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The Mississippi Scheme and Its Antecedents: Banque

This was done by Letters Patent and the Banque Générale came into existence in 1710, and was an immediate success. Its principle was to issue paper money which was to be repayable by coin.

Its paper rose to a premium in 1716; in 1717 there was a decree that it was to be accepted in the payment of taxes. This created a new form of cheap money, with the result that there was a great and sudden extension of industry and trade. From this rose the idea of a new enterprise-The Mississippi Company-which was to outvie the success of the East India Company incorporated by Charter in 1600 under the title of "The Governor and Company of the Merchants of London trading to the East Indies," which after periods of doubtful fortune, and having become consolidated with its rival "The General East India Company"partially in 1702, and completely in 1708, under the somewhat elephantine name of "The United Company of Merchants of England trading to the East Indies" was now a vast organization of national importance. To the new French Company for exploiting the Mississippi Valley was made over Louisiana (which then included what were afterwards the States of Ohio and Missouri). The Decree of Incorporation was issued in 1717. The Parliament at Paris presently grew jealous of such a concession having been given to a foreigner; and the next year a rumour went about that Parliament was about to have him arrested, tried, and hanged.

The Regent met the parliamentary resistance by making (1718) the Banque Générale into the Banque Royale-the King guaranteeing the notes.

Law was made Director General; but he was unable to prevent the Regent from increasing the issue of paper money, by which means he managed to satisfy dishonestly his own extravagance. It was a fiscal principle of the time that the State accountants did not go behind the King's receiptthe acquit de comptant as it was called. The Western Company was enlarged in 1718 by a grant of a monopoly of tobacco, and of the rights of trading ships and merchandise of the Company of Senegal. In 1719, the Banque Royale absorbed the rights of the East India and China Companies, and then assumed the all-embracing title of Compagnie des Indes. The next year it took in the African Company; and so through that the whole of the non-European trade of France. In 1719, the management of the Mint was handed over to Law's Company; and he was thus enabled to manipulate the coinage. In the same year he had undertaken to pay off the French National Debt, and so become the sole creditor of the Nation. He already exercised the functions of Receiver General and had revenue-farming abolished in its favour. He now controlled the collection and disposal of the whole of the State taxation. At this stage of his adventure, Law seemed a good fiscal administrator. He repealed or reduced pressing taxes on useful commodities, and reduced the price of necessaries by forty per cent. so that the peasants could increase the value of their holdings and their crops without fear of coming later into the remorseless grip of the tax-farmer under the infamous metayer system. Free-trade was in the Provinces practically established. This, so far as it went, was all Law's doing. Turgot, who later got credit for what had been done, only carried out what the Scotch financier had planned.