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John Law: The Gambler Who Invented Modern Money (Part 2) · Merryn Talks Money

0:02
Speaker 1: Bloomberg Audio Studios, podcasts, radio news.
0:14
Speaker 2: Are you ready for part two of the Joint Law Story.
0:16
Speaker 1: I'm ready because I've listened to all of part one,
0:19
Speaker 1: or rather recorded it with you, John. But anyone who
0:21
Speaker 1: hasn't done that needs to go back and listen to
0:23
Speaker 1: part one before they move on to part two.
0:26
Speaker 3: Okay, so let's assume you've done that, and let's speak
0:29
Speaker 3: in chapter four are battled superpower? So in seventeen fourteen,
0:51
Speaker 3: Join Law arrives in France by his long term girlfriend
0:54
Speaker 3: Katherine and their son William and their daughter Mary Catherine.
0:58
Speaker 3: And so at this point the water is any succession
1:01
Speaker 3: has just ended, and while France didn't exactly lose, it
1:05
Speaker 3: didn't win either. So as a result of this, is
1:07
Speaker 3: still one of the most powerful countries in Europe at
1:09
Speaker 3: this point, but it's economically exhausted and it's very heavily
1:13
Speaker 3: in debted to debt to GDP is actually sitting at
1:15
Speaker 3: about one hundred percent. Familiar, Yes, yes, a bit too familiar.
1:20
Speaker 3: So I mean fixing this is not easy at all, obviously,
1:23
Speaker 3: as we know from our own experience. But compared with
1:26
Speaker 3: England in particular, France has got a much more regressive
1:30
Speaker 3: and efficient fiscal system. So in the tax side of
1:33
Speaker 3: the things, most of the direct tax burden falls on
1:36
Speaker 3: peasants and commoners, and the nobility and the upper classes
1:39
Speaker 3: are largely exempt from that. And the king also sells
1:42
Speaker 3: the right to collect taxes so effectively privatizes it. He
1:46
Speaker 3: gets the money up front, Yeah, he gets the money
1:48
Speaker 3: up front actively, and then they get to keep whatever
1:50
Speaker 3: they can rake off on top.
1:52
Speaker 1: So there's bidding walls for these rights. Right, you can
1:55
Speaker 1: go and make a stab at how much money you'll
1:57
Speaker 1: be able to get out of the peasants and bid.
1:59
Speaker 2: For it absolute.
2:00
Speaker 3: But also the other problem is it means that the
2:02
Speaker 3: king is selling the right to collect taxes too cheaply.
2:06
Speaker 3: Usually he's desperate for money because he needed to pay soldiers,
2:09
Speaker 3: and that's for the kind of state borrowing side of things.
2:12
Speaker 3: The king likes heavily and selling annuities whose income stream
2:16
Speaker 3: is secured against future tax revenues, so he's kind of
2:19
Speaker 3: mortgaging the tax base into the future. Basically, they sell
2:23
Speaker 3: civil service jobs, so you know things like judges or
2:28
Speaker 3: you know various other kind of posts and office holdings,
2:31
Speaker 3: and those are hereditary and they come with various privileges.
2:35
Speaker 1: And again it has the same effect. You pay up
2:37
Speaker 1: front for the job, but then you collect the salary
2:39
Speaker 1: and definitely.
2:39
Speaker 3: Yeah, exactly, it's all somewhat desperate ways actually raise money.
2:43
Speaker 3: And the other thing is that, you know, he also
2:44
Speaker 3: depends on short term loans from the tax farmers secured
2:48
Speaker 3: against the tax revenues that they are going out to get,
2:51
Speaker 3: so it is, it's all it's very hand to mouth.
2:54
Speaker 3: And of course the other issue is obviously France is
2:57
Speaker 3: an absolute monarch case still so to a great extent,
3:00
Speaker 3: the king can technically default or restructure parts of this
3:05
Speaker 3: debt if it gets too much, and occasionally will do that,
3:09
Speaker 3: but the underlying system remains intact because basically, too many
3:12
Speaker 3: people benefit from the state's quo and they don't really
3:14
Speaker 3: want it to change. Long story shot, France has got
3:17
Speaker 3: a narrow tax base in the very haphazard system is
3:19
Speaker 3: sovereign borrowing, and that also means that funding the war
3:22
Speaker 3: effort has left it really short the real money, and
3:25
Speaker 3: so it's ended up issuing a lot of paper iouse
3:28
Speaker 3: which are called ba data in French, and it's been
3:31
Speaker 3: using them to pay off its military suppliers to pay
3:35
Speaker 3: the tax farmers some of the money it owes them,
3:37
Speaker 3: and pay the wages of the office holders. And so
3:40
Speaker 3: it means that by the time Law arrives in France,
3:42
Speaker 3: the place is a wash and something. It's not payper money,
3:45
Speaker 3: but it is basically io used. That kind of are traded,
3:48
Speaker 3: and they are sometimes used as a former money between people,
3:53
Speaker 3: but they trade at massive discounts to their face value.
3:56
Speaker 3: I mean, we're talking about around seventy percent. And that's
3:58
Speaker 3: because no one expects to actually get paid in full,
4:01
Speaker 3: because they don't trust the king to actually kind of
4:04
Speaker 3: give them the money. And so this is what Laws
4:06
Speaker 3: kind of like walking into when he lands in Paris
4:09
Speaker 3: and he rents a big house near the Louvery now,
4:16
Speaker 3: Law has been in Paris before. He'd pitched his land
4:19
Speaker 3: bank idea to King Louis the fourteenth and seventeen oh seven,
4:23
Speaker 3: and he'd been rejected, just as he was in Scotland
4:25
Speaker 3: and England. But by now louis very elderly, and in
4:28
Speaker 3: seventeen fifteen he dies. The good news for John Law
4:33
Speaker 3: is that Louis the fifteenth who's Louis the fourteenths grandson,
4:36
Speaker 3: and there is only five years old, so they needs
4:39
Speaker 3: someone to act as regent until he reaches his maturity.
4:43
Speaker 3: And that person turns out to be Philippe the second,
4:46
Speaker 3: who's the Duke of Orleans. And this is a guy
4:48
Speaker 3: that Law had befriended at the gaming tables on his
4:51
Speaker 3: previous trip to Paris, and Philippe is already quite receptive
4:55
Speaker 3: to Law's ideas. They're kind of kindred spirits in many ways.
4:58
Speaker 3: They both enjoy gambling, they're both interested in new ideas.
5:02
Speaker 3: But in the immediate term, the Duke has got two problems,
5:05
Speaker 3: and one is that the French finances on such a
5:07
Speaker 3: state that something just needs to be done about it immediately.
5:11
Speaker 3: And the other problem he's got is that the vested
5:13
Speaker 3: interests who kind of benefit from the states quo are
5:15
Speaker 3: not that keen on the idea of an outsider light
5:18
Speaker 3: Law coming in to shake things up. So in early
5:21
Speaker 3: seventeen sixty, my Law is still discussing establishing this bank,
5:25
Speaker 3: the Duke issues a massive crackdown on the richest people
5:28
Speaker 3: in France at that time.
5:29
Speaker 1: What do you mean by crackdown?
5:31
Speaker 3: It's almost as if h and Marc just calls them
5:33
Speaker 3: all in to do kind of a massive tax audit,
5:36
Speaker 3: and then if it looks as if you know you're
5:38
Speaker 3: havn't major money and exactly the way the King approves of,
5:42
Speaker 3: then you'll have to take a haircut.
5:44
Speaker 4: Some of them even go to jail.
5:45
Speaker 3: There's a few dead sentences passed, although none of those
5:48
Speaker 3: actually get carried out. Because the thing is they also
5:51
Speaker 3: realize that actually, we rely on these guys, so we
5:54
Speaker 3: need to put the frighteners on them.
5:56
Speaker 4: But we can't.
5:57
Speaker 1: It's going to say, surely of doing stuff like this
5:58
Speaker 1: cuts off the supply of new money, you go chuck
6:01
Speaker 1: people in jail, etcetera, etcetera. Maybe they go lend them
6:03
Speaker 1: money to the UK or Spain.
6:05
Speaker 2: Instead, exactly and so wisely.
6:07
Speaker 3: I mean this is interesting because John Law actually he
6:09
Speaker 3: says to the Duke, look, this is a bad idea
6:12
Speaker 3: because he knows it will result in a credit crunch.
6:14
Speaker 3: But the good thing from Law's point of view is
6:16
Speaker 3: that this basically puts a lot of people out of
6:18
Speaker 3: the picture who have been objected to the idea of
6:20
Speaker 3: setting up this kind of alternative way of financing this
6:24
Speaker 3: state or what they see as a threat, because in
6:27
Speaker 3: the end the Duke does give them the go ahead
6:29
Speaker 3: it's a much less ambitcious version of the project that
6:32
Speaker 3: he eventually wants to get into. But in May seventeen sixteen,
6:36
Speaker 3: that's when he sets up the General Bank or the
6:39
Speaker 3: Bonk General as the French call it, and this makes
6:42
Speaker 3: a small private bank in Paris. For context, you've got
6:46
Speaker 3: the kind of French colonomy. Prison economy is experiencing physical crisis.
6:51
Speaker 1: And you've got a credit crunch because nobody trust anybody anymore.
6:55
Speaker 1: They didn't want to lend money anymore. Some of them
6:57
Speaker 1: in jail they ever to take haircuts on their debt.
6:58
Speaker 1: They're all fit up the back to you the whole time,
7:01
Speaker 1: So everyone's just sitting on that cash exactly.
7:04
Speaker 3: And also the other thing is they key point pushing
7:07
Speaker 3: through currency devaluations. This is important to what happens next.
7:11
Speaker 3: So the time metal is money, you get bits of
7:15
Speaker 3: paper flying the boot at the end of the day.
7:17
Speaker 3: The reason that bits of paper have any value at
7:20
Speaker 3: all is because their promises back by gold or silver,
7:24
Speaker 3: So you get gold to have and copper for lower
7:25
Speaker 3: value coins. But the coins themselves, they are actually denominated
7:30
Speaker 3: in the unit of account. So like in Britain, we've
7:32
Speaker 3: got the pound, sterling, there isn't actually a gold coin
7:36
Speaker 3: called the pound sterling, but that's what the kind of
7:39
Speaker 3: coins are denominated in. So in France it's the liverra.
7:43
Speaker 3: So this is what contracts in wages and debts are
7:46
Speaker 3: denominated in. So if you are working for someone or
7:51
Speaker 3: you owe someone money, then they will be described in
7:54
Speaker 3: a certain amount of levra. But that's how they debase
7:56
Speaker 3: the currency. Take an example from Longtowan Murphy's book on
8:04
Speaker 3: John Law. So let's say you get ten gold coins
8:06
Speaker 3: in seventeen fifteen. That's ten louis door. They're worth one
8:10
Speaker 3: hundred and forty livres in total, so fourteen livre each.
8:15
Speaker 3: So you now take them in the nearest mint, and
8:16
Speaker 3: this is how the revaluation happens. The mint stamps them,
8:20
Speaker 3: so each of these coins is now a louis d'Or
8:22
Speaker 3: reform a, but they're now technically worth twenty livre each.
8:26
Speaker 3: So you came in with one hundred and forty livra,
8:29
Speaker 3: you go out again with one hundred and sixty livre
8:31
Speaker 3: because they give you a bit extra to make it
8:33
Speaker 3: worth your.
8:33
Speaker 4: While changing them.
8:34
Speaker 3: But the things you came in with ten gold coins,
8:36
Speaker 3: and you're actually only going out with eight, so it
8:39
Speaker 3: looks as if you're getting more money you came in with,
8:41
Speaker 3: but in fact the gold itself has been devalued in
8:44
Speaker 3: LEVRA terms.
8:50
Speaker 1: So why would you take your money in? Well, take
8:53
Speaker 1: your money in, You take your money in, you give
8:55
Speaker 1: it to them, they give you back list. It's like
8:57
Speaker 1: beings like being Paya and.
8:58
Speaker 2: The UK these days, exactly exactly.
9:01
Speaker 3: I mean it's partly because you have to kind of legally,
9:04
Speaker 3: but of course what.
9:05
Speaker 1: Money you have under your bed, in your safe, well.
9:08
Speaker 3: There's an awful lot of informers. I mean, this is
9:10
Speaker 3: the other thing. It's it's the kind of different, kind
9:13
Speaker 3: of and quite nasty world. But the things but you're right,
9:15
Speaker 3: the more aggressive the kind of recoinage is, the more
9:19
Speaker 3: people avoid it. So the things people do, things like
9:21
Speaker 3: they smuggle their money out to be stamped in private
9:23
Speaker 3: workshops in Holland. Some of them even just send out
9:26
Speaker 3: the country to get melted down and get the money
9:28
Speaker 3: from that. So basically means that money is kind of
9:30
Speaker 3: flooding out the country or being hidden in people's basements.
9:33
Speaker 3: So again that contributes to this credit crunch as well.
9:36
Speaker 3: But as part of the reason that the General Bank
9:39
Speaker 3: actually ends up being quite successful. Not a listed company,
9:43
Speaker 3: but it does issue shares and they form the bank's capital,
9:47
Speaker 3: and John Law himself has about a quarter of that,
9:49
Speaker 3: so he stakes a lot of money on the line.
9:52
Speaker 3: In total, it's six million livre is the capital of
9:56
Speaker 3: the bank, and he's subscribed for a quarter of that
10:00
Speaker 3: gives it he's backing as well. It's not clear how
10:03
Speaker 3: much he personally subscribed for, but it was probably a fair chunk,
10:06
Speaker 3: and to keep the region happy, a lot of the
10:09
Speaker 3: financiers who he's been cracking down on also chip in money.
10:13
Speaker 3: The other reason people are happy to subscribe for the shares,
10:15
Speaker 3: of course, is that they can swap their heavily discounted
10:17
Speaker 3: state I'll use the BA data for shares in the
10:21
Speaker 3: bank at full face value. So the initial capital base
10:24
Speaker 3: of the bank is relatively small, but despite that, once
10:27
Speaker 3: it takes off, is pretty successful at reinvigorating trade in
10:31
Speaker 3: a credit crunch stricken Paris. For a start, he's offering
10:35
Speaker 3: banking services and making loans at much cheaper rates than
10:39
Speaker 3: anyone else. But fundamentally what people really like is laws
10:43
Speaker 3: bank notes. You go in, you put your money in,
10:47
Speaker 3: and you get a banknote. Back, But the bank notes
10:51
Speaker 3: are written for basically the amount is silver that you
10:54
Speaker 3: put in rather than the lever value.
10:58
Speaker 4: Of the silver.
11:00
Speaker 3: If you put ten silver coins in and get a
11:02
Speaker 3: bank note back from Law's bank, you can go in
11:05
Speaker 3: a year later, six months later, and even if the
11:09
Speaker 3: coin is just being devalued, you will still get ten
11:12
Speaker 3: silver coins back.
11:13
Speaker 1: Okay, so it's better than the other money.
11:16
Speaker 2: Why back?
11:17
Speaker 3: I find this really fascinating, quite ironic. He starts off
11:21
Speaker 3: by creating paper money that is harder than the metal
11:24
Speaker 3: money that.
11:25
Speaker 4: Is in circulation.
11:27
Speaker 3: Amazing, so people start to feel confidence because basically he
11:31
Speaker 3: restores sound money in Paris. By doing this, it also
11:37
Speaker 3: makes its initial shareholders very wealthy. The bank ends up
11:40
Speaker 3: running the reserve ratio of about twenty five percent, and
11:42
Speaker 3: the writer James Bucking estimates it could have been making
11:45
Speaker 3: about a million leave a year writing loans at four
11:48
Speaker 3: percent interest. So as a result, when the shareholders a
11:51
Speaker 3: letter bought out by the regent, which we'll get to
11:53
Speaker 3: in a minute, they've made six times their money.
11:57
Speaker 1: Nice, Okay, it's worth doing. That's an easier way to
12:01
Speaker 1: make money than setting up a par of gaming tables.
12:10
Speaker 3: Chapter five, The buff of the Mississippi Company. Okay, so
12:18
Speaker 3: by early seventeen seventeen, the General Bank has helped alleviate
12:22
Speaker 3: the immediate credit crunch in France. But it's just the
12:25
Speaker 3: beginning the laws plans. Now he's can attackled the national
12:28
Speaker 3: debt and all those dodgy IO used the BA data
12:31
Speaker 3: that are still flying around, and that's where the next
12:34
Speaker 3: part of the scheme comes in.
12:35
Speaker 1: All right, Okay, don This is a bit I always
12:36
Speaker 1: find incredibly confusing. If I'm really honest, it's tough for
12:39
Speaker 1: me to see how we get from this relatively small
12:42
Speaker 1: bank suddenly taking on the national debt and being this
12:46
Speaker 1: huge company.
12:47
Speaker 3: Yes, I'm not surprised. That is quite confusing, but we'll
12:50
Speaker 3: do our best to talk you too how it does
12:53
Speaker 3: that over the course of roughly eighteen ones to two years.
12:59
Speaker 3: So we're starting Louisiana. I mean, this is not Louisiana
13:02
Speaker 3: as we know it today. Instead, it's in the area
13:05
Speaker 3: that encompasses basically like half the landmass of the present
13:08
Speaker 3: day United States. And what had happened is French fur
13:11
Speaker 3: traders from Canadian colonies had claimed it for King Louis
13:14
Speaker 3: in the late sixteen hundreds, and he'd established a small
13:17
Speaker 3: house post there. So about seventeen seventeen this year that
13:21
Speaker 3: we're talking about, the right to develop the colony is
13:24
Speaker 3: owned by one of the big French financiers, one of
13:26
Speaker 3: the tax farmers basically. But when he's caught up and
13:30
Speaker 3: the tax crackdown that we mentioned earlier, he gives back
13:33
Speaker 3: the concession as part payment for his overdue taxes basically,
13:38
Speaker 3: and it's at that point the Law says, well, look,
13:40
Speaker 3: I'll take over this concession and then what we'll do
13:44
Speaker 3: is we'll set up a company, will issue shares, will
13:47
Speaker 3: allow people to buy the shares with the BEA data,
13:51
Speaker 3: and that will help us to get rid of that
13:53
Speaker 3: and consolidate that debt. So basically Law wants to clean
13:57
Speaker 3: up the public finances.
14:01
Speaker 1: Okay, so he must get rid of the outstanding bills.
14:04
Speaker 1: So he buys this trade monopoly and says, you can
14:10
Speaker 1: have shares in exchange for the bills. Yes, but then
14:14
Speaker 1: he has all the bills and everybody else has the shares.
14:19
Speaker 1: Bills are off the market, but they still exists.
14:22
Speaker 3: I know. This is the clever bit. The deal is
14:24
Speaker 3: that when the bills are swapped for the shares, the
14:27
Speaker 3: bills get destroyed then return the King will pay the
14:32
Speaker 3: company of perpetual annuity, which is backed by specific tax revenues.
14:36
Speaker 3: Is actually a new stamp, its new stamp duty that
14:38
Speaker 3: they introduced, believe it or not, which will we use
14:40
Speaker 3: to find a dividend payment of four percent a year.
14:44
Speaker 3: So what's happening is the shareholder is getting to swap
14:48
Speaker 3: a rubbish bit of paper I owe you from the
14:51
Speaker 3: King that they don't have a great daily confidence will
14:54
Speaker 3: get repaid. And there's getting instead face value swapped rather
14:59
Speaker 3: than heavily discounted. They're getting a stake in a company
15:02
Speaker 3: there's promising to pay them four percent a year anyway,
15:06
Speaker 3: plus the added potential for you know, what happens we
15:09
Speaker 3: trade and what happens with the colony in the future.
15:12
Speaker 3: So he's getting the equity steak.
15:14
Speaker 1: And you got a stream of the income. Yeah, and
15:16
Speaker 1: you get the potential for future upside exactly.
15:19
Speaker 3: And all you're giving up is an IOU that he
15:21
Speaker 3: probably didn't expect to get paid anyway. And the king, well,
15:25
Speaker 3: as the king goes, he's getting to retire loads of
15:28
Speaker 3: independent kind of short term IOUs that are road to
15:31
Speaker 3: thousands of individuals for one long term debt that is
15:36
Speaker 3: owed to just one company. Does that kind of make
15:40
Speaker 3: some sunds?
15:41
Speaker 1: Yes, it helps a lot, thank you.
15:46
Speaker 3: So he's one to swop the French national debt for
15:49
Speaker 3: equity in a colonial exploration company. He's not just making
15:55
Speaker 3: this up. The company does exist and over the next
15:59
Speaker 3: couple of years, the invest in ships, they send colonists
16:03
Speaker 3: off to Louisiana. Gradually he also takes over more parts
16:09
Speaker 3: of the state, so he gets the monopoly on the
16:12
Speaker 3: tobacco trade for example. Basically the Mississippi Company does manage
16:16
Speaker 3: to wash its face.
16:18
Speaker 4: Over this time.
16:19
Speaker 3: It makes enough money to pay dividends out to its shareholders,
16:24
Speaker 3: so it's came people happy and the money is coming
16:26
Speaker 3: in from the tobacco trade and from kind of various
16:29
Speaker 3: other bits of business that it does. But setting up
16:32
Speaker 3: a colony is very difficult, in time consuming and capital intensive.
16:37
Speaker 3: And the truth is there's lots of fairly grim stories
16:40
Speaker 3: that come out here. The initial settlers are largely poor
16:43
Speaker 3: and desperate people hoping for a better life. But the
16:46
Speaker 3: longer run is it drags on and it's not obviously
16:49
Speaker 3: turning into a massively prosperous area. You get more and
16:53
Speaker 3: more people being just sent out there, so prisoners being
16:56
Speaker 3: sent out. There are stories of convicts and prostitutes kind
16:59
Speaker 3: of getting married on the talk and then sent out. Overall,
17:02
Speaker 3: there is no point in which Louisiana is economically significant
17:06
Speaker 3: to France, like even many years into the future. So
17:10
Speaker 3: while it's definitely a real project, I think it is
17:12
Speaker 3: also fair to say that it mostly plays a role
17:14
Speaker 3: as a carrot to attract people to swap their government
17:17
Speaker 3: debt for equity and I kind of stake in a
17:20
Speaker 3: blue Sky's company.
17:22
Speaker 4: So it's not.
17:23
Speaker 3: Successful immediately, and then by December seventeen eighteen, what harms
17:29
Speaker 3: is that France ends.
17:30
Speaker 4: Up going back to war with Spain again.
17:33
Speaker 3: This is when Law has got his opportunity to change
17:36
Speaker 3: the General Bank to the Royal Bank, so basically it
17:40
Speaker 3: becomes the French Central Bank. Effectively, the other shareholders are
17:45
Speaker 3: bought out, so this is the point at which they
17:47
Speaker 3: make six times of money. The king now owns the bank,
17:51
Speaker 3: and the important thing is that the Royal Bank can.
17:55
Speaker 1: Issue How does the king own the bank?
18:00
Speaker 3: Basically, the other shareholders are bought out by Law and
18:02
Speaker 3: the Law then sells the bank to the regent.
18:05
Speaker 1: Does he do that because he's got something greater in mind.
18:08
Speaker 3: Is useful to understand that he really does want to
18:13
Speaker 3: see his system take off. He is minted himself, so
18:17
Speaker 3: at this point he owns a lot of estates in France,
18:21
Speaker 3: he has plenty of money, and he's thoroughly embedded with
18:24
Speaker 3: the monarchy.
18:26
Speaker 4: Anyway.
18:27
Speaker 3: Basically, the whole driving force throughout his intellectual career is
18:34
Speaker 3: to sever money and credit from gold, because he doesn't
18:40
Speaker 3: see why a country's entire economy and money supply should
18:46
Speaker 3: be subject to what he sees is the vagaries of
18:49
Speaker 3: precious metal supply. And that's one reason why in his
18:53
Speaker 3: early proposals he wants to back money with land, because
18:58
Speaker 3: a land can't leave your country and be He kind
19:01
Speaker 3: of sees it as the source of all the productive
19:05
Speaker 3: work an economy. But by this point he's going beyond that,
19:09
Speaker 3: and he said, well, actually there's a lot of impracticalities
19:11
Speaker 3: to the land, But why do we need anything back
19:15
Speaker 3: in money at all? We can run an economy basically
19:19
Speaker 3: just on credit and on paper. As long as there's
19:23
Speaker 3: not too much paper and too little stuff, then the
19:25
Speaker 3: credit and the paper will stimulate activity.
19:28
Speaker 1: So the king and the bank John Law basically controls
19:31
Speaker 1: money supply. Yeah, and we're off on as you put it,
19:36
Speaker 1: the roads were fully fair currency bye by gold.
19:40
Speaker 3: And this is what's so revolutionary about laws. Thinking paper
19:44
Speaker 3: money is self isn't new, But the idea that it's
19:47
Speaker 3: the state that you should control and manage the money
19:50
Speaker 3: supply rather than being beholden to underlying the availability of
19:54
Speaker 3: gold and precious metals and specie is much more radical.
19:58
Speaker 3: I mean in the way he's kind of enter suppating,
20:00
Speaker 3: like you know, two hundred years ahead of time. John
20:03
Speaker 3: Maynard Kensey's view that the gold standard is a barbarous
20:06
Speaker 3: relic that just gets in the way of efficient economic management.
20:26
Speaker 3: Chapter six inflating the bubble. So the missis Zippi Company
20:34
Speaker 3: has been gradually expanding, but May seventeen nineteen's when things
20:38
Speaker 3: really start getting going. So lawd decays to buy out
20:41
Speaker 3: the other trading companies in France, and his end goal
20:44
Speaker 3: is to have the Mississippi Company own everything, every monopoly,
20:48
Speaker 3: every trading privilege, control of the money supply, and essentially
20:52
Speaker 3: basically most other state functions all under one roof. So
20:56
Speaker 3: the first batch in missus Zippy shares is issued at
20:59
Speaker 3: five hundred lire each and the price hasn't changed much
21:02
Speaker 3: since then. These are known as Lea Mayer or the Mothers.
21:06
Speaker 3: So the Law announces a new issue known as lay
21:09
Speaker 3: Fee or the Daughters, and this is to raise funds
21:12
Speaker 3: to buy the trading companies and pay for some more ships.
21:15
Speaker 3: But what he does is he allows people who buy
21:17
Speaker 3: these and installments so you only have to put ten
21:19
Speaker 3: percent down. In other words, you can leverage up your bets.
21:23
Speaker 3: He also underwrites the share issue himself to post confidence
21:26
Speaker 3: in it, and as a result, it actually ends up
21:29
Speaker 3: being oversubscribed. That's what they then do is they actually
21:32
Speaker 3: restrict the initial offering to the people who already own
21:36
Speaker 3: shares in others, people who already own the mothers, so
21:40
Speaker 3: they're the ones that can get in on the ground.
21:42
Speaker 3: And people start to get a bit more excited about
21:44
Speaker 3: all this, partly because there's a wider bubble going on
21:47
Speaker 3: people are getting excited about stocks in general, but also
21:50
Speaker 3: because Law has been printing lots of banknotes and people
21:53
Speaker 3: need somebody to.
21:54
Speaker 4: Put that money.
21:55
Speaker 3: And so as the share price starts to go up,
21:57
Speaker 3: so it goes up from about five hundred to six hundred,
22:00
Speaker 3: and then in June. Some months later they kind of
22:03
Speaker 3: they've gone up further, and by mid July they're up
22:06
Speaker 3: to one thousand and all this time he's issuing kind
22:10
Speaker 3: of extra notes and this actually continues throughout that year,
22:14
Speaker 3: and that you've got the mares, then you've got the fear.
22:16
Speaker 3: Then you end up getting the issues called the Legrong fear.
22:20
Speaker 3: And it's all very profitable because people can also sell
22:23
Speaker 3: their rights to.
22:24
Speaker 1: These, They can sell the right to buy them.
22:26
Speaker 4: They can sell the right to buy them as.
22:28
Speaker 1: They're effectively selling options.
22:30
Speaker 3: Exactly, so you're selling options as well, and so people
22:33
Speaker 3: getting more and more excited about getting in on the
22:37
Speaker 3: ground with this because the people who owned the mares
22:40
Speaker 3: have now seen the value of those shares kind of
22:43
Speaker 3: maybe doubled or more in the space about three months.
22:47
Speaker 3: The big kind of turning point is when in August
22:51
Speaker 3: he says, right, we're going to raise one point two
22:54
Speaker 3: billion lavor and we're going to buy the whole national debt.
22:59
Speaker 3: We're going to buy the outstanding be A data, we're
23:03
Speaker 3: going to get ready the annuities. Ideally, we're going to
23:07
Speaker 3: get ready the jobs for the boys. Basically, they kind
23:10
Speaker 3: of hang us on roles that are in the Royal
23:14
Speaker 3: Court and also take over tax collection. So it's going
23:19
Speaker 3: to buy the right which is currently private with someone else,
23:24
Speaker 3: is going to buy that right off the king, the
23:26
Speaker 3: right to collect tax, so basically putting everything under the
23:32
Speaker 3: Mississippi Company, from the money supply to tax collection to
23:37
Speaker 3: managing the national debt.
23:39
Speaker 1: Okay, so we've got the beginning of a bubble going here. Yeah,
23:43
Speaker 1: shares going up a lot, Everyone's beginning to get excited. Yeah,
23:48
Speaker 1: shares going up in other countries to all over the place.
23:51
Speaker 3: Yes, And so this is proably when the kind of
23:57
Speaker 3: real kind of excitement takes off. Chapter seven, Fun and
24:07
Speaker 3: the rue Can Campois.
24:13
Speaker 4: This is where it all starts to go a bit nuts.
24:17
Speaker 3: And most of the kind of stories from around this
24:19
Speaker 3: time are focused around the rue Can camp Follo, which
24:22
Speaker 3: is a like exchange alley in London. It's where everyone
24:26
Speaker 3: goes to trade shares. It's kind of rowdy, it's kind
24:31
Speaker 3: of messy. It's very much all the talk of the town.
24:35
Speaker 3: I guess it's like crypto boys. Maybe there's one clerk
24:38
Speaker 3: at the British embassy who says that the streets just
24:41
Speaker 3: crowded from early morning to late at night with princes
24:44
Speaker 3: and princesses and dukes and peers and duchesses in the world.
24:48
Speaker 4: All that is great.
24:49
Speaker 3: In France, they cell estates and they point jewels to
24:51
Speaker 3: purchase Mississippi. All the news of this town is stopped jobbing.
24:55
Speaker 3: The French heads seemed turned to nothing else at present.
25:00
Speaker 3: But the other thing that people are noticing is that
25:02
Speaker 3: prices are going up, so rising land prices, and this
25:06
Speaker 3: is because obviously the money supply is exploding as well.
25:10
Speaker 3: There's a local duke who notes that rising prices are
25:13
Speaker 3: encouraging agricultural workers to cultivate land hasn't previously been farmed,
25:18
Speaker 3: so it's becoming worth people's wild to go out and
25:22
Speaker 3: work on the harder land because the price of it
25:25
Speaker 3: is going up. I mean of the share price keeps
25:29
Speaker 3: going up and up and up, like for example, in
25:32
Speaker 3: in October, the highest six thousand, five hundred and the
25:34
Speaker 3: lowest four thousand, six hundred. It's quite volatile. In November
25:38
Speaker 3: there's a higher nine thousand, eight hundred and the lowest
25:41
Speaker 3: six thousand, seven hundred.
25:42
Speaker 1: It's really moving.
25:44
Speaker 3: Yeah, And also people are coming in as well. So
25:47
Speaker 3: between November eighteenth and the twenty second, the share price
25:50
Speaker 3: surduced from seven thousand, two fifty to nine thousand because
25:53
Speaker 3: one British invoice is a great number of people came
25:56
Speaker 3: from the provinces and they all all arrived at once
25:59
Speaker 3: in the street on Saturday last.
26:01
Speaker 4: So basically there's are.
26:02
Speaker 3: Many people are coming weighed buying the shares. They're able
26:07
Speaker 3: to do it in leverage, and you're also able to
26:09
Speaker 3: do it via futures. So I kind of type of
26:13
Speaker 3: futures market has been set up where traders are basically
26:16
Speaker 3: saying we'll take missus Zippy stock off your hands in
26:21
Speaker 3: March next year, so March seventeen twenty for twelve thousand,
26:25
Speaker 3: five hundred liv. So these traders are better in March,
26:29
Speaker 3: the share price will have risen from nine thousand to
26:32
Speaker 3: obviously more than twelve thousand, five hundred, because otherwise they
26:35
Speaker 3: wouldn't be offering twelve and a half thousand for it.
26:38
Speaker 3: So you're seeing actually a lot of kind of financial
26:43
Speaker 3: innovation alongside.
26:45
Speaker 1: Yeah, I'm always nervous of the phrase financial innovation, jon
26:48
Speaker 1: as you know, and here it comes right And one
26:53
Speaker 1: of the things you say this is when we first
26:54
Speaker 1: get the word millionaires, it's used.
26:57
Speaker 3: Or it appears to have been used first in the
26:58
Speaker 3: kind of the same local newspaper, and Voltaire uses the
27:02
Speaker 3: world as well. Basically says, if you all lost your
27:05
Speaker 3: minds the taught company Paris, and the talk is of
27:08
Speaker 3: nothing but millions.
27:09
Speaker 1: Okay, so we've got a millionaires. They're all over the place.
27:12
Speaker 1: This is temporarily good.
27:15
Speaker 4: Really good.
27:16
Speaker 3: But obviously he's driving up prices as well. Retail prices
27:19
Speaker 3: are going up, and that's not ideal for people who
27:21
Speaker 3: haven't been speculating in the shares. But I mean, obviously
27:24
Speaker 3: Law is kind of enjoying himself. He's popular, he's kind
27:28
Speaker 3: of widely liked. In January seventeen twenty, he's made controller
27:33
Speaker 3: generality phenoes. So basically he's made the equivalent of the
27:37
Speaker 3: Prime Minister, Chancellor, Exchequer kind of rolled into one. So
27:41
Speaker 3: I think, so this is kind of the magazine cover moment.
27:43
Speaker 3: He's basically the most powerful man in friends. It's certainly
27:46
Speaker 3: one of the richest private citizens in Europe and there
27:49
Speaker 3: for the world. And so the only way is down.
27:55
Speaker 3: Chapter eight laws fall from Grace for the first quarter
28:03
Speaker 3: of seventeen twenty. It seems as if it's still rumbling along.
28:07
Speaker 3: This is the point at which he starts to demonetize
28:12
Speaker 3: gold and silver. So if you're spending over a certain
28:16
Speaker 3: amount of money, it has to be in bank notes,
28:19
Speaker 3: not in gold or silver. He wants to stop gold
28:23
Speaker 3: and silver being taking a basis of the kind of
28:26
Speaker 3: money system people are, okay, we're trading in their golden
28:30
Speaker 3: silver at first, much for the same reason that they
28:32
Speaker 3: wear whenever he originally set up the General Bank, because
28:36
Speaker 3: there's coinfidence in paper money, and there's also a sense
28:39
Speaker 3: that it's more immune to devaluation than coinage. But equally
28:45
Speaker 3: a lot of people have now made quite a bit
28:47
Speaker 3: of profit. People are noticing prices generally going up, and
28:52
Speaker 3: Law himself, I think is keenly aware that he's printed
28:55
Speaker 3: too much money. I think the first point at which
28:58
Speaker 3: he starts to panic is is a bit later in January,
29:02
Speaker 3: and one thing that he's doing he's watching the futures market,
29:06
Speaker 3: and at this point the share price shares peaks at
29:10
Speaker 3: ten one hundred livre. So Law, because he is worried
29:16
Speaker 3: about the a the extent of the speculation, which is
29:19
Speaker 3: quite disruptive and rowdy, also about the money supply, wants
29:24
Speaker 3: to flood the futures market with a different kind of
29:27
Speaker 3: contract called a prime, and this is basically a futures
29:31
Speaker 3: contract that says, in March, you'll be able to buy
29:34
Speaker 3: Missus Ippy shares for ten thousand round thirteen thousand. So
29:38
Speaker 3: the idea here is he's basically trying to encourage people
29:40
Speaker 3: to realize that the shares aren't going to go any
29:43
Speaker 3: higher and they should stop bidding them up. But what
29:47
Speaker 3: happens instead is that people actually buy the primes and
29:52
Speaker 3: then start to pay a premium for the primes because
29:54
Speaker 3: they're like, oh, wait a minute, this gives me an
29:56
Speaker 3: option buy the shares for much cheaper than they're definitely
30:00
Speaker 3: going to pay in three months time, and so they
30:03
Speaker 3: start to do that, and not only that, they actually
30:05
Speaker 3: start to sell their underlying shares to buy the derivatives.
30:09
Speaker 3: So that actually puts pressure on the share price of
30:12
Speaker 3: the Mississippi Company, pushes it down, while at the same
30:15
Speaker 3: time people are paying well over the odds, like two
30:17
Speaker 3: and three hundred percent of the price of the primes
30:20
Speaker 3: to kind of get the option that kind of buying.
30:22
Speaker 4: These shares in the future.
30:23
Speaker 3: So that's one thing that kind of starts to I
30:27
Speaker 3: guess show that a he's rattled and start to actually
30:30
Speaker 3: rattle the wider market, and then the next month options
30:35
Speaker 3: trading is banned. Law has always been during his rise
30:41
Speaker 3: quite pro the free market, so he's objected to various
30:45
Speaker 3: coercive measures in the past, but now that he is
30:49
Speaker 3: realizing that his system make any trouble, he's not remotely
30:52
Speaker 3: above using coercion or attempting to use coercion to get
30:56
Speaker 3: people to do what he wants and get it to work.
31:00
Speaker 1: Don't like him anymore, all they'll be honest, he was always.
31:02
Speaker 4: A murder Yeah, he's obvious. I mean to be fun.
31:05
Speaker 2: That probably was self defense, standing up for my man.
31:07
Speaker 4: Yeah.
31:08
Speaker 3: And then so in February again they also the attempts
31:12
Speaker 3: to suppress specie get much more aggressive, and so the
31:16
Speaker 3: metal coin needs just devalued again and to other to
31:19
Speaker 3: encourage people to swap their specie, their golden silver for
31:22
Speaker 3: paper notes. And then he bands diamonds and jewelry stop
31:26
Speaker 3: people from turning their their gains into metal. But the
31:29
Speaker 3: great thing is there's a loophole for church ornaments. So
31:32
Speaker 3: suddenly golden silver crucifixes just become really popular. They start
31:36
Speaker 3: paying people big rewards to inform on their neighbors and
31:39
Speaker 3: their friends. But obviously this all makes people a bit
31:43
Speaker 3: more paranoid about what's going on, and so they kind
31:46
Speaker 3: of like they want to convert their shares into gold.
31:49
Speaker 3: They want to basically get their paper money turned into
31:52
Speaker 3: something else.
31:53
Speaker 1: I feel like that, John, we all felt like that.
31:56
Speaker 4: We feel like that now.
31:57
Speaker 3: But really the big clanger, and this is where he
32:00
Speaker 3: really does seem you have either not thought it through
32:04
Speaker 3: or just just not really realized what was going to happen.
32:07
Speaker 3: So in May he issues and order. So the Missus
32:12
Speaker 3: Zippy shares are training at about nine thousand lever and
32:15
Speaker 3: he says, right, there's too much money floating about Frans.
32:20
Speaker 3: We need to rain in the money supply. What we're
32:23
Speaker 3: going to do is we're going to have to value
32:24
Speaker 3: the shares. The shares are going to be fixed, the
32:26
Speaker 3: ships are can be fixed at five thousand levs, half
32:29
Speaker 3: of what it is just now. I said, But it's
32:31
Speaker 3: okay because the banknotes are going to be reduced in
32:33
Speaker 3: value by the same amount, so you still you still
32:36
Speaker 3: get the same relative amount. So this is really just
32:41
Speaker 3: an adjustment. And of course everybody goes ballistic because there's
32:45
Speaker 3: people that have done things like soldier houses to you know,
32:49
Speaker 3: buy the missus Ippi shares. So he's basically announced a
32:53
Speaker 3: massively deflationary measure that sends everyone into a panic, which
32:59
Speaker 3: is understandable because he's single handedly ruining them. So this
33:05
Speaker 3: is the point where he really gets ato serious trouble
33:09
Speaker 3: where the regent, because the other issue is that the
33:12
Speaker 3: people who don't like what he's doing, you know, the
33:16
Speaker 3: people who kind of live on annuities and on jobs
33:19
Speaker 3: for the boys, are starting to get the Regent's here again,
33:24
Speaker 3: partly because the Regent is kind of getting a little
33:26
Speaker 3: bit nervous about what's going on and.
33:29
Speaker 1: Feeling John Laura is pretty busy and doesn't have the
33:33
Speaker 1: suck up time he had previously.
33:35
Speaker 2: Yeah, I there's that too.
33:36
Speaker 3: He's forced to reverse it, and then he's actually put
33:39
Speaker 3: under house arrest for a short period of time, and
33:42
Speaker 3: it looks as if he might end up in the
33:43
Speaker 3: bas tale.
33:45
Speaker 2: But what basically happens is that because no one else.
33:51
Speaker 3: Knows how the system works, the Regent decides to get
33:55
Speaker 3: them back in. But at this point it's very much
33:59
Speaker 3: a case of he's no longer in charge. It's about
34:05
Speaker 3: how do we unwind this in the most in the
34:08
Speaker 3: best way without kind of destroying the entire economy. This
34:12
Speaker 3: is when things actually start to go from quite bad
34:15
Speaker 3: to worse. Plague breaks out in Marseille, which is one
34:18
Speaker 3: of France's most important port cities. It's absolutely devastating. Tens
34:22
Speaker 3: of thousands of people die. It was extremely bad for
34:25
Speaker 3: the French economy, and it also adds to the laws
34:28
Speaker 3: on popularity because the problem is that in that circumstance,
34:32
Speaker 3: when you get a quantity quarantined plague city. Although he
34:36
Speaker 3: sends something like one hundred thousand paper lever to help,
34:38
Speaker 3: nobody wants to paper money. They all want specially they
34:41
Speaker 3: want gold and silver because in extremists that's the only
34:44
Speaker 3: way that you can pay for supplies the kind of
34:48
Speaker 3: in this necessities of life. So he's kind of ends
34:51
Speaker 3: up almost getting the blame not so much for the plague,
34:54
Speaker 3: but for one of the reasons of why it ends
34:56
Speaker 3: up being just as bad as it is, and then
34:59
Speaker 3: real over the next six months, he's kind of fighting
35:03
Speaker 3: a rear guard action.
35:05
Speaker 4: The share price keeps falling.
35:08
Speaker 3: His kind of rivals in the core demand the return
35:12
Speaker 3: of annuities, so the king starts to raise money by
35:16
Speaker 3: giving out annuities again. The banknotes are gradually demonetized. Gold
35:22
Speaker 3: and silver make a comeback, and basically by December, most
35:28
Speaker 3: of his system has been unwound, despite his kind of
35:32
Speaker 3: best efforts to try and slow the process or thinking
35:35
Speaker 3: different ways to kind of reintroduce it, and he has
35:40
Speaker 3: only become more and more unpopular. His carriage is attacked
35:43
Speaker 3: in the street more than once. So yeah, so basically
35:46
Speaker 3: he's extremely unpopular and it just gets to the point
35:49
Speaker 3: where his presence in France is no longer sustainable. In December,
35:55
Speaker 3: he turns round to the region, offers his resignation, offers
35:59
Speaker 3: to leave the country, and there are a lot of
36:01
Speaker 3: people saying, look, you should arrest this guy, you should
36:04
Speaker 3: buying him up. He really he's ruined the country, but
36:06
Speaker 3: he's still got close friends in the court, and also
36:10
Speaker 3: at the end of the day, the region is up
36:11
Speaker 3: to his eyeballs in the system as well. The Regent's
36:14
Speaker 3: kind of made money from it. He's the one that's
36:16
Speaker 3: put all this faith in Law. So basically they allow
36:21
Speaker 3: Law to leave along Bay's son William. Chapter nine the aftermath.
36:47
Speaker 3: So that's the story of Law is ignominious leaving a France,
36:50
Speaker 3: but it's not actually the end of his story. He
36:52
Speaker 3: goes to Venice for a little while and then he
36:54
Speaker 3: heads to London. He's got friends there that can support
36:57
Speaker 3: him financially, and with this point he's also received an
37:00
Speaker 3: official pardon from King George. And he's still hoping he
37:04
Speaker 3: gets the called to France and reinstated, and also obviously
37:07
Speaker 3: to recover at least some of the wealth that he's
37:09
Speaker 3: left there. But meanwhile, back in France, the state is
37:14
Speaker 3: getting to work on unwinding the system. It embarks on
37:17
Speaker 3: something that becomes known as the Visa of seventeen twenty one.
37:21
Speaker 3: Every security issued by law, from bank notes to his
37:24
Speaker 3: shares has to be submitted. They basically annaudit, and then
37:28
Speaker 3: he gets stamped or a visa put on it saying
37:31
Speaker 3: how much you're actually going to get back. You get
37:34
Speaker 3: a haircut according to in theory, how honestly your money
37:39
Speaker 3: was earned. It's a form of very lucrative virtue signal
37:41
Speaker 3: and for the state, but really in practice what it
37:44
Speaker 3: means is that the kind of deserving widows and the
37:47
Speaker 3: nobility practically get all the money, whereas kind of like
37:50
Speaker 3: uncouth common speculators get kind of ninety five percent haircuts
37:54
Speaker 3: and are ruined end up cutting. I think it's about
37:57
Speaker 3: two point two billion lever of outstanding pay down to
38:00
Speaker 3: one point seven billion. And meanwhile, the Mississippi Company's taken
38:04
Speaker 3: into administration and it's eventually actually found to be a
38:07
Speaker 3: going concern.
38:08
Speaker 4: It's not it's been run.
38:10
Speaker 3: Acceptably, but it's which is focused from the Louisiana colonization
38:15
Speaker 3: to just trading with Asia, which.
38:16
Speaker 4: Is more profitable, and who am is it now?
38:19
Speaker 3: The original shareholders do get it back, but obviously with
38:23
Speaker 3: a massive haircut taken. I think it takes about three
38:26
Speaker 3: or four years for the administration process to go through.
38:29
Speaker 3: Not sure what its lifespan is, but it does end
38:32
Speaker 3: up being a going concern for a while. But in
38:34
Speaker 3: the immediate aftermath, law is actually still hoping to return
38:37
Speaker 3: to France, and at one point in kind of like
38:40
Speaker 3: seventeen twenty.
38:41
Speaker 1: Does not give up. This man, does he?
38:43
Speaker 3: He doesn't give up, and it looks as if he
38:46
Speaker 3: might actually get back. But then the Duke of Orleans
38:50
Speaker 3: dies in seventeen twenty three, and that's that well, and
38:54
Speaker 3: that's that the young king is now of age.
38:57
Speaker 4: He takes over and basically there's no more.
39:00
Speaker 3: That's it. Kind of Law's role as a I guess
39:04
Speaker 3: a kind of financial wiz is then over. It ends
39:08
Speaker 3: up back in Venice with his son still raised to
39:11
Speaker 3: cat and they still write to each other. He's still
39:14
Speaker 3: quite a successful gambler, but it really is, you know,
39:16
Speaker 3: it's a massive fault.
39:17
Speaker 1: At his peak, it was kind of the Elon Musk
39:19
Speaker 1: of the seventeen hundreds. I think, insanely intelligent, hugely innovative,
39:27
Speaker 1: massively creative, intense relationship with the leader, this kind of stuff.
39:33
Speaker 3: I think that's a good analogy. I think Law was
39:37
Speaker 3: probably more relatable to most people than than Musk, Like
39:41
Speaker 3: Musk seems to kind of get on a lot of
39:44
Speaker 3: people's nerves, whereas I get the feeling that John Law
39:46
Speaker 3: was actually you know, you get the impression that even
39:48
Speaker 3: these kind of like enemies kind of liked him. I
39:53
Speaker 3: think it was quite quite clubbable. But but yeah, I
39:56
Speaker 3: think Musk is probably the closest, more than the equivalent
39:59
Speaker 3: in terms of proximity to the state, and also a
40:02
Speaker 3: real fondness for financial engineering. And then he dies in
40:06
Speaker 3: seventeen twenty nine of pneumonia. That's where the French day,
40:10
Speaker 3: I mean, the ironic thing is so when Law came
40:12
Speaker 3: in seventeen sixteen, the French government's kind of debty G
40:16
Speaker 3: D Peira show was one hundred percent, and by the
40:18
Speaker 3: time the Visa twenty one had given everyone massive haircuts,
40:22
Speaker 3: the debty gd Peira show was down to about fifty percent.
40:25
Speaker 3: He was successive work semi solvent again, but only by
40:29
Speaker 3: completely shafting everyone that invested in anything to do with
40:33
Speaker 3: John Law, and obviously, over the longer run that wasn't
40:36
Speaker 3: very helpful for France's kind of perceived credit worthiness. And
40:40
Speaker 3: then as far as Louisiana goes, in eighteen oh three,
40:42
Speaker 3: Napoleon sold it to Thomas Jefferson for two point five
40:45
Speaker 3: million pounds, so he'd have to pay mansion tax on
40:48
Speaker 3: that today. And the story, the story of John Law draws.
40:56
Speaker 4: To his clothes.
40:58
Speaker 1: It's appassed John, I should ask. It was a long
41:01
Speaker 1: and fascinating story, with some joy in the middle and
41:04
Speaker 1: significant misery at the end. Yes, what do we learn
41:08
Speaker 1: that we should hang on to a gold ignore everyone
41:10
Speaker 1: who tells us that gold doesn't matter.
41:13
Speaker 3: I think there are two main lessons here. The most
41:15
Speaker 3: obvious one is own gold. That's what everyone turns to
41:18
Speaker 3: when money breaks down. But the other is that if
41:21
Speaker 3: you want to run a few councy system, you need
41:23
Speaker 3: strong institutions with checks and balances that people can trust.
41:26
Speaker 3: And even then it's still very fragile, as we've learned
41:29
Speaker 3: in plenty of occasions, and the problems. Law was trying
41:33
Speaker 3: to impose something like a modern day monetary system almost
41:36
Speaker 3: overnight on into a country that simply didn't have the
41:38
Speaker 3: political infrastructure to cope with that. So it's not surprising
41:42
Speaker 3: that it blew up as soon as confidence evaporated. And
41:45
Speaker 3: then I think the other question is longer term impact.
41:49
Speaker 3: I don't think it's fair to trace the French Revolution
41:51
Speaker 3: back to Law, because if anything, the revolution results from
41:54
Speaker 3: the sort of the same power and balances that.
41:57
Speaker 4: Undermine his scheme.
41:59
Speaker 3: But I do I think you can view Law as
42:01
Speaker 3: a major fact on France losing ground to Britain over
42:03
Speaker 3: the course of the rest of the eighteenth century because
42:06
Speaker 3: his system collapse and basically puts the French off financial
42:09
Speaker 3: innovation for good. So Britain, by contrast, already has the
42:13
Speaker 3: Bank of England and it's already get more checks and
42:15
Speaker 3: balances at a political level, So even after the south
42:19
Speaker 3: Sea bubble pops, it's better able to manage its national
42:21
Speaker 3: debt and to raise funds, and that means that overall
42:25
Speaker 3: Britain's able to spend more on warfare, which means it
42:27
Speaker 3: ends up having a better navy, and it's ultimately it
42:30
Speaker 3: overtakes France as the European and global superpower of the time.
42:35
Speaker 4: Those are all useful life lessons.
42:37
Speaker 2: Thanks John, I think so true.
42:46
Speaker 1: Oh there you go, John Lohey wanted a legacy, didn't he?
42:48
Speaker 1: And I suppose you didn't really think about.
42:50
Speaker 3: It like this, you know, I mean the scotsman kind
42:55
Speaker 3: of putting the spokes in the French army. I don't know.
42:58
Speaker 1: Interesting, you couldn't imagine he did on purpose?
43:03
Speaker 3: It surely too cynical. Thanks for listening to our special
43:10
Speaker 3: two part series and Join Law. We'd love to hear
43:12
Speaker 3: your thoughts, so please do send us questions or comments
43:15
Speaker 3: to Merion Money at bloombard dot net. And if you
43:18
Speaker 3: enjoyed these episodes or any of our episodes, don't forget
43:20
Speaker 3: to rate, review and subscribe and share with friends. This
43:24
Speaker 3: episode was hosted by me Join Stepic alongside Merion's Somerset Web.
43:28
Speaker 3: It was produced by Summer Sadie and Moses and Dam
43:32
Speaker 3: with help from Amy Keane. Sound designed by Blake Maples
43:36
Speaker 3: and Robert Williams.
43:38
Speaker 1: Right, Can I get walk with the dog now