interest to pay than before; to say nothing of the gain which might have been made by a lucky sale of the shares: and these were the advantages which the regent, it is probable, expected.

The shares were therefore raised in round numbers during the early parts of the year, 1719, from two hundred thousand to six hundred and twenty-four thousand. The bank notes were coined during the whole of the year 1719, and more particularly during the earlier parts of 1720, till they mounted up from fifty-nine millions to nearly two thousand seven hundred millions of livres: and when the whole system failed at the end of May, the regent was found holding four hundred thousand of the six hundred thousand Mississippi shares; and the public were in possession of (that is, there had been paid away) twenty-two hundred millions of the twenty-six hundred millions of bank notes.

The whole scheme therefore failed; for the regent was answerable for these twenty-two hundred millions of bank notes that were out, just as he had been before for the billets or debts of the state; and he had four hundred thousand shares in his hands, which he had not been able to dispose of. He could not get a sufficient number of the bank notes back; he could not transfer the public debt from himself to the company, as he had hoped to do.

In the event, therefore, after the run on the bank, and in the course of the remainder of the year 1720, he gave up the whole scheme; settled his accounts with the company by burning their shares, or their debt to him, and annihilating part of his own debt to them, and he returned to the old system of providing funds for paying the interest of the bank bills outstanding, which were no longer to be negotiable, and to be destroyed at the end of the year.

The result of the whole arrangement was, that he had to pay fifty-three millions for interest on the national debts, instead of eighty millions per annum, as he had before done, so that a certain advantage was gained; but himself and his administration were covered with disgrace, and his great agent and adviser, Law, narrowly escaped with his life.

Now though these were the facts, and though such were the intentions of the regent and the meaning of the scheme,

it does not follow that the regent, as has been sometimes thought, or even Law himself, meant to defraud the public.

The regent must have conceived, that he had furnished the company with a large revenue: first, by the interest which he was to pay them for their loan of bank notes; secondly, by the exclusive advantages of trade; and thirdly, by the advantages of farming the taxes, which he had allowed them. In this manner they appeared furnished with an income perfectly adequate to discharge the dividends on their shares.

He and Law might both have persuaded themselves, that by the paper system which they had introduced, they had so increased the wealth of the state, that the interest of money would and ought to fall, and that he therefore, as a debtor to the public, might, without injustice to the public, pay less interest than before.

The only question is, whether improper arts and dishonest practices were used, to raise the value of the shares, for on their sale all depended.

There is one fact extremely suspicious. In the middle of the year 1719, the year of the system, the company promised a dividend, far disproportioned to any rational expectations that could be formed of their means. Why they did so, has never been properly explained; and the company must be left with the imputation of, at least, most unpardonable delusion, if not of direct dishonesty. It was at this moment, it may be remarked, that the financial scheme we have mentioned from Stuart, appears to have been brought into action. In August, the company obtained the general farming of the taxes from the regent; and while they promised this extraordinary dividend on their shares, they agreed to lend the regent one thousand six hundred millions at three per cent. Three hundred thousand shares were created in the next two months of September and October; and in December, 1719, and the first five months of 1720, two thousand millions of bank notes were created, but in the last of these five months, in May, the bank stopped. All these facts connected, seem to be best accounted for by the explanation of Stuart. The dividend was promised, which raised the value of the shares; a large number of shares were created to be purchased; and again, a large number of bank notes were struck off and paid away to

the public creditor, who was thus furnished with the means of buying the shares. All this runs smooth; but the question is, upon what grounds this large dividend was promised; a question, it is to be feared, which neither Law nor the regent could have properly answered.

Lastly, with respect to the failure of this system. Stuart thinks that this failure was owing to the order given on May the 21st, that the bank bill should only go for half its numerical value. He considers the credit of the bank as good, all through the months of January, 1720, February, &c. down to May. "The French nation," he says, "had been accustomed to diminutions in the value of the coin; by these they neither were, nor could have been alarmed; indeed, such depreciations of the coin had been always urged by Law and the adherents to his system, as arguments to show the superiority of paper. When, however, it was publicly declared, that the paper money should be subject to diminutions too, contrary to the original terms of the bill, and the engagement with the public; and when it was thus seen that the paper, which had no value in itself, could not even boast of the value to be derived from good faith, that is, was in fact left without any value at all, the consequence was sure to be what immediately took place, that the public would rush forward to get for it any value that could be found in silver or gold."

All this must indeed be allowed. The failure of the system was an inevitable consequence of such an edict as that of May.

The question, however, that remains behind is, what could tempt or force the regent and Law to issue such an edict? This must, I think, be accounted for, not by saying with Stuart, that it was a mere blunder, for it was an impossible blunder; but by saying that it was an expedient which they had recourse to (a vain expedient, no doubt), for enabling their bank to struggle through the difficulties which are always the consequence of an over-issue of paper.

Law certainly had an idea that paper was fitter than precious metals to become the money of a state; and he had even thought that money, that is, in this instance, that paper was wealth to a country, in the proper sense of the word

wealth; that is, was industry, trade, production, prosperity, in every meaning of these terms, because he thought it caused them. With these ideas he might have filled the imagination, if not betrayed the understanding of the regent, and both might have thought that in a country like France, a proper exercise of the authority of the state would carry them through all difficulties, till at length all the common prejudices on this subject of money being removed, the new medium might have its full circulation and influence, and the system be left without any further interference of government, to stand on its own merits. The paper was therefore issued without fear,

to an enormous extent.

But in the mean time, the real nature of things could not be altered. It was not possible that the shares of the company should advance so high, and the public not begin to perceive that they had advanced beyond their value; it was not possible that the paper money should be so increased in quantity, and the numerical prices of things not increase also, and that foreigners should not therefore bring their goods, receive for them paper, turn the paper into cash, and then carry the cash out of the kingdom; it was not possible that the disappearance of the coin should not create alarm, notwithstanding the edicts of the regent, and the letters and reasonings of Law; it was not possible that all annuitants should not find their stipulated incomes less valuable, as the medium they were paid in became less valuable, that is, was more multiplied; it was not possible that the small part of every society, which may be called the sober reasoning part, should not be much struck with the sudden fortunes, the restless speculations, the extravagant enthusiasm, the violent agitation that every where prevailed, that they should not themselves doubt, and at last teach others to doubt of the solidity of a system unphilosophic in itself, and which, after all, had to depend on the profits of a commercial company, and the good faith of the regent. It was impossible, on these and other accounts, that gold and silver money should not at length be preferred to paper of whatever promise or description; and the whole merit, and meaning, and success, of Law's system depended upon a contrary supposition-the preference of the bank paper to the precious metals.

These are all consequences that were, and must ever remain, inevitable when an excess of paper money has been, on whatever account, introduced into the circulation of a country; and the only real grounds of astonishment are, how the system existed so long, and how Law could succeed in the manner he did, to persuade the public of the value of the company's shares, and the solidity of the bank notes.

On the whole, the failure of the scheme seems to have been owing to two great causes: first, a change of the public opinion with regard to the probable success of the mercantile project; and secondly, to the over-issue of paper.

While the demand for shares continued, the bank notes were thus employed and absorbed, and though there might be a general excess of circulation visible in all the proper tests of an excess, still there might be no positive distinction made by the French people between notes and specie. But the moment the demand for shares ceased, the demand for notes ceased with it; and the distinction between the notes and specie immediately began to take place.

The famous edict of May, which had been occasioned by circumstances like these, only brought on a crisis which was from the first sooner or later inevitable, and was sure to be, when it did take place, totally ungovernable.

This system has been always looked upon as a system of mere fraud, and Law as a mere projector and impostor. It has been always thought that the short account of the whole is, that he deceived the French nation, and that the only instruction to be derived from these transactions is, the disposition of the public to the folly and guilt of gambling and stockjobbing; the caution with which governments should listen to projectors; the hesitation with which the public or individuals should embark in schemes of wide extent and rapid profit.

Without meaning to controvert positions like these, the undeniable maxims of experience and good sense, it may be added, I conceive, that these transactions afford other lessons not less valuable, though not so obvious-I mean the circumspection with which the expedient of paper money should be used, the caution with which governments should listen to those whose systems proceed upon any other supposition with respect to their paper-issues, than that of their being freely