The Banque générale was made the royal bank in 1718, and its issues of notes were guaranteed by the state. Finally (1720), Law, made controller general of finances, merged the huge stock company with the royal bank and took over most of the public debt and the administration of revenue. A rash of speculation swept France. Numerous small investors bought stock, which soared to heights far beyond what could be expected in returns from the exploitation of the colonies (see Mississippi Scheme ) and from trade with Asia. The bubble burst suddenly. Well-informed speculators sold their stock at huge profits, setting off a frenzy of selling that ruined thousands of investors. The system collapsed (1720), and Law fled France in disgrace. He died in Venice, where he had supported himself by gambling.
The dizzy speculation caused by Law's system greatly helped to discredit the regency and the idea of a national bank. Although the immediate results of Law's schemes were disastrous, colonial enterprise received a lasting stimulus. His monetary theories have found defenders among later economists.
See biographies by H. M. Hyde (rev. ed. 1969) and J. Gleeson (2000).
The Columbia Electronic Encyclopedia, 6th ed. Copyright © 2012, Columbia University Press. All rights reserved.
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