John Law - a Scotland financier, prophet, adventurer, banking romantic, credit wizard, father of inflation - this is what people spoke about him in the 18th century. First, this man turned France into one of the most prosperous countries in Europe, and then drove it into poverty. The first financier biography came out during his lifetime and was translated into many languages. The French called him Jean Lass. In other countries, he was known as John Law. This article will describe a brief biography of the financier.
Youth
John Law of Loriston was born in Edinburgh (Scotland) in 1671. The boy's father was a jeweler and a usurer. In 1683, the head of the family bought a small estate, Loriston, to which was attached the noble title. In his youth, John was quite attractive, and he was gladly received in the best houses of Edinburgh. Thus, the future financier quickly "mastered all kinds of debauchery." Soon the young man became bored, and at the age of twenty he went to conquer the capital of England.
Speculations and duel
In London, John Law immediately developed a vibrant activity. He inherited the ability to make money from his father. John began by speculating in stocks, jewelry and paintings. In addition, he came up with his system of playing cards. This brought Lo solid money. John also enjoyed wild success among women and was not distinguished by selectivity in love affairs. His next affair ended in a duel in 1694. Law killed his rival and was arrested. At the trial, the future financier was sentenced to death. But John escaped from prison and went to Amsterdam. In general, the hero of this article was very lucky.
Change of activity
Arriving in a new city, John Law came to grips with the study of economic theory. On this subject, the young man re-read quite a lot of authoritative works. Soon he published his book. There, the financier spoke about the main reason for the economic stagnation. According to Law, it was a shortage of money. To solve this problem, John proposed to introduce paper banknotes and provide them with gold. And it is best that a government agency deal with the issue of notes. The financier suggested that this idea be adopted by almost all European countries. But they managed to realize it only in one state.
Idea implementation
In 1715, after the death of the monarch, the treasury of France completely emptied. Philip of Orleans (regent under the great-grandson of Louis XIV) was shocked after calculating public debt. It turned out that this figure reached 3 billion livres. And the annual taxes and taxes brought only 250 million. Although according to the report of the chief of the Secret Police, this amount was three times higher. Just 500 million settled in the pockets of various bureaucrats.
According to the regent, in such a difficult situation, only John Law's system could help. Already in the middle of 1716, the hero of this article opened a bank (though not state, but joint-stock) with the right to issue paper money. At the same time, banknotes were freely exchanged for coins from precious metals in real terms at the issue date, and were also accepted as taxes and taxes. That is, John's banknotes became harder than silver and gold money.
In those days it was an unprecedented adventure. To ensure all the issued notes in France, there simply was not the necessary amount of silver and gold. However, 12 months after the start of the issue of notes in France, there was an economic upsurge. Construction resumed, industry developed, trade revived, and low-interest loans were issued.
Another company
But the bank was not the only Scottish idea. At the beginning of 1717, John Law created the Company of the Indies. Lo wanted to invest the capital of this company in the development of the Mississippi River Basin. The French called her Louisiana in honor of King Louis XIV. This event went down in history as the Mississippi company.
In late summer 1717, John announced the placement of 200 thousand shares. The conditions were very favorable: at a nominal value of 500 livres, the paper was sold for only 250 with a guaranteed redemption in six months at the initial price. Shares of the company bought up instantly. Six months later, their market value was many times higher than the nominal value. Having bought all the securities, John put a handsome jackpot in his pocket. Soon, the Lo companies were given a monopoly on the trade of “both Indies.” This only increased the market value of securities and increased demand for them.
First stock exchange
An issue of 50,000 shares was what John Law announced shortly. After the method used last time, the financier decided to make more money. Demand six times exceeded supply, as 300 thousand applications were received for the purchase of securities. Counts, marquises, dukes, barons and viscounts besieged the house of the financier, wanting to become part of the wealth of the "Indies". Due to this, the Scottish secretary made a huge fortune by receiving bribes from them.
A secondary securities market spontaneously appeared . In fact, it was the first stock exchange. Seeing an additional source of profit, John organized pavilions near his house. People hired by Law, who are now called "brokers," began to trade in them.
The course of securities grew exponentially. This was partly due to the fact that the head of state included the Duke of Orleans on the board of the company. The welfare of the French grew along with an increase in stock prices. Naturally, John Law himself made good money on this. The financier’s pyramid has reached its maximum growth point. But the Scot did not think about it and "bathed" in money. He even acquired a couple of expensive estates. And John received the title of Duke and became Minister of Finance (in fact, the second person in the country). But all good things come to an end.
Lack of funds
Carried away by the Mississippi Company, John had poor control over bank management. And all of its emissions went to loans that were invested in the purchase of shares in the company. In turn, the Company India regularly placed new issues of securities, acquiring government bonds with the money received. Thus, the company became almost the only creditor in France. But the regent was happy with everything, and he demanded the release of more paper money.
Yes, and in the "Company of India" things were not going very well. The development of the distant territories of Louisiana was quite slow. Cities were actually built on the banks of the Mississippi, expeditions were outfitted there and ships with immigrants set off. But there was no significant return on this project at all. Only a few knew about the real state of affairs. Due to the catastrophic shortage of immigrants, the regent ordered (by secret order) to send prostitutes, thieves and vagrants to America under the escort. But a well-thought-out advertising campaign inspired the French that ships arriving at the country's ports were clogged with fabrics, spices, silver and other foreign wealth.
Crash
The first bell was the arrival of Prince de Conti at the bank. He took a whole banknote with him and demanded to exchange them for coins. John immediately turned to the regent and he persuaded a relative to hold paper money. Although the case received wide publicity, almost no one gave it any importance, since Conti was not popular among the population. But the most prudent and cautious people began to exchange banknotes for silver and gold. And this despite the authority that John Law had at that time. The financial pyramid was about to fall apart, as the number of exchanges only grew every day.
The tiny reserve of precious metals of the bank was melting before our eyes. In early 1720, Law issued decrees that limited the exchange of notes. It was also forbidden to purchase precious stones and jewelry with paper money. In May, banknotes were devalued twice, and then their exchange for coins was completely stopped.
Popular hatred
The French immediately disliked Law. Somehow, a crowd of Parisians demanded that John exchange bills for gold. Having been refused, the furious citizens nearly tore the adventurer. In this regard, Law moved to the Palais Royal to live under the direct protection of the duke. Soon the financier was removed from government posts. Chancellor Dagasso, who had previously been fired due to resistance to John’s reforms, returned to France’s administration. His first decree in the new post was the resumption of exchange. Since June 10, 1720, all the French went to the Royal Bank. After the start of the exchange of silver and gold, it was not enough, and copper coins were used. Poor people were happy about this. Every day, the passion of the bank flared up. On July 9, soldiers guarding the establishment lowered their grates so that the crowd could not destroy the building. People began to throw stones at them. In turn, the soldiers responded with gunfire. As a result, one Frenchman died. And a few days later 15 people were trampled in the crowd ...
In August 1720, the Royal Bank was declared bankrupt. Three months later, all of his banknotes were canceled.
The Indian company was doing no better. The stock price plummeted. Parliament has put forward a demand that John Law, as the organizer of the first financial pyramid, should be put on trial and executed. But instead of the hero of this article, his brother William went to the Bastille. The guilt of the latter was not proved, and a relative of the financier was released.
Relocation to Brussels
Well, John Law himself left France at the end of 1720. The Scotsman and his son went to Brussels, leaving their daughter and wife. In the new city, John lived quite modestly. His only income was a pension paid by the Duke of Orleans (in France, all of Lo's property was confiscated).
Unexpected offer
In 1721, the financier was in Venice. There he was visited by a Savoyard noble who introduced himself as a Russian government agent. He handed John a letter from one of Peter's advisers. In the message, Lo was invited to the Russian service and promised a good advance. But then all John's hopes were connected with the English court, where Russia was very hostile. Therefore, the Scot decided not to risk it and declined to answer. And then he hastily left Venice.
Last years
For a few months after leaving, Lo was comforting himself with the hope that the regent would call him back to France to help overcome the crisis. But in 1723, the Duke of Orleans died, and the financier realized that he could no longer return there.
John Law, whose biography was presented above, died in Venice from pneumonia in 1729. Before his death, the Scot wrote a book, The History of Finance from the Regency. But she saw the light only after two centuries.