The Freeman 1972 - The Ludwig von Mises Institute

372BLOODfromTURNIPSTERRILL 1. ELNIFF~Notes toward anltnderst~ndingof John Law'seconomlC errorsWHEN JOHN LAW arrived inFrance in 1716, he found Franceon the edge of bankruptcy. Thegovernment debt amounfed to 2.4billion livres plus another 590 millionlivres worth of billets d'etat ­outstanding royal promissory noteswhich were worth about one thirdof their face value. The deficit inthe government accounts for 1715was 78 million livres - a deficit ofnine million livres more than thetotal revenues for that year. 3 Thepeople were overtaxed and starving,and commerce was at a standstill.4Law received a charter for hisBanque Generale in 1716. It wasa private operation, handling allthe normal functions of a bank. Itwas also authorized to issue banknotescalled "bank crowns," whichwere to be redeemable "in moneyof the weight and denomination ofthe day of issue."5 This was soundbanking policy, even though Law'sMr. Elniff teaches American history at theBen Lippen School, a Christian preparatoryschool in Asheville, North Carolina.