Modern history



In his travels he learnt that in Betica everything shone with gold, which made him hurry to get there. He was made very unwelcome by Saturn, who was then on the throne, but once the god had departed from the earth he had an idea, and went out to every street-corner where he continually shouted in a hoarse voice: “Citizens of Betica, you think yourselves rich because you have silver and gold. Your delusion is pitiable. Take my advice: leave the land of worthless metal and enter the realms of imaginations, and I promise you such riches that you will be astonished.”


Persian Letters (1721)

LATE IN 1705, LAW AND HIS FAMILY RETURNED TO A continent riven by conflict. The War of the Spanish Succession pitched the armies of France and Spain against an alliance of England, Holland, and the Holy Roman Empire. A year earlier, at the Battle of Blenheim, the English general Sir John Churchill, later Duke of Marlborough, had vanquished the French, killing, wounding, and imprisoning almost three-quarters of their army, some forty thousand men. That year the British captured Gibraltar and allowed their ships to sail into the Mediterranean “like swans on the river.” Over the following months the allies triumphed also at Ramillies, Barcelona, and Turin. As if to underline France’s waning fortunes, a total solar eclipse on May 11, 1706 signaled that seemingly even God had deserted the Sun King.

Amid the unfolding political drama, the Laws based themselves in The Hague to await the birth of their first child. John Law hankered to make his next move, and the difficulty of traveling in war-torn Europe must have worried him, since he needed free passage to be able to sell his schemes. Over the next nine years, however, he crossed enemy lines with apparent ease, ignoring the usual formalities if necessary, reaching the enemy heartland of Paris several times, as well as visiting Vienna, Turin, Milan, Brussels, and Utrecht.

Soon after the birth of their baby, a boy they named John, the Laws visited Vienna. Here, according to du Hautchamp, “he proposed his system to the Emperor, and although he was unsuccessful he did not leave without playing heavily and making large winnings.” Law did not shed many tears over his failure. By now he had focused his sights on Europe’s largest, most populous, but most severely impoverished nation: France.

Superficially France seemed hardly to have changed for the past half century. Louis XIV had reigned for sixty-three years, during which he had raised his country to commercial heights that made it the envy of Europe, then ruined it with his penchant for military aggression, religious intolerance, and unrivaled extravagance. Lack of money lay at the root of all France’s evils. In the countryside the impoverished masses lived in abject misery, unshod, dressed in rags, forced to scavenge to survive. During severe famines in 1694 and again in 1709, following the worst winter in living memory, the poor made flour from ferns and grass stalks or roots such as asphodel. Children lived on “boiled grass and roots” and, according to one account, “crop the fields like sheep,” while the Princess Palatine, sister-in-law of Louis XIV, wrote, “The famine is so terrible that children have devoured each other.” A fortunate few could barter: a cabbage for a bag of corn, two pigs for a cow, and so on. In Versailles it was not so easy. In a feverish bid to pay for his army and feed his people, the king had to resort to sending his gargantuan golden dinner services and silver furniture to the mint to be melted down for currency. Now he ate off enamel or faience pottery, and his entourage was expected to follow suit.

Various vain attempts had been made to replenish the treasury. Additional venal offices were created and each position, mostly entirely spurious, sold off to the highest bidder. Interest-bearing paper credit notes called billets de monnaie had been offered in return for coins and were later converted into government bonds. New taxes were introduced, old ones raised—there were so many taxes that it was feared even marriages and births would be taxed. The coinage was constantly tampered with. Between 1690 and 1715 the currency was revalued forty times to make the limited gold and silver available stretch further.

But the situation did not improve. By 1715 France would be over 2 billion livres in debt, largely to a group of forty private financiers, who also controlled the collection of taxes. The government could not afford the interest repayments on its notes, let alone repay them in coin. They had become so discredited that when Louis wanted to raise a loan of 8 million livres in coin from one of the financiers of Paris he had to pay 32 million in notes. In the provinces few could afford the taxes; people even resorted to marrying or baptizing their children without a priest to avoid the extra levy they felt might soon be demanded.

Law knew he had the answer. The problems of the country, he promised, all stemmed from a lack of available money. “Trade and money,” he had written in Scotland, “depend mutually on one another; when trade decays money lessens; and when money lessens, trade decays.” The only way out of the downward spiral was through credit and by increasing the circulating money. Since there was a shortage of gold and silver in the country, the answer was to establish a national bank and issue money made from paper.

It was a beguilingly simple solution. The hard part was getting through to the king. In November 1706 Law managed a journey to Paris, where he submitted a four-part memorandum to Chamillard, Louis XIV’s incompetent and overworked controller general, who headed the ministries of finance and war. Law tried to keep his argument brief and to the point. “I know,” he wrote, “that these proposals are long and boring, because it is necessary to explain many aspects of money . . . what I will present will be shorter and easier to follow, I will attempt to include nothing that is spurious.” The harassed Chamillard tried to appear diligent, scribbling annotations in the margin. In truth he did not understand and only laughed at Law’s vision. The king was never told of the proposal, and without his approval Law reached an impasse. “Apparently the opinion is that what I propose does not merit discussion at the council. I am not surprised: a new type of money more suitable than silver seems impossible,” he wrote disconsolately. But the visit was not entirely wasted. During his stay in Paris he met the king’s nephew Philippe, Duc d’Orléans.

The two men had much in common. They were of similar age—Law was just three years Orléans’s senior, aged thirty-six in 1707—both were handsome, athletically built, and brilliant tennis players. Both enjoyed extraordinary success with the opposite sex. Orléans could outstrip even Law in his sexual conquests, although power and position were on his side. His numerous mistresses, whether stars of the opera, actresses from the Comédie Française, serving girls, daughters of diplomats, or, more rarely, aristocrats, were selected for good humor, voracious appetites for banqueting, drinking, and lovemaking, and lack of interest in politics. Looks mattered little—even the duc’s mother remarked wryly, “They do not have to be beautiful. I have often reproached him for choosing such ugly ones.” At night, in his Paris residence, the Palais Royal, he dismissed his servants and held soupers, notorious all-night revelries at which an eclectic assortment of courtesans, actresses, and his inner circle of dissolute male friends—the roués—gorged, drank to excess, and, according to Saint-Simon, “said vile things at the tops of their voices.” It was, said Saint-Simon, a ritual that “when they had made a vast deal of noise and were dead drunk they went to bed and began it all over again the next day.” Meanwhile they stimulated enough gossip to entertain the rest of Paris.

But Orléans was far more than just another debauched aristocrat. A multitalented man of abundant if mercurial intellect, he was a freethinker who was fascinated by developments in music, literature, philosophy, and science, including the science of money. Chemistry enthralled him, and he passed long hours experimenting in his private laboratory alongside the eminent Dutch chemist Wilhelm Homberg. He was intrigued by necromancy; his penchant for conjuring spells and summoning spirits late into the night elicited much criticism in court circles. He was also a connoisseur of art. He learned to paint with the famous decorative painter Antoine Coypel—who decorated the ceiling in the Palais Royal—and festooned the walls of his home with masterpieces by Raphael, Titian, Rembrandt, Veronese, Caravaggio, and leading French artists. He patronized writers and poets, composed operas, and played the flute. Yet for all his abundant gifts and interests Orléans was frustrated. Louis XIV distrusted him and had consistently denied him a fulfilling role. His dissipation was largely inspired by boredom. Underneath the louche exterior, like Law, he was an idealist who longed for change.

Law willingly spent long hours explaining his ideas and in Orléans found someone with the intellect and vision to understand. Perhaps also Orléans’s regard for Law was strengthened by secret admiration for his life of opportunistic adventure, a world away from the protocol and formality of the French court. Both men were fast thinkers and witty talkers, and with mutual intellectual respect, personal affection grew.

Encouraged by his royal friend, Law optimistically revised his proposal and resubmitted it to the king. But for all Orléans’s help and Law’s high hopes, Louis eyed it icily. This time, according to Orléans’s mother, the Princess Palatine, the stumbling block was not the scheme’s complexities but the author’s religion. Law was a non-Catholic and therefore, to Louis, inherently untrustworthy. Police superintendent d’Argenson was instructed to hasten Law’s departure.

Law did not give up hope. He based himself in Holland, from where he continued the roving quest for a ruler willing to listen. The nomadic life was arduous for Katherine, with a baby to care for, but the relationship does not seem to have suffered. On the contrary, it seems likely that the fortitude and loyalty she later displayed resulted from the closeness that developed during this extended period of rootlessness. In unfamiliar environments, and during long journeys across Europe, she and Law spent much time together and relied on each other for companionship. At each new city, Katherine’s dignified bearing worked in Law’s favor, for political advancement depended upon social success as much as worthy ideas. Her glamour, allied to his charm, helped forge the alliances on which his career depended.

In the spring of 1710 he was in Italy, accompanied as usual by Katherine, who was pregnant. Their second child, Mary Katherine, whom Law called Kate, was born in Genoa. In Turin, Law presented a scheme for a bank similar to the Bank of England to Victor Amadeus, Duke of Savoy, whose domain was in dire need of cash after the siege of the city. The duke, a great admirer of Law, liked his scheme, and Law’s spirits rose. As he waited to be given the go-ahead, he involved himself in speculative dealings and currency trades so successfully that a year later he was able to open a bank account in Amsterdam with a deposit of £100,000 (US$160,000).

But as the months passed, it became obvious that Victor Amadeus’s support did not mark the turning point for which Law had hoped. The duke’s ministers were stubbornly conservative, and eventually, after lengthy arguments, Victor Amadeus was forced to reject Law’s idea with the lame explanation that his dominions “were too small for the execution of so great a design.” He added that “France was the proper theatre for its performance, if I know the disposition of the people of that kingdom I am sure they will relish your schemes.” Law agreed, but knew that with the present administration intact, there too the door was closed.

Even in exile John Law’s success gripped the English authorities. By now he had decided that his ambitions would be helped if he presented himself to the world as a man of substance. In the spring of 1712 he left Italy to return to The Hague, “the handsomest, the most fashionable and the most modern looking town in the Netherlands,” according to one writer of the time. He invested his winnings in a grand residence and filled it with paintings and works of art. Lavish living on such a scale brought instant acclaim. With Katherine happily playing the role of society hostess, numerous visitors came to call. Everyone wanted to know exactly how his fortune had been made. In April 1713, the diplomat John Drummond wrote to the Earl of Oxford from Utrecht mentioning “a famous man in this country. . . . This Mr. Law has picked up in Italy a great estate, some say by army undertakings at Genoa, and some say partly by gaming. . . . I should be sorry to see him settle at The Hague, where he has bought a fine house, seeing he is rich, and can be very useful . . . the service he may be able to do his country really deserves his pardon.” Law enjoyed his reputation as a man of mystery and did nothing to discourage the gossip. He was as convivial and charismatic as ever: “He is really admired by all who know him here . . . and I should always wish the Queen’s subjects of such good estates and sense established at home,” wrote Drummond.

He was still adding to his substantial fortune. According to Gray, the Dutch were renowned as “a very close wary people, but will give in to anything where there is any prospect of Gain.” Law, said Gray, seized the opportunity to introduce them to the delights of a national lottery, based on the one his old friend Neale had set up in London but “improved” to his own advantage. In Rotterdam Law’s ploy was discovered: he had “calculated these lotteries entirely to his own benefit, and to the prejudice of the People, having got about 200,000 guilders by them.” He was asked to leave the country. Recent research suggests, however, that Law was in fact operating a form of insurance scheme offering investors a way of reducing their losses should all their tickets lose: for a fee of 100 guilders, investors could lodge ten tickets with Law, and claim three times the sum if all ten lost. Later the scheme was modified so that the price dropped but all winnings over a certain level were payable to Law, who was employing his understanding of risk to his own profit, in much the same way as he did in games of chance. Such ventures were highly lucrative; two years later his fortune was said to have grown to $800,000.

In France, meanwhile, his luck had begun to turn. The signing of the peace of Utrecht in April 1713 had brought the long war to a close. Louis XIV, now seventy-five and still in remarkably robust health, brooded over the ruins of his kingdom. His sense of loss was compounded by a tragic sequence of events that had transformed the French succession. In the space of three years, three heirs—his son the Dauphin, his grandson the Duc de Bourgogne, and his great-grandson the Duc de Bretagne—had died. The heir to the throne was now Louis’s second great-grandson, a four-year-old child, and Law’s ally, the Duc d’Orléans, stood in line as regent.

Louis’s sorrow promised opportunity for Law. More than ever France needed an answer to her financial problems. Sensing that the king’s contempt for him might now have mellowed, Law returned to Paris. On Christmas Eve he wrote to Nicolas Desmarets, Louis’s new finance minister, begging for an audience “to discuss matters, which I trust will be agreeable, being for the service of the King and the well-being of his subjects.” Orléans’s support was beginning to work in Law’s favor, and his request was received slightly more favorably. Desmarets scribbled a note to his clerk, “when he comes I will speak to him,” at the top of Law’s letter. But either the office was inefficient and no word was sent to Law, or some of the old distrust lingered and Desmarets dragged his feet. Nearly a fortnight later, having heard nothing, Law wrote again, this time more impatiently: “On 24 December I took the liberty of writing to your lordship to beg you to allow me a private audience to discuss the service of His Majesty. As my business affairs oblige me to leave shortly I would like to know if this honour will be granted.” Again the honor was not granted, but Law was still convinced that a breakthrough was close. He returned to The Hague to prepare to move his family to France.

By May 1714 he was back in Paris, still denied the formal audience to make his presentation. He wrote confidently, “You had the goodness to say you would let me know when you had time to give me an audience. I await your orders.” Katherine, meanwhile, was in The Hague supervising the packing of furnishings and personal effects, a formidable task, with their extensive collection of art and furniture. They suffered a setback when they were held up by French customs officials at Rouen. Law wrote to Desmarets, confidently requesting the assistance he felt was due to a man who would soon be playing a key role in French affairs: “Several chests and crates with the valuables and furnishings that I used during my stay there are being dispatched from Holland. As among these there are some crockery and other fragile objects that will be easily damaged if they are opened en route and as I have no one to look after them, I am taking the liberty of begging your lordship to grant permission for them to pass through Rouen without being opened, and that they can be examined when they arrive at my house.” Desmarets was not unsympathetic, but neither would he allow Law to ignore the usual formalities. He gave instructions that Law should be told “that I can’t arrange a visit at his home . . . this is only usual for ambassadors . . . but if he likes I will send an order to have the chests and crates sent to the customs in Paris, where they can be opened in front of him.”

A month or two later the Law family were comfortably settled in their new residence, a mansion staffed with “a sizeable retinue of servants,” in the Place Vendôme (then known as the Place Louis le Grand), one of Paris’s newest and most fashionable squares, where many of the capital’s most powerful financiers lived. The move had been noticed by d’Argenson, who remained extremely wary of Law and alerted foreign minister Torcy: “A Scot named Law, gambler by profession and suspected of evil intentions towards the King appears at Paris in high style and has even bought an impressive home in the Place Louis le Grand, although no one knows of any resource except fortune in gambling, which is his whole profession. I cannot believe that the motives which have aroused just suspicions against him have ended with the peace.” Torcy, however, must have caught wind of the shift in the establishment’s regard for him and scribbled on the letter, “He is not suspect. One can leave him in peace.”

The move had just been completed during the summer of 1714 when Queen Anne died. Still hankering for a role in England, Law immediately lobbied an old Scottish friend, John Dalrymple, second Earl of Stair, the recently appointed British ambassador to France, to bring his case to the attention of the new king, George I. The son of the disgraced earl held responsible for the massacre at Glencoe, Stair shared the youthful Law’s passion for gambling and high living; he may have met Law over the tables in Edinburgh or London. When Stair arrived in Paris in January 1715, Law was the first person he visited.

The encounter left him deeply impressed. Now forty-three, Law had retained his good looks and athletic physique, but his youthful appetite for self-indulgence had been replaced by lofty ambition. Stair was dazzled by Law’s grasp of finance and his ability to explain complex subjects lucidly. He had little hesitation in taking up Law’s case and wrote to the statesman and secretary of state in England, James Stanhope, to recommend Law as “a man of very good sense, and who has a head fit for calculations of all kinds to an extent beyond anybody.” He was, said Stair, “certainly the cleverest man that is,” who might be “useful in devising some plan for paying off the national debts.” Stair also recommended Law to Lord Halifax at the Treasury. Halifax, who had met Law in The Hague and seen the proposal he had written in Scotland, needed little convincing of Law’s talent: “I have a great esteem for his abilities, and am extreme fond of having his assistance in the Revenue,” he said. But his good opinion was not enough. Later he wrote, “There appears some difficulty in his case, and in the way of having him brought over. If your lordship can suggest anything to me that can ease this matter, I should be very glad to receive it.” Stanhope’s reply to Stair confirmed the objections: “I did not fail to lay it before the king,” he wrote. “I am now to tell your lordship that I find a disposition to comply with what your lordship proposes, though at the same time it has met, and does meet, with opposition, and I believe it will be no hard matter for him [Law] to guess from whence it proceeds.” According to Law, Stanhope was furious that the petition was turned down, and “speaking to the King on my subject said that England’s debts during two wars were £50 million, but that she had lost more in the form of one of her subjects the day that I engaged myself in the affairs of France.” Twenty years on, the ghost of Wilson still hindered Law’s rise.

He did not waste time lamenting. Having resolved instead to prove to England what she had lost by his success in France, in May he made the long-awaited proposal to Desmarets for a state bank issuing paper money against deposits. But Desmarets, still distrustful, strung him along in a state of constant suspense, demanding endless explanations, pointing out pitfalls. In early summer, perhaps worn out with frustration, Law fell ill and was not sufficiently strong to revise his scheme again until July. By then word of it had filtered to Paris financiers, who, fearing that their profits would suffer, noisily voiced their opposition. A state bank of issue would never work, said Samuel Bernard, one of the wealthiest of the financiers, “in a country where everything depends on the King’s pleasure.” Faced with yet more hostility Law remained cool and surprisingly optimistic. But Desmarets, still playing for time, raised more queries. How soon could Law begin? What guarantees would he offer? How would it be administered? Patiently Law answered every question. He was ready to open the bank on August 10 or even earlier if he could. He was so sure it would succeed he would put up 500,000 livres of his own money as guarantee. In this grand new institution Desmarets should certainly hold an official role. Eventually, in early August, Law’s persistence paid off. Desmarets approved. There remained only the king to convince.

Louis was enjoying a quiet summer at his summer residence at Marly. On August 10, the day on which Law hoped to open the state bank, the king’s health suddenly deteriorated. According to contemporary reports, discolored blotches on his leg enlarged and the doctors, fearing gangrene, tried magical elixirs, multiple incisions, and swathing it in brandy-soaked bandages. But he was beyond help. On Sunday, September 1, 1715, at a quarter to nine in the morning, having reigned for seventy-two years, Louis XIV, France’s most glorious king, died.

Orléans, like most of France, spent little time grieving. The day after Louis’s death he made a compelling address to the Parlement in which he coerced the representatives to reject the right of a council of noblemen and the Duc de Maine to assist him in his regency, a scheme of joint rule laid out by Louis to restrain Orléans’s power. He emerged triumphant. Until the five-year-old Dauphin came of age, Orléans would rule France as regent. For John Law, the opportunity of which he had long dreamed had never seemed so close.

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