Important acquisitions

Lettres patentes du roy : portant privilege au Sieur Law & sa Compagnie d'establir une Banque generale.

Author [John Law]
Title Lettres patentes du roy : portant privilege au Sieur Law & sa Compagnie d'establir une Banque generale.
Imprint Paris :Chez la Veuve de Franc¸ois Muguet
Date of Publication 1716
Language France
Notes This is the first letter patent issued on 2 May 1716 on behalf of King Louis XV of France, authorising the Scottish financier John Law (1671-1729) to found a general bank in France. Law is one of the most colourful and notorious figures in Scottish history. In the early 1690s he moved to England to make his fortune. Using his superior knowledge of mathematics and probability theory, he spent his time 'gaming and sharping'. His career as a gambler was, perhaps inevitably, fraught with risk; in 1692 he was forced to sell his rights of inheritance to his late father's estate of Lauriston, a few miles west of Edinburgh, to his mother. In April 1694 he killed a man in a duel over the affections of a woman. He was convicted of murder at the Old Bailey in London and sentenced to death, but managed to escape from prison and fled to the Continent. Law then travelled widely in Western Europe, where he gained a reputation as a financial expert who was able to support himself through speculating in currency markets in France and the Netherlands. He also developed his theories of the advantages of establishing a national land bank, and of expanding the money supply to increase national output, by issuing banknotes backed by land, gold, or silver. Law tried, without success, to sell his ideas of a bank for national finance and a state company for commerce to the rulers of various countries in the early 1700s. He settled in France in 1713 and lobbied Louis XIV and his finance minister, Nicolas Desmarets, to form a national bank. His plan was initially favourably received, but rejected shortly before the king's death in September 1715. However, the old king's death proved to be stroke of fortune which transformed Law's career. Louis's successor, his great-grandson Louis XV, was only a child of five, so France was then governed by a regency council, presided over by Philippe, duke of Orleans, the late king's nephew and son-in-law. The duke of Orleans, as a regent, was a bold leader; he was dedicated to reforming the policies of the late king and to restoring the finances of France, which were in a very poor state thanks to Louis XIV embroiling France in a series of expensive wars. The resultant shortage of precious metals had also led to a shortage of coins in circulation, which in turn limited the production of new coins. As a fellow gambler, the duke of Orleans was particularly interested in Law's plan for a bank as a way of dealing with the national debt. He agreed to the foundation of a 'banque generale' (General Bank), with the authority to issue banknotes. A further letter patent was issued on 20 May, stipulating the regulations for the operation of the General Bank. The bank proved to be popular and profitable within a short time, which encouraged Law to think on a bigger scale. In 1717 he set up the Compagnie d'Occident (formerly known as the Mississippi Company), which consolidated existing French trading companies who had control of the ports and islands of Louisiana, and a monopoly on the beaver trade in Canada. The company was strongly connected to the bank from the start, and in December 1718, to reflect its enhanced status, the Banque Generale became the Banque Royale, with Law appointed as director. In May 1719 Law added the struggling French East India and China companies to his own, and renamed the new company, the Compagnie des Indes. From being a simple trading company, the Compagnie des Indes took over the collection of indirect taxes in France and redemption of the debt; it had in effect become a giant holding company controlling almost the entire revenue-raising system in France, the national debt, the overseas companies, the mint, as well as the note-issuing bank. The rise of the company led to Law gaining a prominent role in the government of France; by May 1720 he was effectively chief minister and minister of finance in France. However, the rapid expansion of Law's company led to boom and bust, with its shares being the subject of wild speculation on the French stock market, as adventurers and aristocratic gamblers from all over Europe bought and sold shares at vastly inflated prices. The Banque Royale was declared bankrupt in October 1720, having already temporarily closed in May of that year, and the share price of the Compagnie des Indes collapsed. Law lost his own personal fortune and in December he had to resign from his ministerial posts. He went into exile abroad, living for a brief spell in England. The death of the duke of Orleans in 1723 put an end to his hopes of ever returning to France. He died in Venice in poverty.
Shelfmark RB.m.759
Reference Sources Oxford Dictionary of National biography
Acquired on 06/03/15
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