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362 ing banking establishments. From France he proceeded to Holland, where the mercantile system of those wealthy republicans, who had succeeded the merchant princes of Venice in conducting the commerce of Europe, presented to his mind a vast- and most interesting subject of investigation. Amsterdam was at this period the most important commercial city in Europe, and possessed a celebrated banking establishment, on the credit of which her citizens had been enabled to baffle the efforts of Louis XIV., to enslave the liberties of their country; a treasury, whose coffers seemed inexhaustible, and the whole system of which was an enigma to the political economists of other countries. Law, with the view of penetrating into the secret springs and mechanism of this wonderful establishment, took up his residence for some time at Amsterdam, where he ostensibly officiated as secretary to the British resident.

About the year 1700, he returned to Scotland. He was now nearly thirty years of age, and had acquired a more accurate acquaintance with the theory of commercial and national finances, as well as with their practical details, than perhaps any single individual in Europe possessed at this time. The contrast which Scotland presented to those commercial countries which he had visited during his exile now struck him forcibly, and he immediately conceived the design of creating that capital to the want of which he attributed the depressed state of Scottish agriculture, manufacture, and commerce. Law's views were not without foundation; but unfortunately, he stumbled at the outset, by mistaking the true nature of capital The radical delusion under which he laboured from the outset to the close of his financial career, originated in the idea which had got possession of his mind, that by augmenting the circulating medium of a country we proportionally augment its capital and productive energies. Now, money is not always convertible into capital, that is, into something which may be employed towards further production; for the creation of exchangeable products must, in the nature of things, precede the creation of a general medium of commerce, and it is quite evident, that if we double the amount of the circulating medium without doubling the products of industry, we just depreciate the currency in the degree of the excess, and do not increase the resources or industry of a country in the least. But Law conceived that to her overflow of money alone Holland owed her national prosperity; and he calculated that the increase of the circulating medium in Scotland would be absorbed by the increase of industry, and have no other effect than to lower the rate of interest. This view he developed in a publication entitled "Proposals and Reasons for constituting a Council of Trade," dated at Edinburgh, 31st December, 1700, and published at Glasgow in the following year; and in a second and more important work, entitled "Money and Trade considered, with a Proposal for supplying the nation with Money," printed at Edinburgh in 1705.

In the latter work, Law developed his views of banking and the credit system. He proposed to supply Scotland with money by means of notes to be issued by certain commissioners appointed by parliament; which notes we're to be given out to all who demanded them, upon the security of land. In answer to the supposition, that they might be depreciated by excess or quantity, he observed, that "the commissioners giving out what sums are demanded, and taking back what sums are offered to be returned, this paper-money will keep the value, and there will always be as much money as there is occasion or employment for, and no more."Here his project evidently confounds the quantity of good security in the country, and the quantity of money which people may wish to borrow at interest, with the quantity necessary for the circulation, so as to keep paper-money on a level with the precious metals, and the currency of surrounding countries, a mistake which has prevailed to a very considerable ex-