Memoirs of Extraordinary Popular Delusions

by Charles MacKay

Trading Stories of some of the crazy things that have happened in the world of trading, and how it effected the currencies and markets.

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Hitherto no difficulty had been experienced by any class in
procuring specie for their wants. But this system could not long be
carried on without causing a scarcity. The voice of complaint was
heard on every side, and inquiries being instituted, the cause was
soon discovered. The council debated long on the remedies to be taken,
and Law, being called on for his advice, was of opinion, that an edict
should be published, depreciating the value of coin five per cent.
below that of paper. The edict was published accordingly; but, failing
of its intended effect, was followed by another, in which the
depreciation was increased to ten per cent. The payments of the bank
were at the same time restricted to one hundred livres in gold, and
ten in silver. All these measures were nugatory to restore confidence
in the paper, though the restriction of cash payments within limits so
extremely narrow kept up the credit of the Bank.

Notwithstanding every effort to the contrary, the precious metals
continued to be conveyed to England and Holland. The little coin that
was left in the country was carefully treasured, or hidden until the
scarcity became so great, that the operations of trade could no longer
be carried on. In this emergency, Law hazarded the bold experiment of
forbidding the use of specie altogether. In February 1720 an edict was
published, which, instead of restoring the credit of the paper, as was
intended, destroyed it irrecoverably, and drove the country to the
very brink of revolution. By this famous edict it was forbidden to any
person whatever to have more than five hundred livres (20 pounds
sterling) of coin in his possession, under pain of a heavy fine, and
confiscation of the sums found. It was also forbidden to buy up
jewellery, plate, and precious stones, and informers were encouraged
to make search for offenders, by the promise of one-half the amount
they might discover. The whole country sent up a cry of distress at
this unheard-of tyranny. The most odious persecution daily took place.
The privacy of families was violated by the intrusion of informers and
their agents. The most virtuous and honest were denounced for the
crime of having been seen with a louis d'or in their possession.
Servants betrayed their masters, one citizen became a spy upon his
neighbour, and arrests and confiscations so multiplied, that the
courts found a difficulty in getting through the immense increase of
business thus occasioned. It was sufficient for an informer to say
that he suspected any person of concealing money in his house, and
immediately a search-warrant was granted. Lord Stair, the English
ambassador, said, that it was now impossible to doubt of the sincerity
of Law's conversion to the Catholic religion; he had established the
inquisition, after having given abundant evidence of his faith in
transubstantiation, by turning so much gold into paper.