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By Root 650 0

of repute. The following autumn, when Lady Mary Wortley Montagu was passing through Paris, she noted the change in his fortunes: “I must say I saw nothing in France that delighted me so much as to see an Englishman (at least a Briton) absolute at Paris. I mean Mr. Law, who treats their Dukes and Peers extremely de haut en bas and is treated by them with the utmost submission and respect.” Always an enthusiastic patron of the arts, Law sat for his portrait, probably with artist Alexis Simon Belle, at around this time. The painting shows a man in his mid-forties, of refinement, charm, and still youthful appearance, wearing a full-length brown periwig, embroidered velvet robe, and lace cravat—grand clothes befitting his already elevated status. His face is thin and rather angular, his mouth, though half-smiling, has an air of determination, and the expression is distant—the piercing gray-eyed gaze avoids the viewer, as if his mind is elsewhere, perhaps with his system’s next phase: his bank’s takeover by the state. The bank’s assets now included over 9 million livres in coins and 1.6 million in bills of exchange. Against these were fewer than 40 million livres in outstanding notes. Law had remembered the warnings of Saint-Simon and the lessons of the Bank of Amsterdam and had restricted the issue of notes.

In December 1718, the Banque Générale became the Banque Royale, the equivalent of a nationalized industry today. Law continued to direct it, and under his leadership over the next months, the finances of France leaned more heavily on it. New branches opened in Lyon, La Rochelle, Tours, Orléans, and Amiens. To ensure that everyone made use of paper money, any transactions of more than 600 livres were ordered to be made in paper notes or gold. Since gold was in short supply, this obliged nearly everyone to use paper for all major transactions. Meanwhile, for the leap of confidence they had shown in purchasing shares in the bank in its early uncertain days, and perhaps to buy his way into their world, Law rewarded investors lavishly. Shares that they had partly bought with devalued government bonds were paid out in coin. Both he and the regent had been major shareholders and were among those who profited greatly from the bank’s takeover.

Few recognized the dangers signaled by the bank’s new royal status. Hitherto Law had kept careful control of the numbers of notes issued. There had always been coin reserves of around 25 percent against circulating paper notes. Now, with royal ownership and no shareholders to ask awkward questions, the bank became less controllable. The issuing and quantity of printed notes and the size of reserves would be decided by the regent and his advisers. The temptation to print too much paper money too quickly would thus be virtually unchecked.

Within five months of its royal takeover, the writer Buvat had noted in his journal, with more than a touch of irony, that eight printers, each of whom earned only 500 livres a year, were employed around the clock printing 100-, 50- and 10- livre notes. A further ominous change followed: notes were no longer redeemable by value at date of issue but according to the face value, which would change along with coins if the currency was devalued: the principle that underpinned public confidence in paper had been discarded and one of Law’s most basic tenets breached. But as the eminent eighteenth-century economist Sir James Steuart later incredulously remarked, “no-body seemed dissatisfied: the nation was rather pleased; so familiar were the variations of the coin in those days, that nobody ever considered anything with regard to coin or money, but its denomination . . . this appears wonderful; and yet it is a fact.”

If Law was unhappy he gave no sign of it. Apparently he was busy reinvesting profits from his bank shares. He began to build a vast property portfolio, buying the Duchy of Mercoeur from the Dowager Princess of Condé for the sum of 100,000 livres and the Hôtel de Soissons from the Prince of Carignan for 750,000 livres. The Hôtel became the headquarters