Adam Smith's Simplified Wealth of Nations, Book 2, Chapter 2e: Bank collapse -- Ayr Bank & Mississippi Scheme


Chapter 2e: Bank Collapse -- Ayr Bank & Mississippi Scheme

73 In the midst of this clamour and distress, a new bank was established in Scotland to relieve the country's distress.

The estates of the bank's proprietors were worth several million pounds.

74 This bank produced the opposite effects it intended. 75 In the long-run, the operations of this bank increased the real distress of the country it meant to relieve. 76 Initially, people thought that its coffers could be easily replenished by raising money from its debtors' securities. 77 The country derived no benefit from this operation even if it was practicable and profitable to the bank as a mercantile company.

Quantitative Easing: Mississippi Scheme

78 Mr. Law thought that Scotlan's industry languished for the lack of money to employ it.

The idea of multiplying paper to almost any extent was the real foundation of the Mississippi scheme.


Next: Chapter 2f: Central Banks