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John Law: The Gambler Who Invented Modern Money (Part 1) · Merryn Talks Money

• 0:02
  Speaker 1: Bloomberg Audio Studios, podcasts, radio news. Okay, look back through
• 0:09
  Speaker 1: the history of money, and quite often it seems like
• 0:10
  Speaker 1: nothing is happening, long long bits of calm, and then
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  Speaker 1: suddenly there's a catalyst of some kind. Stuff changes, right,
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  Speaker 1: and you get everything exploding, things flipping, a period of chaos,
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  Speaker 1: and then everything seems to reinvent itself. John Law, John,
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  Speaker 1: you know all about John Law. His history reflects exactly that.
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  Speaker 1: So what we're trying to do here over this holiday
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  Speaker 1: and over two episodes is tell his story, which tells
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  Speaker 1: us a lot about money, right, Yeah, and we need.
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  Speaker 2: To take two whole episodes to do it. This is
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  Speaker 2: a special series, folks, Join Law Stories, the story of
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  Speaker 2: bast a fugitive scotsman clearly identify with that quite closely.
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  Speaker 2: Briefly became the most powerful man in France and the
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  Speaker 2: richest I'm the richest, yeah, which is even more important.
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  Speaker 2: And then doing so he changed both my literary and
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  Speaker 2: arguably European her study forever.
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  Speaker 1: Wow, it's a big story, So stay with us for
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  Speaker 1: it because his rise and it's for us not just
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  Speaker 1: about history, is it. It's about the monetary system that
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  Speaker 1: we live in today. Okay, John Law. He might not
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  Speaker 1: be as respected as like Adam Smith, but he pretty
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  Speaker 1: much laid the foundation for the monetary system that we
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  Speaker 1: use today, right, So you could arguably say that his
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  Speaker 1: thinking is more important than a lot of that academic muk.
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  Speaker 2: Yeah, you could, and actually and whatever else he was,
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  Speaker 2: he was a gambler, sometime moderor he was also a practitioner.
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  Speaker 2: He did what he believed, and of course, as we'll
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  Speaker 2: find it, that didn't necessarily work to his advantage.
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  Speaker 1: All the time, I think you know, you're already giving
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  Speaker 1: away the fact that despite the fact he's a murderer, gambler,
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  Speaker 1: the beginning of the end of monetary systems, and all
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  Speaker 1: sorts of other appalling things. John rather likes John Law.
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  Speaker 2: I think I'm really quite fond of it.
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  Speaker 1: It's the charisma every time.
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  Speaker 2: Well, yes, yes, perhaps chapter one the beginning, Well, is
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  Speaker 2: this horrible, doesn't borne? Well, let's wind by call the
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  Speaker 2: way back to April sixteen seventy one and John Law
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  Speaker 2: is born in Edinburgh. He was one of twelve children,
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  Speaker 2: four of whom died in childhood. His dad, William Law,
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  Speaker 2: was a goldsmith, and his mum, Jean Campbell, was William's
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  Speaker 2: second wife, and she had three sisters and they'd all
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  Speaker 2: married well, so he's basically from my kind of upper
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  Speaker 2: merchant class background. So in sixteen eighty three, when John
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  Speaker 2: Law's twelve, his father William, goes to France because he's
• 2:45
  Speaker 2: got a kidney stone. He has to get an operation.
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  Speaker 2: The chances are that he'll die under the knife, but
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  Speaker 2: it's his only chance, and there happens to be a
• 2:55
  Speaker 2: company of barber surgeons of great reputation in France who
• 2:59
  Speaker 2: do this kind of thing the time. So before he leaves,
• 3:01
  Speaker 2: he puts his affairs in order, says goodbye easy, eight
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  Speaker 2: kids and his wife, and then heads off to France.
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  Speaker 2: And as it turns out, unfortunately, he does die when
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  Speaker 2: the operating.
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  Speaker 1: Table, leaving behind eight kids.
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  Speaker 2: Leaving behind eight kids, and so Gene takes over the
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  Speaker 2: family business, and she also avoids getting married again so
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  Speaker 2: it's not to have to sign the business over to
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  Speaker 2: her husband. And at this point goldsmiths are all ready
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  Speaker 2: in banking, so when he joins Brothers, takes over the
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  Speaker 2: kind of goldsmith side of things, actually making stuff out
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  Speaker 2: of gold. But Jane and join sort of jointly kind
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  Speaker 2: of operate the banking side of the business, so lending money.
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  Speaker 2: This is already something that goldsmith's are starting to do.
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  Speaker 1: So we're not into fractional reserve banking at this point,
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  Speaker 1: not quite yet.
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  Speaker 2: Well not formally, but actually goldsmiths really are lending out money.
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  Speaker 2: It's not like they have to have a one to
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  Speaker 2: one correspondence. There's not one hundred percent reserve requirements, and
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  Speaker 2: people know that people need credit, and there's no way
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  Speaker 2: you could do that and have all the gold still
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  Speaker 2: sitting there in the bank and demand at any time.
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  Speaker 2: I mean, there's actually an interesting called bailment, and this
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  Speaker 2: is where if you want your goldsmith to look after
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  Speaker 2: your gold, you put it in a bag and you
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  Speaker 2: give it to them, and that means that you want
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  Speaker 2: that gold back. But if you give them loose coins
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  Speaker 2: and there's an understanding that that money can be lent
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  Speaker 2: out and it's not necessarily the same gold coins, it's
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  Speaker 2: you're going to get back. So basically, if everyone came
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  Speaker 2: to the goldsmith's at once and wanted all the money back,
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  Speaker 2: it wouldn't be there immediately that day.
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  Speaker 1: I reckon I would won my own gold coins back.
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  Speaker 2: I mean, I think you probably would at this time,
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  Speaker 2: because a lot of them are debased.
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  Speaker 1: But people's maybe chipped in kleptics out.
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  Speaker 2: Yeah, so I mean you kind of maybe want to
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  Speaker 2: use the bailment.
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  Speaker 1: If as a child he's already learned about gaging, interest rates,
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  Speaker 1: monopolies gold. Yeah, yeah, he's kind of off before it.
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  Speaker 2: Yeah, he's that because I suppose another interesting in one
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  Speaker 2: of the core things would being a goldsmith is that
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  Speaker 2: he's used to that world where gold is an object.
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  Speaker 2: So it's it's jewelry, it's plates, it's things like that,
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  Speaker 2: but it's also got a separate financial function. Does this
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  Speaker 2: thing called moneyiness somewhere that is a kind of abstract
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  Speaker 2: property of the gold And he appreciates that there's a
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  Speaker 2: difference between the gold object and gold has money, and
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  Speaker 2: that's probably already kicking around and his brain a wout
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  Speaker 2: of thought. A look the things he has a tear away.
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  Speaker 2: His mum actually sends him off to a boarding school
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  Speaker 2: in a little village called Egoshum, which is still about
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  Speaker 2: an hour and a half drive from Edinburgh, and at
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  Speaker 2: least part of it, according to sources at the time,
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  Speaker 2: is to keep him away from the temptations at the
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  Speaker 2: big city. He's interested in things like gambling, and it
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  Speaker 2: does get to a point where he comes back he's
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  Speaker 2: sixteen because of the bet that yeah, exactly, yes, class
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  Speaker 2: war even then, but he comes back and they have
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  Speaker 2: a falling out him In his muther there actually is
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  Speaker 2: a kind of court case over it. It sounds like
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  Speaker 2: he's almost like trying to divorce her and get his
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  Speaker 2: inheritance so that he can be free, and she says
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  Speaker 2: in the court documents that actually the true cause of
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  Speaker 2: his deserting of my family was because of my motherly
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  Speaker 2: reprehending him for biding late out at night and going
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  Speaker 2: to the lottery and other games. So basically he's just
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  Speaker 2: a naughty boy and she's kind of fed up beating.
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  Speaker 1: Sixteen sixteen seventeen, and a lot of mothers in Edinburgh
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  Speaker 1: today similar feelings.
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  Speaker 2: Yes, I can imagine there's a lot of pushing pull,
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  Speaker 2: but it doesn't ever fully go to court, and it
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  Speaker 2: does eventually get settled by the time he's twenty one
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  Speaker 2: in sixteen ninety two. But the point is, I think
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  Speaker 2: this illustrates that a he's already someone who's very much
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  Speaker 2: pushing the boundaries and excited about getting out from under
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  Speaker 2: and making his name in the world, and also that
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  Speaker 2: he's someone who kind of enjoys taking risks and actually
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  Speaker 2: probably isn't that careful with money despite his upbringing. So
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  Speaker 2: sixteen ninety two, John Law's twenty one and he's finished
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  Speaker 2: his education, He's inherited the money that he's owed from
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  Speaker 2: his mother and he goes down to London in the
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  Speaker 2: company of a chap called John Campbell, who's a fellow
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  Speaker 2: Scott who wants to set up a goldsmith's in London.
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  Speaker 2: Now he does this and that actually eventually becomes Cook's Bank,
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  Speaker 2: and John Law himself ends up living in Saint Martin's
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  Speaker 2: in the Field, which for anyone who's not based in
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  Speaker 2: London is pretty much where charing Cross station is today,
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  Speaker 2: and at that point it actually was a field.
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  Speaker 1: It's quite a brave move, even as a young man
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  Speaker 1: to move from Edinburgh to London. Quite a journey, yeah,
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  Speaker 1: alien place to scott'stand as it is today.
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  Speaker 2: If I had remember the mood I went to London
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  Speaker 2: for the first time when I was twenty one. Thinking
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  Speaker 2: about it, I think it's a brave move. I think
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  Speaker 2: he is clearly ambitious at this point. I would say
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  Speaker 2: he's more reckless than anything else, for reasons we'll see
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  Speaker 2: in a moment. I think basically just wants to have fund,
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  Speaker 2: because he spends a lot of his time gambling, to
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  Speaker 2: the point where he actually has to write back to
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  Speaker 2: his mum and handover a chunky his inheritance in exchange
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  Speaker 2: for more cash.
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  Speaker 1: Basically she must have been fit up by that point,
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  Speaker 1: if you would think, when you actually it's weird.
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  Speaker 2: Through their lives, they don't have a major falling out again,
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  Speaker 2: and she doesn't disinherit him or anything like that. So
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  Speaker 2: although he's leading somewhat forcibly dissolute life, and he's kind
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  Speaker 2: of known as a dandy and a ladies man, and
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  Speaker 2: he does like gambling and partying and all the rest
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  Speaker 2: of it, she doesn't ever actually cut him off.
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  Speaker 1: Maybe the other kids are worse.
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  Speaker 2: I mean possibly possibly, they'd have to try quite hard.
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  Speaker 2: So down in London he gets known as bow Law.
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  Speaker 2: A bow is a dandy, a kind of it boy,
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  Speaker 2: a kind of man about town.
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  Speaker 1: In bau right b e A U.
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  Speaker 2: Yes, as beautiful, I guess. And then we come to
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  Speaker 2: a massive turning point. It's fair to say that if
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  Speaker 2: this hadn't happened, John Law might just have ended up
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  Speaker 2: as another London society man, maybe dabbling in politics, maybe
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  Speaker 2: pushing money making schemes around exchange Alley with the other
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  Speaker 2: stock jobbers. Instead, he's about to embark in the path.
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  Speaker 2: We'll put him in a position to play financial alchemist
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  Speaker 2: with one of the biggest economies in Europe. Chapter two
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  Speaker 2: the due in April sixteen ninety four. John Law is
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  Speaker 2: twenty three and he gets involved in the life of
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  Speaker 2: a fellow dandy called Edward bow Wilson. Edward bo Wilson
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  Speaker 2: is just another it boy, like John Law, another dandy,
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  Speaker 2: and people are really intrigued by him because he's spending
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  Speaker 2: an awful lot of money down in London. Even the
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  Speaker 2: load of the family that he comes from is not
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  Speaker 2: well off. They're sort of gentry, but they're the lower
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  Speaker 2: end of the gentry, so for perspective, he's thought to
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  Speaker 2: be spending something in the region of about four thousand
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  Speaker 2: pounds a year, which in current money is about six
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  Speaker 2: hundred and seventy five thousand pounds a year, And in
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  Speaker 2: terms of what people were saying about them at the time,
• 10:20
  Speaker 2: there's the equivalent of a local gossip columnist who writes
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  Speaker 2: to his employers and Devon, who like to be kept
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  Speaker 2: up to date on the news in London, and he
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  Speaker 2: tells them that Wilson is the subject of the general
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  Speaker 2: chat of the town. He has no gamester, neither is
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  Speaker 2: he known to keep women company, and it cannot be
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  Speaker 2: yet discovered how he came to live at so prodigious
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  Speaker 2: an extravagancy. We never get to find out where Wilson's
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  Speaker 2: money comes from, because in the ninth of April sixteen
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  Speaker 2: ninety four, he enjoined fight at Bloomsbury Square and join
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  Speaker 2: stabs him in the stomach with an iron and steel
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  Speaker 2: sword of a value of five shillings, which about forty
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  Speaker 2: pounds to day, into a depth of two inches. That's
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  Speaker 2: all according to court documents, and he dies immediately, which
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  Speaker 2: strikes me as a tiny bit odd. But I don't
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  Speaker 2: know any about anatomy.
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  Speaker 1: Okay, so this is really unlucky.
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  Speaker 2: It is unlucky. We don't know why they fought. A
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  Speaker 2: later theory claimed that Elizabeth Villiers, who was King Williams's mistress,
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  Speaker 2: was involved, but there's no evidence for that, and it
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  Speaker 2: lightly originated the century afterwards. And there's also a scandalous
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  Speaker 2: pamphlet from the seventeen twenties, and then this suggests that
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  Speaker 2: Wilson was actually living an affair with a nobleman who
• 11:30
  Speaker 2: was the person paying for his lifestyle, and that Law
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  Speaker 2: killed Wilson to silence and so effectively he was acting
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  Speaker 2: as a kind of eighteenth century hit man. But that
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  Speaker 2: seems to just be pure gossip meant to damage Law's
• 11:43
  Speaker 2: reputation at the time, and a more plausible, if somewhat
• 11:46
  Speaker 2: less dramatic account mentions a Missus Lawrence and she was
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  Speaker 2: a friend of Laws, and she was the landlady of
• 11:52
  Speaker 2: a house where Wilson's sister lived. Wilson then discovered that
• 11:56
  Speaker 2: Law was keeping a mistress there, and he told his
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  Speaker 2: sister to leave, and Missus Longs took offense, probably because like, oh,
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  Speaker 2: what are you accusing me of running some kind of
• 12:05
  Speaker 2: you know, broadle or something. An argument followed and that's
• 12:08
  Speaker 2: where the duel came from. So basically Law might have
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  Speaker 2: been defending his friend's honor, which I think is probably
• 12:15
  Speaker 2: quite believable because he's clearly still quite hot headed and reckless,
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  Speaker 2: but I mean, ultimately we don't know the real reason.
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  Speaker 2: After the fight, Law is arrested and the key legal
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  Speaker 2: question is whether it was a planned duel or a
• 12:34
  Speaker 2: spontaneous fight. The duels were common but illegal, and I mean,
• 12:39
  Speaker 2: this will seem a bit weird. That's what premeditation is
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  Speaker 2: what made it murder and therefore punishable by hanging, whereas
• 12:44
  Speaker 2: a kind of heat of the moment impulse fight meant
• 12:46
  Speaker 2: it was manslaughter, and basically basically knows days you got
• 12:49
  Speaker 2: away with manslaughter. So Law claimed that Wilson attacked him
• 12:53
  Speaker 2: suddenly in Bloomsbury Square, and that would have made it
• 12:56
  Speaker 2: self defense. But the prosecutors argued that it was pre
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  Speaker 2: arranged and that kind of they showed letters and things
• 13:01
  Speaker 2: to show that they had ongoing feud, so it was
• 13:03
  Speaker 2: kind of cut and dried from that point of view.
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  Speaker 2: So the jury agreed, they convicted them a murder and
• 13:08
  Speaker 2: they sent them to hang. Now the king reprieved them
• 13:12
  Speaker 2: because the low jewels were technically illegal. They were also
• 13:16
  Speaker 2: sort of seen as a way that young men let
• 13:18
  Speaker 2: off steam, so no one was actually they can of
• 13:21
  Speaker 2: execute people for them. But Wilson's family appealed and that
• 13:25
  Speaker 2: left join Law kind of rotten in prison. The jails
• 13:29
  Speaker 2: then were privately ruined, so he was able to pay
• 13:31
  Speaker 2: for better quarters. So you know, in certain parts of
• 13:34
  Speaker 2: the prison, poor people were kept and they were awful,
• 13:37
  Speaker 2: whereas the bit that he was in was probably a
• 13:38
  Speaker 2: little bit more pleasant, maybe like a kind of three
• 13:40
  Speaker 2: star B and B. So he remained there for nine
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  Speaker 2: months while the appeals dragged on and on and in
• 13:46
  Speaker 2: the background, because he was quite well connected or from
• 13:48
  Speaker 2: a well connected family, Scottish politicians were lobbying the king
• 13:52
  Speaker 2: for his release, while at the same time, Wilson's side
• 13:55
  Speaker 2: was lobbying for him to be hung, and the king
• 13:57
  Speaker 2: was kind of stuck in the middle. You get the
• 14:00
  Speaker 2: sense that the king just wished the problem would go away.
• 14:04
  Speaker 2: And as early as kind of made that year, you've
• 14:06
  Speaker 2: got officials hinting in documents that law could easily escape
• 14:09
  Speaker 2: from this prison, and it was kind of stupid of
• 14:12
  Speaker 2: him to just be hanging around waiting to see whether
• 14:13
  Speaker 2: he'd get a pardon or not. But I think that's
• 14:15
  Speaker 2: a little bit unfair because obviously he's a society guy,
• 14:18
  Speaker 2: he's a gentleman, and if he does escape from prison,
• 14:21
  Speaker 2: that's going to make him a fugitive. So you can
• 14:22
  Speaker 2: see why he might have thought, well, I'd rather wait
• 14:25
  Speaker 2: for this pardon, which is surely forthcoming at any minute,
• 14:29
  Speaker 2: but in the end of appeal doesn't go his way.
• 14:31
  Speaker 2: He sends to be hung. There's a quote in Johnson's
• 14:34
  Speaker 2: recollections in which he recalls that one of the King's
• 14:36
  Speaker 2: right hand men told him that the King wouldn't pardon
• 14:39
  Speaker 2: Law without the consent of Wilson's brother. But he also
• 14:43
  Speaker 2: said that I think the King is willing he should
• 14:45
  Speaker 2: be saved, provided it can be done in such a
• 14:48
  Speaker 2: manner as that his majesty did not appear in it.
• 14:51
  Speaker 2: And then at that point, reading between the lines, King
• 14:53
  Speaker 2: William tacitly gives permission for him to be bailed out.
• 14:58
  Speaker 1: Fascinating the King's sound in this case, right, It is.
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  Speaker 2: Interesting, But I suppose we need to remember that Law
• 15:04
  Speaker 2: is basically a foreign national who's under threat of execution
• 15:07
  Speaker 2: in a foreign country. So the Scottish legal authorities were
• 15:11
  Speaker 2: almost bound to say something, even if Law wasn't as
• 15:13
  Speaker 2: well connected. And he actually, you know, he is quite
• 15:16
  Speaker 2: well connected.
• 15:17
  Speaker 1: So he get that.
• 15:18
  Speaker 2: So the Law makes his escape, or rather the sounds
• 15:20
  Speaker 2: of it, he's rescued Johnston. That's the Scottish Secretary estate
• 15:24
  Speaker 2: we mentioned earlier reports that the king's right hand man
• 15:27
  Speaker 2: came up to him and whispered to me in a
• 15:29
  Speaker 2: crowd that my friend was at liberty but had been
• 15:31
  Speaker 2: very slow to understand matters and prayed me to keep
• 15:34
  Speaker 2: the secret, which I did until King William's death. And
• 15:38
  Speaker 2: from that point we don't know exactly where Law goes.
• 15:41
  Speaker 1: That's the point, isn't it, John Really.
• 15:42
  Speaker 2: Well, it's yes, yes, when you go on the run.
• 15:45
  Speaker 2: But yes, this is a major turning point in his life,
• 15:47
  Speaker 2: probably the major turning point, because it's his fugitive status
• 15:51
  Speaker 2: that will eventually drive him to France, which is where
• 15:54
  Speaker 2: he will create monetary history Chapter three, Law on the Lamb.
• 16:21
  Speaker 1: There's a gap before he arrived in France, such a
• 16:24
  Speaker 1: refined his monitary and physical thinking.
• 16:26
  Speaker 2: Yes, this is when he does that. Also while he's
• 16:29
  Speaker 2: in jail, this is probably when he meets his long
• 16:31
  Speaker 2: term partner, Katherine Knowles, who is oddly enough a great
• 16:34
  Speaker 2: great granddaughter of Mary Berlin, who was Anne Berlin's big sister,
• 16:39
  Speaker 2: the one who got away from Henry the eighth, and
• 16:42
  Speaker 2: actually introduces the tantalizing prospect that just maybe John Law's
• 16:47
  Speaker 2: children had showed her blood in them, depending on exactly
• 16:50
  Speaker 2: who was the father of Mary's kids, benby Catherine's brother Charles,
• 16:55
  Speaker 2: who's a sort of dissolute upper class scoundrel, is in
• 16:58
  Speaker 2: jail at the same time as Law from mother and
• 17:00
  Speaker 2: his brother in law, and so you have to assume
• 17:03
  Speaker 2: that this is how they meet, because she just sort
• 17:05
  Speaker 2: of appears in his life in the historical record otherwise.
• 17:08
  Speaker 2: And this is something I find really interesting about Law
• 17:10
  Speaker 2: in general. He never gets married, so they're happily living
• 17:13
  Speaker 2: together kind of like essentially out of wedlock. He's born
• 17:17
  Speaker 2: a Protestant, but he converts to Catholicism purely for political purposes.
• 17:24
  Speaker 2: But it's so interesting how does wars being fought over
• 17:27
  Speaker 2: religion all over the place at this point, And I
• 17:30
  Speaker 2: just find it fascinating what I kind of unusually free
• 17:36
  Speaker 2: thinking individual he seems to be. And I don't know,
• 17:40
  Speaker 2: Messa where that comes from. And perhaps there were a
• 17:43
  Speaker 2: lot more people like that in Scotland and England and
• 17:46
  Speaker 2: France of the time that we traditionally think.
• 17:50
  Speaker 1: If he changing religion between Pritain and catholic back then,
• 17:54
  Speaker 1: it did shows a kind of open mindedness and a
• 17:57
  Speaker 1: lack of being but not being widded to an ideology
• 18:00
  Speaker 1: any type that you could say that more or less
• 18:02
  Speaker 1: the same, but we won't go there on this. Customers,
• 18:05
  Speaker 1: you know you're not wedded to a particular ideology. Open minded,
• 18:07
  Speaker 1: you're thinking freely. You've escaped from prison, Yes, got your
• 18:11
  Speaker 1: girl with you, a prison cavern's with them. We don't
• 18:14
  Speaker 1: know where he's gone. But he turns up in.
• 18:17
  Speaker 2: Well, he turns up in general. But I think the
• 18:19
  Speaker 2: other thing he kind of contextualized stuff a little bit
• 18:22
  Speaker 2: at this point. So sixteen ninety four, while he's in jail,
• 18:26
  Speaker 2: This is also when the Bank at England gets established.
• 18:29
  Speaker 2: So England and France are basically both skint because they've
• 18:32
  Speaker 2: spent so much money on either being at war with
• 18:35
  Speaker 2: each other or the other European powers. So England's fiscal
• 18:38
  Speaker 2: problem dates back to Charles the second. So he'd been
• 18:42
  Speaker 2: borrowing money from the goldsmiths and they would lend the
• 18:45
  Speaker 2: money deposited with them to the crown and it would
• 18:48
  Speaker 2: be secured against tax revenues coming during the near future.
• 18:51
  Speaker 2: So it's basically an early but very very primitive form
• 18:56
  Speaker 2: of government debt. But by sixteen seventy two, a combination
• 18:59
  Speaker 2: the war and good living means that Charles is out
• 19:02
  Speaker 2: of money, and so he suspends interest payments to the
• 19:04
  Speaker 2: goldsmiths and an event which is known as the stop
• 19:08
  Speaker 2: of the Exchequer. And as it turns out, the payments
• 19:10
  Speaker 2: are never fully made and there are running court cases
• 19:13
  Speaker 2: right up until the seventeen hundreds. But in the immediate
• 19:16
  Speaker 2: term it bankrupts several big goldsmiths and also means that
• 19:19
  Speaker 2: many wealthy families lose their money because they had been
• 19:23
  Speaker 2: depositing it with the goldsmiths and that had been lent
• 19:25
  Speaker 2: to the king. So anyway, that has a big shadow
• 19:29
  Speaker 2: over the Crown's credit worthiness. And so comes sixteen ninety three,
• 19:33
  Speaker 2: the king has changed. It's King William now in the
• 19:36
  Speaker 2: middle of the Nine Years War, which is a big
• 19:38
  Speaker 2: European war which is basically France versus everyone else, and
• 19:42
  Speaker 2: England's at war again, and William needs to raise money
• 19:45
  Speaker 2: to rebuild the navy after a defeat. But of course
• 19:48
  Speaker 2: the remaining Goldsmiths have no interest in financing the crown anymore.
• 19:52
  Speaker 2: But at the same time, the London financial sector, if
• 19:54
  Speaker 2: you like, is buzzing. People have got lots of ideas
• 19:56
  Speaker 2: about how to raise money. Let's talking lotteries talks about
• 20:00
  Speaker 2: lots of other kinds of schemes, but the scheme that
• 20:02
  Speaker 2: does eventually get support is the idea to set up
• 20:05
  Speaker 2: the Bank of England. So the idea is to establish
• 20:15
  Speaker 2: a bank that will sell shares to raise one point
• 20:19
  Speaker 2: two million pounds in that money, so one point two
• 20:23
  Speaker 2: million a lot more than that today's money from shareholders,
• 20:26
  Speaker 2: and in exchange they'll get an eight percent annual interest
• 20:29
  Speaker 2: rate which is backed by tax revenues raised on excise
• 20:33
  Speaker 2: duties from ships coming up and down the Thames. Basically,
• 20:37
  Speaker 2: and that's the start of a kind of more formal
• 20:40
  Speaker 2: way of raising debt for the country in a way
• 20:45
  Speaker 2: that doesn't purely rely on the whims of the crown.
• 20:51
  Speaker 2: We used since it has a bit, it has a bit.
• 20:53
  Speaker 2: Where as she's getting your institutionalized and your institutions are
• 20:57
  Speaker 2: starting to get built. Was in France, you still get
• 20:59
  Speaker 2: this very kind of old system. Louis the fourteenth has
• 21:03
  Speaker 2: already experiment to be paper money and then bind it
• 21:05
  Speaker 2: because he didn't trust it. The tax is raised largely
• 21:09
  Speaker 2: from the poor. Nobles and the clergy are exempt. The
• 21:12
  Speaker 2: tax raison powers are sold to people who then pay
• 21:15
  Speaker 2: for the right to raise the taxes, but then when
• 21:17
  Speaker 2: they're collecting them, obviously there's massive scope for corruption involved
• 21:21
  Speaker 2: in that, and so you get a much older, less efficient,
• 21:25
  Speaker 2: more corrupt and also more vested interests kind of system
• 21:29
  Speaker 2: of financing the country in France. So that's kind of
• 21:33
  Speaker 2: where we are at that point. So I think that's
• 21:37
  Speaker 2: just useful for thinking about what happens next.
• 21:39
  Speaker 1: If you see an organization set up out with the crown, yeah,
• 21:44
  Speaker 1: supposedly independent or a separate organization, but also allowed to
• 21:50
  Speaker 1: raise money, yeah, with the power of the state behind it,
• 21:53
  Speaker 1: that would definitely start thinking.
• 21:54
  Speaker 2: Okay, so that's the state of the public finances in
• 21:57
  Speaker 2: England and France, and that's a very idea who they differ.
• 22:01
  Speaker 2: So now let's get back to John Law of an
• 22:04
  Speaker 2: Escape from Prison. Okay, So if this was a film,
• 22:11
  Speaker 2: this is the point which we'd break into training montage,
• 22:15
  Speaker 2: except rather than having Rocky punching bits and meat, we'd
• 22:19
  Speaker 2: have Join Law darting about Europe with his wife Catherine,
• 22:23
  Speaker 2: also not his wife, his lady partner. And so between
• 22:26
  Speaker 2: about sixteen ninety five and seventy oh five they spend
• 22:29
  Speaker 2: ten years going around Europe. They spend a lot of
• 22:31
  Speaker 2: time in France, they spend some time in Holland, there's
• 22:34
  Speaker 2: various other places they may or may not have been,
• 22:36
  Speaker 2: And most of the time he's basically funding their lifestyle
• 22:39
  Speaker 2: by hosting high end society gambling games. He's very good
• 22:44
  Speaker 2: with statistics, he's very good with understanding probability, which I
• 22:50
  Speaker 2: mean he wants to be. When you read some of
• 22:52
  Speaker 2: the things that people were getting excited about at the time,
• 22:54
  Speaker 2: but they're talking bit like he's calculating the odds of
• 22:56
  Speaker 2: rolling a seven with two dice, and you're kind of
• 22:58
  Speaker 2: like thinking, how did know when el know how to
• 23:00
  Speaker 2: do that? But you know, it's that sort of thing,
• 23:03
  Speaker 2: and he also wanted to be able.
• 23:04
  Speaker 1: To do that instinctively. It's amazing, really, yeah.
• 23:07
  Speaker 2: I and also taking the interest to write it down
• 23:09
  Speaker 2: because there are a lot of people writing a book
• 23:11
  Speaker 2: probability and gaming in particular at this point. The other
• 23:15
  Speaker 2: thing that's interesting is that he twigs that in certain
• 23:18
  Speaker 2: games what you need to be as the banker, So
• 23:20
  Speaker 2: a lot of the time he's not actually gambling so
• 23:23
  Speaker 2: much as being the house on the behalf of a
• 23:26
  Speaker 2: lot of rich people who probably not engage with probability. Particularly,
• 23:30
  Speaker 2: and that's the other way he's making his money. But
• 23:32
  Speaker 2: at the same time he's not just doing that. He's
• 23:34
  Speaker 2: learning about financial markets. So you know, in Holland, he's
• 23:37
  Speaker 2: sort of learning about shotting, he's learning about futures options
• 23:40
  Speaker 2: because you know, the financial markets and Amsterdam are extremely
• 23:43
  Speaker 2: sophisticated by the standards of the time. He's also spent
• 23:46
  Speaker 2: a lot of time thinking about money because obviously his
• 23:49
  Speaker 2: goldsmith and background means that he knows a fair bit
• 23:52
  Speaker 2: about basic banking already. I think something that's real and
• 23:56
  Speaker 2: poly point out is that none of this is coming
• 23:58
  Speaker 2: out of the blue. But the biggest drivery all this
• 24:01
  Speaker 2: actually and all this monetary theory stuff is the fact
• 24:03
  Speaker 2: that England and France have been and the rest of
• 24:06
  Speaker 2: you know, Europe has been in war for three or
• 24:09
  Speaker 2: four decades. So the governments are incredibly indebted and they
• 24:12
  Speaker 2: keep looking for schemes and ways to raise more money,
• 24:15
  Speaker 2: and so there's all kinds of schemes going around and
• 24:17
  Speaker 2: there's all kinds of thinking about it. So during this time,
• 24:21
  Speaker 2: John Law actually pitches Land banks to three different countries.
• 24:25
  Speaker 2: He pitches them England, he pitches it to France, and
• 24:27
  Speaker 2: he also pinches it to Scotland, and Scotland is the
• 24:30
  Speaker 2: place where in seventeen oh four he ends up back there,
• 24:35
  Speaker 2: and he's actually up in front of Parliament or sending
• 24:37
  Speaker 2: his ideas to Parliament because Scotland is looking for ways
• 24:40
  Speaker 2: to raise more money because it's gone bank up because
• 24:43
  Speaker 2: of an ill advised colonial scheme, the burn in mind.
• 24:46
  Speaker 2: He can go back to Scotland because Scotland and England
• 24:49
  Speaker 2: obviously are two separate countries, so the fact he's wanted
• 24:51
  Speaker 2: in England doesn't mean that he's a fugitive in Scotland.
• 24:55
  Speaker 2: But also by this point he has actually reached an
• 24:58
  Speaker 2: agreement with Robert Wells, Wilson's brother that he will scrap
• 25:03
  Speaker 2: his appeal and he's no longer going to pursue him
• 25:06
  Speaker 2: for the death penalty. So Lowie hasn't got a formal
• 25:09
  Speaker 2: pardon yet and won't receive one for quite some time.
• 25:13
  Speaker 2: It's less of a pressing problem for him. So back
• 25:17
  Speaker 2: in Scotland is where he publishes his monetary Treatise, which
• 25:20
  Speaker 2: is Money in Trade, which is basically his idea of
• 25:23
  Speaker 2: how money works. So Phelix Martin and need for Chancellor,
• 25:27
  Speaker 2: both of whom are respected financial historians and former guests
• 25:30
  Speaker 2: on this podcast make the point that laws thinking does
• 25:34
  Speaker 2: advance the concept of money. And there's one key quote
• 25:39
  Speaker 2: that they pull out, which is this money is not
• 25:43
  Speaker 2: the value for which goods are exchanged, but the value
• 25:47
  Speaker 2: by which they are exchanged. So, in other words, Laws
• 25:50
  Speaker 2: making the point that money is not a thing in itself,
• 25:53
  Speaker 2: it's the financial technology that makes everything else work. And overall,
• 25:58
  Speaker 2: that's his view of the world, that is that money
• 26:01
  Speaker 2: is the problem where there isn't enough of it. Money
• 26:04
  Speaker 2: is the kind of oil you need to make things
• 26:06
  Speaker 2: go round.
• 26:08
  Speaker 1: What do you think his driver was? I mean, if
• 26:09
  Speaker 1: the way you've just described him, he could have stayed
• 26:11
  Speaker 1: in Amsterdam and made an absolute fortune trading right. I
• 26:14
  Speaker 1: was like, he would have been a phenomenal trader. He
• 26:16
  Speaker 1: could have made a fortune doing that. What was his
• 26:18
  Speaker 1: driver behind doing all this? Do you think he's have
• 26:20
  Speaker 1: to state is after power, after more money than you're
• 26:23
  Speaker 1: going to ever make shorting stuff on Amsterdam.
• 26:27
  Speaker 2: I think that's a really interesting question, But I honestly
• 26:29
  Speaker 2: think it's the ideas that drove him. I mean that
• 26:31
  Speaker 2: there is a quote a camera who it's from, but
• 26:34
  Speaker 2: one of his contemporaries points is not the money that
• 26:38
  Speaker 2: he was basically interested in. It was his ideas. He's
• 26:40
  Speaker 2: basically a world improver. One of the problems we tie
• 26:44
  Speaker 2: in your currency to gold, and it was a problem,
• 26:47
  Speaker 2: and it would be a problem, is it sometimes you
• 26:50
  Speaker 2: run out of gold. And I think one of the
• 26:52
  Speaker 2: things that we forget because we've had paper money for
• 26:55
  Speaker 2: a while, so we recognized paper money's foible's relative to gold.
• 26:59
  Speaker 2: Gold and precious metal had a lot of problems too.
• 27:02
  Speaker 2: They were constantly being devalued and constantly having the relative
• 27:07
  Speaker 2: values change. One of the things that John Law does
• 27:09
  Speaker 2: is he goes back into the history books and looks
• 27:11
  Speaker 2: at how much the price of silver has changed. And
• 27:14
  Speaker 2: one of the reasons that he talks about a land bank,
• 27:16
  Speaker 2: and this is the idea basically that you issue a
• 27:18
  Speaker 2: paper currency that is effectively a mortgage on land. It's
• 27:22
  Speaker 2: not very practical, which is one reason why it doesn't
• 27:24
  Speaker 2: take off. But the point is that the land is
• 27:26
  Speaker 2: almost like the kind of stones of Yap. It never
• 27:29
  Speaker 2: would actually change hands. Is just a thing that backs
• 27:32
  Speaker 2: the iowe you. And his idea is that, well, actually
• 27:35
  Speaker 2: we should use land because a that's where all of
• 27:38
  Speaker 2: the wealth of the economy actually comes from and b
• 27:42
  Speaker 2: At that time, the price of land was much less
• 27:45
  Speaker 2: volatile than the price of silver, so he's actually talking
• 27:47
  Speaker 2: about anchoring the paper currency to an asset which is
• 27:50
  Speaker 2: a much more stable background value. So basically, I think
• 27:54
  Speaker 2: he's very much an idealist and he's excited by economic
• 27:58
  Speaker 2: ideas and excited by theory at the same time. There
• 28:01
  Speaker 2: are lots of people like them, you know. So Daniel
• 28:03
  Speaker 2: Defoe is not just you know, you know, the writer
• 28:06
  Speaker 2: of Robinson Crusoe. He's also a kind of political pamphleteer,
• 28:10
  Speaker 2: and he's also they call them projectors. But it's not
• 28:13
  Speaker 2: his guy's coming up with mad ideas for raising money
• 28:16
  Speaker 2: or not so mad. I mean, that's where the Bank
• 28:18
  Speaker 2: of England came from. Wasn't a default idea, but it
• 28:21
  Speaker 2: was the idea of the guy who would actually later
• 28:23
  Speaker 2: go on to do Scotland's ill fated Darians game.
• 28:27
  Speaker 1: Yes, shape us from the Improved is absolutely so.
• 28:30
  Speaker 2: Yeah, it's a time of intellectual ferment. And John Law
• 28:33
  Speaker 2: happens to be one of the flowers that grows most
• 28:37
  Speaker 2: rapidly from that particular.
• 28:40
  Speaker 1: Flower weed weed.
• 28:42
  Speaker 2: Yes, he's proposal for this Land Bank, Money and Trade Considered.
• 28:50
  Speaker 2: That's published anonymously by Joins aunt Agnes, who runs a
• 28:54
  Speaker 2: printing business which holds the local monopoly in printing bibles
• 28:56
  Speaker 2: as well. By the way, everyone in politics knows who's
• 28:59
  Speaker 2: behind it. And despite the fact that his reputation is
• 29:02
  Speaker 2: obviously controversial and he does have some high profile supporters,
• 29:07
  Speaker 2: and his scheme does get a hearing in the Scottish
• 29:09
  Speaker 2: Parliament alongside several others. However, they cut along and complicated
• 29:13
  Speaker 2: story shot. It's not something that he go into for
• 29:15
  Speaker 2: this podcast. Scotland doesn't go ahead when monetary reform and
• 29:18
  Speaker 2: instead it's somewhat reluctantly agrees to you to night with
• 29:21
  Speaker 2: England in seventeen oh seven, and that's partly to be
• 29:24
  Speaker 2: like the economy and specifically the elites who'd lost a
• 29:27
  Speaker 2: lot of money in the Darian scheme.
• 29:34
  Speaker 1: Okay, so here we are. He's still in Scotland. Is
• 29:37
  Speaker 1: he still in Scotland for the active Union?
• 29:39
  Speaker 2: He is not because what happens, but obviously the Actor
• 29:42
  Speaker 2: Union is coming up and he's still a fugitive.
• 29:46
  Speaker 1: He can't stay in Scotland.
• 29:48
  Speaker 2: Exactly because it might become part of England and so
• 29:51
  Speaker 2: that's when he moves to buy looks at it. That's
• 29:54
  Speaker 2: when he moved to Genoa.
• 29:56
  Speaker 1: Ply his descendants still calling for independence, I.
• 30:02
  Speaker 2: Would explained something. So he goes to Genoa. During this time,
• 30:07
  Speaker 2: they had two kids, and by seventeen eleven he's got
• 30:12
  Speaker 2: one hundred and forty thousand lera in the bank. Now,
• 30:15
  Speaker 2: Corny James Buckin's book, a laborer earns one or two
• 30:18
  Speaker 2: lera a day, so let's call that in the minimum wage. Now,
• 30:22
  Speaker 2: the minimum wage in the UK's about twelve quid an
• 30:24
  Speaker 2: hour at the moment. I wasn't going to multiply that
• 30:26
  Speaker 2: to a day. But even if you take twelve quid
• 30:28
  Speaker 2: for an hour and you multiply that by one hundred
• 30:30
  Speaker 2: and forty thousand, then you are looking at somewhere between
• 30:33
  Speaker 2: eight hundred and fifty grandy about one point seven million.
• 30:36
  Speaker 2: So he's definitely a well off guy. He's got a
• 30:39
  Speaker 2: lot of liquid assets, and this seems to being built
• 30:42
  Speaker 2: up through the same sort of thing, so like running games. Also,
• 30:46
  Speaker 2: I think he's probably involved in supplying armies because again
• 30:52
  Speaker 2: there's kind of a war going on, and he's also
• 30:55
  Speaker 2: making a lot of contacts, so there's a lot of people,
• 30:58
  Speaker 2: a lot of factions. The Jackieby in Scotland are very
• 31:01
  Speaker 2: fond of him, even though though he doesn't really doesn't
• 31:04
  Speaker 2: see me have very high convictions in terms of political stuff.
• 31:09
  Speaker 2: It's like he's kind of nice to Jacobates because they're
• 31:11
  Speaker 2: nice to him. He's quite a loyal person, really, somebody
• 31:15
  Speaker 2: helps him out than he tends to do. Likewise, but
• 31:18
  Speaker 2: again you don't get the sense that he's terribly ideological
• 31:20
  Speaker 2: in terms of party politics or anything like that. He's
• 31:24
  Speaker 2: kind of more obsessed with his ideas about monetary and
• 31:28
  Speaker 2: economic reform, because during this time he is also trying
• 31:31
  Speaker 2: to shop his ideas around. So he's tried in Scotland
• 31:33
  Speaker 2: and failed. He approaches the Ducas Savoy with a similar
• 31:37
  Speaker 2: idea for a kind of central bank type organization. He
• 31:41
  Speaker 2: nearly gets the scheme going in Turin, but again that
• 31:43
  Speaker 2: doesn't happen. And so as far as we can see,
• 31:49
  Speaker 2: France is currently engaged in the war succession that comes
• 31:53
  Speaker 2: to an end in seventeen thirteen, and at this point
• 31:56
  Speaker 2: he moves back to Frances lucas you can get and
• 32:00
  Speaker 2: now because they're not a war anymore. And it's also
• 32:05
  Speaker 2: very clear that Louis the fourteenth is on his last legs,
• 32:08
  Speaker 2: it's going to be a succession. France is very, very,
• 32:11
  Speaker 2: very badly off. Deb is running at something like to
• 32:14
  Speaker 2: one hundred percent of GDP, which reminds me of somebody
• 32:18
  Speaker 2: else that we can them right now, and so basically
• 32:20
  Speaker 2: he sees the opportunity to get his ideas maybe taken up.
• 32:26
  Speaker 2: And what is actually one of the biggest economies in
• 32:28
  Speaker 2: Europe at this point, so France.
• 32:31
  Speaker 1: Is kind of at again this might sound familiar, but
• 32:34
  Speaker 1: reform or crisis stage absolutely when they decide to go
• 32:37
  Speaker 1: for a reform or as we will find out, yeah,
• 32:40
  Speaker 1: well a bit of both.
• 32:41
  Speaker 2: Why not both exactly? So France is desperate for fresh
• 32:47
  Speaker 2: ideas on how to deal with it's lacking money, and
• 32:50
  Speaker 2: John Law is desperate to see his ideas put into practice.
• 32:55
  Speaker 2: He's been knocked back by Scotland, he's been knocked back
• 32:58
  Speaker 2: by Savoy, but maybe he can find a home for
• 33:02
  Speaker 2: his thoughts in France and we'll find out how that
• 33:06
  Speaker 2: went in the next episode.