par la connoillanee que Nout avoei
frife de leftac de no» Colonnies lituces iins la pjrtic Septcntrionale de Aroerique; Nous arons reconnu qa'ellei avoient diuunt plusbefoin de noflre protection que le Grut Antoine Croiat. auquel tc feu Roy noflre Uct-honoii Seigneur & Bitaycul, aroie accord par (n Lettrei paientfs du moi« dc Scpttroixe dc l'um<e ijit-le privilege da Commerce eidufif dar«s noftre Gouvernement de la Loiufi*noe, No«m tret-bumklcmcm fait fopniwrr de crourer bon qu'il Noui le remit, ce que Nom Juy avont accotJt nt 1’Arreft dc noflre ConTcil du vinj-i.iroiCeste jour du prtlcnt moit; itque le traite fait avec lej fieun Aoben, Neter Sc Cayoe le dix^me war da mois d.-M>ydcl'»na<e i?o«. poor La traict du Ctftoi de Canada doit eipuer i la fin de U pcefente onnee, Nout avom jug* quil cftoit neccflaire pour le tueti de noftre lcrricc Sc 1‘avanuee de cc* deu< Colonnut, d'ertablic une Cocnfagnic cn cIUi d'en fimtcnir le commrrtc , Sc de faire travailler aux difirrcntes cultures t< plantations qui s’y pt-uvegt faire. A cii cavsii & autre* t ce Ncnivmouvani, de 1‘avis de noftre «rej. cher 6r t/ei-ami Oncle le Due d'Orleans, Petic-Filt dc France , Regent j dc n-iflre uet-cher Sc tcej-ami Coulin le Doc de Bourbon, de noftre trekchrf Sc tfct-ami Coafia le Prince de Conty. Piineet de noftre Sang; dc noAic trrt-cber Sc trrs-ani Oncle le Dut du Maine, de noftre n« th-r & rrcs-aml Omle le Comre de Touloofe, Pnneet Irj-irm.-* ,&auurt 1‘airs de France Crai
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Edict establishing the Company of the West,
Paris: Imprimerie Royale, 1717 (2010.0158.12), acquisition made possible in part by the Clarisse Claiborne Grima Fund and the Boyd Cruise Fund
Louis’s death left France in the hands of his five-year-old great-grandson, whose reign would be overseen by the regent, Philippe, due d’Orleans, until he reached the age of majority at 13. The regent inherited a financial crisis of epic proportions. France’s treasury was bankrupt. State debt topped 2 billion livres, not including annual interest payments to its creditors of 90 million livres, and the treasury had borrowed against future tax revenues through 1718. The entire financial system was on the verge of collapse, a situation that left the regent predisposed to consider Law’s proffered solutions.
Law’s ascent in the months and years following the death of Louis XIV was meteoric. Within two months his proposal to create a national bank was heard before the finance council. The following summer, the bank became a reality. In August 1717 Law’s newly formed trading company, the Company of the West (Compagnie d’Occident), took over Crozat’s Louisiana charter with hopes of establishing a French version of the Chesapeake in the Mississippi Valley. A year later the regent awarded Law’s company a nine-year monopoly of all tobacco trade within the French empire.
To raise capital and fund the acquisition of smaller companies, the Company issued a series of shares. Proceeds from each issuance were intended to create greater solvency. This money-raising scheme was authorized by the state, which benefited from the arrangement by the elimination of some of its floating debt. The initial 1717 offering could only be purchased with billets d’etat— the paper notes of credit issued by the Crown, their valuation prone to violent fluctuations. The intent was to decrease the number of unstable billets in circulation, while promoting the sale of shares in what Law and the Crown viewed as a
CONSIDERATIONS
SUR LE
COMMERCE
ET SUR
L’ARGENT.
Par M*. LAW, Controlleur General dcs Finances. Tmdmt de VAvgHm.
A LA HATE,
Chez JEAN NEAULME.
MD CC XX.
First French-language edition of Law’s Money and Trade Considered, La Haye: Jean Neaulme, 1720 (2010.0158.7), acquisition made possible in part by the Clarisse Claiborne Grima Fund and the Boyd Cruise Fund
more stable alternative. In exchange, the Company charged 4 percent interest on the billets d’etat, a lower rate than what the Crown paid to most of its creditors.
By the summer of 1719 Law’s company had absorbed the Company of the East Indies and the Royal China and Africa Companies. It also acquired the Senegal Company, a slave-trading entity whose resources and contacts Law hoped to exploit in order to bring laborers to Louisiana. The resulting conglomerate, the Company of the Indies (Compagnie des Indes), had the most far-ranging geographic scope in the history of European trading companies. To finance the expansion Law released more share issuances and eliminated the stipulation that shares be purchased with billets d’etat. At the same time the bank issued 50 million livres of banknotes to ensure that there was enough cash in circulation to cover new share purchases, and Law pledged to personally underwrite the new share issue. Loosened subscription requirements, an increased money
The Historic New Orleans Collection Quarterly 3