Millionaire - Janet Gleeson [22]
Amsterdam’s bank was not the first to turn to paper as a substitute form of money. Paper notes were invented, like so many ingenious artifacts, by the ancient Chinese, who are known to have used them in the seventh century. In Europe, nearly a thousand years later, tentative trials had been made in 1656 in Sweden, where a Livonian, Johan Palmstruch, was given a royal charter to found a private bank, provided that half of his profits were paid to the Crown. Sweden was rich in copper but poor in silver and gold, and its currency included massive copper sheets, of equivalent worth to silver coin, but so heavy—as much as fifteen kilograms—that people carried them lashed to their backs or needed a horse and cart to transport them. In 1661 Palmstruch and his Stockholm Banco overcame this inconvenience by printing paper notes that represented the value of the metal currency, the first true circulating European banknotes as we understand them today. The project blossomed initially, but the temptation to overissue notes proved irresistible. Six years later, unable to redeem the notes it had produced, the bank foundered and Palmstruch landed in prison, only narrowly escaping execution.
Three decades later in America, there was a further foray into paper money. In 1690 the Massachusetts Bay Colony was forced to use banknotes to pay its soldiers after the failure of a military incursion into Quebec, which had been expected to yield enough plunder to pay them. In place of gold and silver salaries the men were given paper notes that would be redeemed, they were promised, as soon as taxes were paid by the local community. Predictably the shortage of hard cash continued to beset the colony, and two years later, citing “the present poverty and calamities of this country, and through scarcity of money, the want of an adequate measure of commerce,” the paper was made legal tender. Other colonies, beset by similar cash shortages, soon followed suit.
Of all the unpromising and disparate seeds from which the paper revolution grew, Amsterdam stood out as a shining exemplar of prudence. Loans to private individuals were offered only against deposits of silver and gold and were carefully restricted; there was no mass circulation of notes without metal reserves. The result was that everyone had faith in Amsterdam’s bank. One visitor, Sir William Temple, remarked, “Foreigners lodge here what part of their money they could transport and know no way of securing at home.” Overseas investors—including English, Spanish, and other governments—gladly used it, and their vast deposits were then advanced as loans at modest rates of interest. In this way fleets were financed and trade thrived. In 1609 the bank had 730 accounts; by the end of the century it had 2,700, with over 16 million florins held on deposit. Trust in a bank had secured an entire nation’s fortune.
In 1697, two years after Law’s life of exile began, peace temporarily descended on Europe. The treaty of Ryswick brought to a close the bitter Nine Years War between France and Austria, Holland, England, Spain, Sweden, and Savoy. France became more accessible to foreign tourists, and around this time Law made what was probably his first visit to Paris.
The city must have captivated him. During the past forty years of Louis XIV’s reign, Paris had become “one of the most beautiful and magnificent [cities] in Europe,” according to Dr. Martin Lister, who visited the same year as Law, “in which a traveller might find novelties enough for six months for