------------------------------------------------------------------------ CHAP. XXXIII. _Why Credit fell, and how it might have been supported._ I shall now make a few general observations upon the total and sudden fall of credit in France in May 1720: and I shall suggest the means by which, I think, it might have been sustained, even after all the preceeding mismanagement. Was it any wonder that the French should be astonished at this prodigious revolution, at this immense value of paper on the 21st of May, and at the total discredit of every bit of it the day following? If there was a value, said they, what is become of it? If there never was any value, how could a nation be so deceived? This phænomenon has puzzled many a head; but the nature and principles of credit furnish an easy solution of it. In deducing the principles of credit, we have shewn _that a permanent and well secured fund of interest is always equal in value to a corresponding capital_. The difference between a _permanent_ and _well secured fund_, and a _precarious_ and _ill secured fund_, consists in this, that the first never can disappear, and the other may. Now the fund, in this case, was at first _real_ and did exist; but it was rendred precarious, by a blundering administration: then credit failed, and in that convulsion, the fund of interest was fraudulently diminished by an act of power. Had the true principles of credit been understood in France, the bank notes and actions might have been supported, even after the _arret_ of the 21st of May: and all the monstrous value of paper, raised so high by the low rate of interest, might have been preserved: consequently that value, in capital, _really existed_ relatively to the rate of interest. As the object of the present disquisition into the principles upon which the Missisippi scheme was conducted, is only intended as an illustration of the principles of credit in general; I shall first account for the wonderful phænomenon above mentioned, and then shew how, in the greatest of all the French distress, their credit might have been re-established in a more solid manner than ever. As to the wonderful phænomenon of the prodigious _wealth_ created by the system, and annihilated in one day, I answer, that there had been no creation of wealth at all, except in consequence of the fall of interest. 1_mo_, We have seen that at the death of the late King of France, the interest of his debts amounted to 80 millions. Was not this a fund which ought to have been made solid and permanent? Will any man say, that a regular plan of paying this interest was a means of creating new wealth? Certainly not. 2_do_, These debts were secured by _contracts of constitution of annual rents upon the town-house of Paris_: a security taken in the name of a particular creditor, which requires a form of law to transfer.