Events now very rapidly developed in the history of the Bank and of the West India Company. Law’s accession to power marked the beginning of his difficulties—difficulties which taxed his judgment to the utmost and forced him into the employment of expedients which he himself foresaw could not permanently ward off injury to his schemes. He thought, however, they might serve their purpose until his schemes assumed a less fluid condition, and that their establishment in good working order would render them proof against attack from such outside forces as might array themselves against him.

The first indications of danger were becoming apparent in December, and by the following month had assumed an alarming aspect. Shares had been selling at the very high price of 10,000 livres each, but by concerted action amongst several large holders and speculators that price was gradually forced up until it reached the unprecedented figure of 20,000 livres. This was now their opportunity. Artificial inflation could not be carried to greater lengths, and accordingly a process of extensive unloading commenced. These speculators, however, suspicious of the stability of the new system, were not satisfied with holding notes, the value of which might depreciate at any moment, and immediately presented them at the Bank for their equivalent in specie. Law perceived that such a process if allowed to run unchecked would soon deplete the Bank of all its available resources. Refusal to exchange would be suicidal, and if public confidence could not be maintained without recourse to artificial means, the currency of the notes would require to be forced directly or indirectly.

One of the chief offenders was the Prince de Conti, a near relative of the Regent. This nobleman had amassed great wealth through engaging in speculation under Law’s guidance, but had alienated the latter by his insatiable appetite for still greater fortune. Unable again to enlist the services of Law in his interests, he evinced towards him that bitterest form of ingratitude, the ingratitude of the man who is favoured to him who does the favour. He attacked Law in his most sensitive part by realising great quantities of stock, and converting the notes he received in payment into money at the Bank, an operation which required the aid of three waggons. Many speculators who had preferred specie to paper transmitted their money abroad for safe investment, and in the course of a few weeks several hundred millions of livres were sent out of the country. A few also hoarded their wealth in secret places until the time would come when they could without fear employ it openly.

The first step taken by Law with a view to placing a check upon this continuous drain on the reserves of the Bank was the issue of a decree on 28th January, depreciating the coinage by raising the price of the silver marc to 54 livres. At the same time the interest of money was reduced from 4 to 2 per cent. Many people refused to bring their specie to the Bank for recoinage, and then commenced that system of domiciliary visits which under subsequent decrees worked with so much tyranny and for a time absolutely destroyed not only public but also domestic confidence.

The result of the decree was not so satisfactory as had been anticipated, and in quick succession other decrees were issued introducing alterations in the standard of the coinage. The purpose of this was to discredit specie as far as possible as a medium of exchange, and by giving the note the appearance of fixity in value to raise its credit for currency purposes. Payments in specie were only allowed to the extent of 300 livres in gold, and of 10 livres of silver, sums respectively equivalent to £12 10s. and 8s. 4d. in our money. Public offices could only receive payments in bank notes, except where the amounts of these or the balances were less than the lowest denomination of the note. And then the employment of gold and silver for other than coinage purposes was strictly prohibited without the royal license. These measures, however, were still unequal to restoring public confidence in the paper of the Bank, although in addition to those already specified, decrees were published fixing the value of paper at five per cent. and then at ten per cent. above the corresponding nominal value of specie. Trade was now beginning to experience the bad effects of a restricted currency, and representations were strongly made to Law and to the Regent to restore the currency to its previous position. This of course Law was unable to do without facing the consequences of seeing the bulk of the specie withdrawn altogether not only from circulation but from the country. A financial and industrial crisis would have at once been precipitated. To meet the situation, Law resolved upon bold and extreme measures. On the pretext that there were 1,200,000,000 livres in specie lying idle in the hands of financiers and successful speculators, an edict of Council was published on 27th February, which ordered “that no person, of whatever estate or condition, not even any religious or ecclesiastical community, should keep more than 500 livres in coined money or ingots, under pain of confiscation of the excess, and of a fine of 10,000 livres.” All payments exceeding 100 livres in amount were to be made without exception in paper, and the purchase of jewellery, plate and precious stones was declared illegal if made for purposes of investment. To provide against concealment of specie informers were promised a reward of half the sums disclosed, and all government officials were ordered to make search wherever ordered by the directors of the Bank. This decree was followed on 5th March by one which further debased the currency by raising the price of the silver marc to 85 livres, and on 11th March by a third, by which gold specie was to be withdrawn from the currency from and after 1st May following, and silver specie, except the smaller pieces which were necessary for odd change, from and after 1st August following.

These various decrees wrought a revolution in the fiscal arrangements of the country. No one appreciated more fully their danger than Law himself, but extraordinary circumstances such as those with which he was forced demanded the employment of extraordinary methods to counteract them. He was presented with the alternative of certain collapse of his schemes if he did not resort to arbitrary measures, or of a possible chance of saving the situation if he could force the currency of paper by withdrawing all the specie from circulation and holding it in the hands of the Bank. Had he succeeded in doing this, confidence in the notes of the Bank would undoubtedly have largely been restored since that depends entirely upon the knowledge of the public that behind them there are liquid reserves available for conversion whenever required. It is questionable if any other methods could have been devised than those followed by Law, and in judging their character it is necessary to bear in mind the ultimate object he had in view.

It was natural that these tyrannical steps should have had the immediate effect of rousing a storm of opposition amongst the public towards Law, and if we are to believe Lord Stair, they also prejudiced him in the eyes of the Regent, to whom the hostile attitude of the people was a matter of grave concern. On the day following the issue of the decree of 11th March, he wrote to Craggs, “The rage of the people is so violent, that, in the course of one month, he will be pulled to pieces; or his master will deliver him up to the rage of the people. You may depend upon it that he is mightily shaken in his master’s good opinion, who, within these few days last past, has used him most cruelly to his face, and called him all the names that can be thought of, ‘Knave and madman,’ &c. He told him he did not know what hindered him to send him to the Bastille; and that there never was anyone sent thither deserved it half so well. To make matters better, Law’s head is so heated that he does not sleep at nights, and he has formal fits of phrenzy. He gets out of bed almost every night and runs, stark staring mad, about the room making a terrible noise; sometimes singing and dancing, at other times swearing, staring and stamping, quite out of himself. Some nights ago his wife, who had come into the room upon the noise he made, was forced to ring the bell for people to come to her assistance. The officer of Law’s guard was the first that came, who found Law in his shirt, who had set two chairs in the middle of the room and was dancing round them, quite out of his wits. This scene the officer of the guard told Le Blanc, from whom it came to me by a very sure conveyance. Le Blanc is in despair about the state of Law’s health and discredit in which he stands with the Regent. At the same time, there is a most formidable party formed against him, and almost everyone who held their tongues out of fear, now take courage to speak to the Regent upon his character; so that they believe the Regent is only withheld by shame from sacrificing him to the resentment of the nation. Law, on the other hand, says, that if they will give him but a little time, he will set everything to rights; that he will raise the credit of the stocks; turn the course of the exchange; sink the stocks in England, and put everything in that country into such disorder that it shall plainly appear that he can do everything in that country he pleases. In order to that, he has prevailed with Croisset, AndrÉ, and several other people, who had very great sums in our stocks, to withdraw their money and to remit the greater part of it back into France; with the rest, he proposes to turn the course of the exchange and to carry on his other designs. He proposes further, in order to alter the course of the exchange, to lower the value of the specie in France, till the crown is brought down by degrees to three livres; and this arret is to come out in a few days.”

Law’s object was to a large extent gained so far as it aimed at replenishing the reserves of coin at the Bank. During the month of March no less than 300,000,000 livres were deposited, a sum undoubtedly large but still short of being an adequate security against the enormous mass of paper afloat, which has been estimated at 2,600,000,000 livres. These deposits were at the same time maintained in full strength by the operation of the decree of 27th February, which relieved the Bank of the necessity of repaying at any time more than 500 livres in specie. Success however limited as it was, was only secured at considerable cost to Law’s reputation. The domiciliary visits which were made use of for detecting hoarded coin created widespread and bitter resentment. A feeling of deep distrust, of insecurity, and of fear crept through the community. The reward for information was so great that sons betrayed their parents, brothers their sisters, servants their masters. Friend betrayed friend, and enemies had an effective instrument of revenge. “Never before had sovereign power been so violently exercised, never had it attacked in such a manner the temporal interests of the community. Therefore was it by a prodigy, rather than by any effort or act of the government, that these terribly new ordinances failed to produce the saddest and most complete revolutions; but there was not even talk of them; and although there were so many millions of people, either absolutely ruined or dying of hunger, and of the direst want, without means to procure their daily subsistence, nothing more than complaints and groans was heard.”

Among those who were ruined in their fortunes at this time was one of the directors of the Bank itself. A domiciliary visit, prompted by one of his enemies, resulted in the discovery of 10,000 crowns, which were confiscated. For failure to declare his hoard and deposit it in the Bank he was fined 10,000 livres and lost his appointment. The brothers PÂris were also among the sufferers. They were detected in the act of conveying 7,000,000 livres into Lorraine, and a visit to their residences brought into the coffers of the Bank an additional sum of like amount. These confiscations and many others of more or less substantial sums were published abroad in order to induce others to conform to the edict from fear, and in many cases the prospect of loss of fortune was regarded a less evil than possibility of discovery with all its attendant penalties. There is in fact every reason to believe that neither Law nor the Regent anticipated recourse to harsh measures in carrying out their decree. They relied upon the fear which would be created by its publication serving their purpose, and in order the better to accomplish it arranged with several well-known prominent men to allow themselves to become apparent victims. Thus were many of the courtiers and public officials intimidated into divesting themselves of their accumulated wealth, and into exchanging it for paper which was so soon to lose its value. The largest capture which was made was that of ex-Chancellor Pontchartrain whose cellars disgorged the enormous sum of 57,000 louis d’or or considerably over £10,000,000. The deep dislike the Regent had for his own decree is also evinced by his conduct towards the President Lambert de Vernon, who had sought an interview for the purpose of informing against some one who was possessed of 500,000 livres in gold. On hearing his message, the Regent in horror enquired, “What d—d sort of a trade have you taken to?” The President replied, “Sir, I do nothing more than obey the law, and it is that which you indirectly treat with such an appellation. As for the rest, your Royal Highness need not be alarmed, and may do me more justice. It is myself I come to inform against, in the hope of being allowed to keep at least a part of this sum, which I prefer to all the bills of the Bank.” As a result of his appeal, the President was allowed the reward of an informer and permitted to retain half his fortune.

Law himself was the victim of a somewhat amusing result of his own methods about this time. Some months before he negotiated with the President of Novion the purchase of his estates for £400,000 francs. The President required payment to be made in silver, and Law, who was anxious to impress everyone with the advantages to be gained by the use of paper alone, could not of course refuse, declaring that he preferred to be rid of a metal which was to him a burden on account of its bulk, and of the embarrassment it caused him. Unfortunately Law was compelled afterwards to re-transfer the estates to the President’s son to whom the right of pre-emption had been reserved, and received back the price in notes which he was bound to accept according to his own decree. Nor could Law complain of the advantage that had been taken of him without depreciating the value of his own paper.

A measure of vastly greater importance and destined to lead to much graver consequences than even those already mentioned was the union of the Royal Bank and the Indian Company. A meeting was held on 22nd February at the Bank to which had been called the principal shareholders of the Company, the proposal being formally made and agreed to. Since the General Bank had been converted, in December, 1718, into a Royal institution, it had carried on its business for the benefit of the Royal revenues alone. The notes in circulation carried the guarantee of the King, a guarantee which was still to remain notwithstanding the amalgamation. For the ostensible purpose of preventing unlimited issue of additional notes it was provided that authority must in all cases be first obtained from the Council. Since the Council was in all its deliberations under the influence of the Regent, it will be seen later how worthless such a provision proved as an effective check to arbitrary fabrication of paper. During the period of the Bank’s existence as a Royal establishment, it had carried on business with great success, its balance sheet showing on paper a profit 120,000,000 livres of profit. This profit it was also arranged should be transferred intact to the company for the benefit of its shareholders. The object which Law had in view in bringing about the union could only have been one of expediency. It contained no feature which promised permanent success to the undertaking, and showed a singular lack of foresight and real business capacity. Undoubtedly it gave encouragement to speculators, who were carried away by the apparent increase of stability given to the Company by the amalgamation. But even this was of short duration. It was impossible to conceal for long the elusory nature of the transaction, and it soon became clear that a false step had been taken inasmuch as the fortunes of the Bank were now altogether bound up with those of the Company.

Previously to the date of the incorporation of the Bank and the Company, the note issue in circulation amounted to about 600,000,000 livres. Within three months after that date, an additional 2,000,000,000 livres were fabricated and set afloat. The bulk of the fresh issues was utilised for the purpose of discharging the national debt, one of the great objects which Law had in view at the initiation of his financial schemes. The national creditors were now become creditors of the Company in respect of the notes they held; and the state had now nominally discharged her debts in full.

One of the difficulties created by the publication of the various decrees limiting the currency of coin was that of scarcity of notes of small denomination. On 19th April, accordingly, a decree was registered by which no less than 438,000,000 livres in notes of 10 to 1000 livres each were issued in order to facilitate the changing of notes of greater value and the carrying out of transactions of small amounts.

Although all these expedients failed in their object, the extent to which speculation was carried was very little affected. The time for suddenly made fortunes had now gone, but sufficient excitement remained to render the purchase and sale of shares an occupation attractive to thousands of speculators. The tendency of the market was distinctly downwards, but there were intervening fluctuations, which maintained the mania in almost all its former strength. The Rue Quincampoix was still crowded from morning till evening. So great were the crowds on many occasions that scenes of confusion were frequent and sometimes developed into scenes of violence. It formed a happy hunting ground for the lowest classes in the community. Robberies and even murders took place so often that special precautions had necessarily to be taken by those who carried money on their person. So dangerous had the street and its environs become that on 22nd March, the council published an edict prohibiting its use as a stock market, and requiring all houses and offices wherein share transactions had been hitherto usually negotiated to be closed in future for such business. No other locality was assigned to the speculators, and for two months they had no recognised place of meeting. The wisdom of this decree was dictated by an unhappy occurrence that took place on the morning of the day of its issue, in which was involved a young foreigner of noble family, Comte de Horn, son of Prince Philippe Emmanuel who had served in France at the sieges of Brizac and of Landau, and at the battles of Spire and of Ramillies. According to the account given of the incident by Duclos, it appears that the Count, who had been living a riotous life in Paris for some time and had contracted extensive debts, along with two companions, Laurent de Mille, and a sham knight named Lestang, plotted the assassination of a rich stock-jobber and the theft of his pocket-book in which he was known to carry large sums of money in paper. They resorted to the Rue Quincampoix, and under the pretext of negotiating the purchase of 100,000 crowns worth of shares, took the stock-jobber to a tavern in the Rue de Venise and stabbed him there. The unfortunate stock-jobber, in defending himself, made sufficient noise to attract the attention of a waiter, who, passing at the moment the door of the room, opened it. Seeing a man lying in a pool of blood, he immediately closed and locked the door and shouted murder.

The assassins, finding retreat closed against them, escaped through the window. Lestang, who had been keeping watch on the staircase, rushed off on hearing the shouts of the waiter to the lodging house in the Rue de Tournon, where the three of them boarded, took the most portable luggage and fled. Mille dashed through the crowds in the Rue Quincampoix, but followed by the people, was at last arrested at the markets. The Comte de Horn was seized on jumping from the window. Believing his two accomplices to have succeeded in saving themselves, he had enough presence of mind to say that he feared he himself would also have been murdered in trying to defend the stock-jobber. His ruse, however, proved valueless by the arrest of Mille, who, having been brought back to the tavern, confessed all. The Comte declared to no purpose he did not know Mille; and the Commissary of Police took him to prison. The crime being fully established, the trial did not last long, and on 26th March both were broken alive on the wheel in the Place du GrÈve. The Comte was apparently the author of the plot; for, while he was still breathing on the wheel, he demanded pardon for his accomplice, who was executed last.

Before the execution had been carried out, the strongest efforts had been made to influence the Regent to grant a pardon, or at least a commutation of the punishment. The crime was so atrocious that they did not insist on the first, but redoubled their solicitations for the latter. They represented that the execution by the wheel was so ignominious, that no daughter of the house of Horn could, until the third generation, enter any convent. The Regent rejected all prayers for pardon. They appealed to him on the ground that the culprit was allied to him, but he replied,—“I shall partake of the shame. That ought to console the other relatives.” He repeated the words of Corneille: “The shame is in the crime, not in the scaffold.” The Regent was inclined however to commute the punishment, but Law and the AbbÉ Dubois impressed him with the necessity of preserving the public safety at a time when everyone carried his wealth about with him. They pointed out to him that the people would not be satisfied, and would consider themselves humiliated by a distinction of punishment for a crime so atrocious.

When his parents lost all hope of pardon from the Regent, the Prince de Robec Montmorency, and the Marechal d’Isenghen, found means of securing admission to the prison. They brought poison with them and exhorted him to take it in order to avoid the shame of the execution, but he refused. “You wretch,” they declared, leaving him with indignation, “you are only worthy to die by the hands of the executioner.”