John Law

John Law OF Lauriston (* 16. April 1671 in Edinburgh; † 21. March 1729 in Venice) was a Scottish political economist and banker.

John Law as a director of the Banque Royale

table of contents

personal record

John Law was the fifth child of the guild master of the Goldschmiede of Edinburgh and Geldverleihers William Law. To school attendance in its hometown and a boarding school he - soon after the early death of the father (1688) - went to London. There operatedit itself as woman hero and professional players. To calculate chances of winning with astonishing speed it had the ability itself probably by means of reading (Antoine Arnauld, Jakob Bernoulli) and exact observation rains; its gift as brilliant head computers helped thereby crucially. 1694 it became because of one Duel to death condemns and fled during the appointment negotiation on the continent. In the following years Law studied the financial system of the bank of Amsterdam and learned the British pretender to the throne James III.know. In Paris madame became Katherine Seigneur, geb. Knowles, its loving; with it fledit before envious people after Venice. After one decade in the exile it was back in still independent Scotland, in order it futile from the financial disaster from the Darién - project to save. Its plan to a reform of the financial condition was rejected; as the combination of the parliaments of Englandand Scotland threatened, went Law (in England further as volatile criminals applied) the continent.

By gambling „“he compiled into of Paris a fortune and became 1707 a friend Philipps von Orléans, the regent of France (starting from 1715). From 1716 on it could into of Paris finally its monetary political ideas into the practice convert (see below). As one of the principal shareholders of the societies controlled of him it became not only heavy-rich, but also the star of Paris. 1717 had been settled the murder affair by pardon on the part of the English king, endit converted 1719 to the catholic faith. Few days later he was already appointed the general tester of finances. In financial regard it was simultaneous thereby the ruler of France and - as a director of the Mississippi company - a third of the North American continent. In order to support its social acknowledgmentit gave enormous sums for karitative purposes out (in such a way report agreeing Lieselotte of the Pfalz and Daniel Defoe).

However the result of its activities was as a banker and finances the state a monetary political disaster. When Law had 1720 cause in the spring, at the support by thatRegents to doubt, he suffered a Nervenzusammenbruch. The children were brought on the country, Katherine endured with it. In December 1720 it fled over Brussels after Venice; its fortune was first blocked, then it conveyed it as compensation of the company. In the autumn 1721 traveledit to London - alone, because Katherine and the children were not allowed Paris further to leave. After an episode as a secret agent of England in Aachen and Munich he turned 1726 again after Venice, where he worked as a painting dealer. There he deceased 1729 at the consequencesa pneumonia. Katherine (with which it had been married never) inherited the remainder of its fortune (collected paintings) and the common children.

the Mississippi speculation

in London had had to experience Law, how „Greshams law worked “, according to which inferior money the werthaltigere from the circulationdrives out. For the public welfare travel „healthy “money was crucial. Coined money had been worsened in Europe since generations, good money was hoarded; the result were shortage of money and stagnation. After its experiences in Amsterdam money could consist also of notes, if only covering were secured. Beside sufficientVolume of money was after Laws conviction confidence of the market participants into the currency the crucial factor for a flowering economy. In Scotland he wrote 1705 the writing, with which he admits far away became:Money and trade Considered, with A Proposal for Supplying the nation with Money.It demanded - unsuccessfully - the establishment of a bank, which should make financing instruments available (credits) and at the same time spend paper money (notes), which should be besichert by precious metals, in addition, by real estates. After its way course from Scotland it made similar suggestions, those in Vienna, later in Turin,were rejected however likewise.

1715 received due to its relations with the regent in France the license to Law for the establishment of a private issuing bank, in order to save by expensive Spanish of succession war the zerrtteten finances of the state. The French currency had been forty times devalued since 1690; afterdeath Ludwig XIV. measures for reorganization of the finances of the state, moved by the chairman of the financial advice, Duc de Noailles, the confidence of the economy had only continued to undermine. 1716 created Law the Banque of generals and assigned credits on paper money basis. The bank was private, their capital however becameto three quarters of out to a large extent worthless - government loans applied. Despite the initial undercapitalization it won slowly the confidence of the public and its notes as currency was accepted. This particularly due to the personal support on the part of the regent. From 1718 on the bank under that becameCompany Banque Royale led. Law remained their director, could not control however the note circulation any longer.

In the year 1717 Law based then - against the resistance of the Parlements (the highest Court of Justice of France) however with agreement of the regent - who d'Occident commercial company Compagnie de la Louisiane ou (also briefly: Compagnie d'Occident or Mississippi company), which was granted privilege for the French colonies in America. Also this society was at first unterkapitalisiert, since the capital originated from the devalued government loans. When Law could acquire further profit yielding privileges and monopolies however on the Mississippi company, changedthe situation. As experienced Hasardeur it had set everything on a map. The shares of the society were exposed - also by occasional artificial offer shortage - to such a strong demand that this finally affected itself over several capital increases inflatorisch. Because the Banque Royale always emitted at the same timemore notes and went loans, so that the new shares could be acquired. 1719 acquired the company also still the rights at the royal coin. The result was a rise in stocks, which released a real estate speculation and a true consumer intoxication for its part. Foreigner, itself likewise on the shares, brought the country foreign exchange fell along and was Law as a general tester of finances high-welcomely. Its society took over all colonization and administration companies for colonies of France within a yearly; it successfully caught the immense national indebtedness, by replacing it by an enormous, lowinterest-bearing loan. In addition it painted countless trifle taxes,those had strangled the economy, and replaced them by an income tax. Thus it had spanned the elbow: it had driven to the tax tenants, who had made enormous profits as tax A DRIVERs since generations and had at the same time financed thus the national budget and had coated interest, into the parade.

Also the introduction of the paper money led in the first time to a clear stimulation of the economy. Soon however led the money supply substantially risen and the gradually occurring confidence loss into the new artificial currency to inflation. Within fewer months (not-noble) speculators had become „millionaires “(this expressionfor the first time 1720 dip on), which threatened to place the social order on the head. The intoxication went so far that 160 kiosks in the park were set up by Vendôme and Hôtel of the Soissons, in order to satisfy the demand, guards had to prevent that also at the night boughtbecame.

Its opponents and the envious people were formed. There obvious that the colonies were not in Louis IANA by any meansthe Eldorado “, from which the promised net yields to be gotten had. After the course for a 500-livre-Aktie risen to 10.000 (with option dealings even on 15.000)was, the boom ended in November 1719. The speculation fallow together, the value of the shares sank just as rapidly as the confidence into the paper money of the Banque Royale (February 1720). In addition the overestimation of the Mississippi company of France coincided with the South Seas blister of England: the capital thatSpeculators fled from Paris to London. The desperate attempts to stop with prohibitions and drakonischen penalty clauses the flight of capital did not have effect. Laws further plans to contain the crisis (21. May), by the regent, the Parlement and the Oberschicht had been taken up in a well-meaning manner refused themselves however to everyoneSolution. Law was briefly set off (29. May), and had to be afraid - after a run on the Banque Royale - for its life. (Since at the end of of August were also the shares of the South Seas company in London in free case.) in December was finally permitted to it to leave Paris.A later investigation resulted in among other things that large quantities of notes without official permission had been in circulation brought. The note money and the banks abolished (November), France returned to the monetary standard.

appreciation

the statement, John Law invented, is the paper moneyincorrectly. Already from 1609 on the bank of Amsterdam had spent notes, whereby very for many decades carefully to at any time sufficient covering by coins one paid attention. 1661 had been emitted in Stockholm by a private issuing bank notes - however for lack of confidence with moderate success.

The crucially newat Laws procedure was, not only precious metals, to consult but also real estate properties - with its in the future lying yield prospects - for the covering of the note circulation. Law aimed at preventing by means of so created paper money deflation and supplying trade and trade with sufficiently liquidity - inReason taken no wrong concept. After the blow-out of the speculation blister 1720 were however its conceptions for generations of respectable money politicians taboo.

Law had far preceded its time. Only after the experiences with the inflation in the Weimar Republic completely become impoverished one dared oneself 1923 to it, thatnew note circulation („pension Marks “) with the yield capacity („the pensions “) of the German agriculture too besichern, which had success up to the world economic crisis also. At the latest for years the covering of the money circulation with precious metal plays the 1970er world-wide no more role.

Remarkable is also the sociopolitically in a revolutionary manner workingAttempt to replace countless consumption taxes by a income-dependent tax. In feudal the coined/shaped France of its time this measure could not have existence, because it would have relieved the small man and would have loaded parasites of the commonwealth.

A further aspect of its politico-economic measures was the attempt, all commercial monopolies,to transfer the note issue and the tax collection from private hand into national direction. Thus, then he hoped, can make the public hand sufficiently for profit and replace their commitments.

John Law was with the prominent restaurant politicians of his time united that plentiful and brisk money circulation for thoseNational economy is favorable. One lost sight of the inflationary dangers of such a policy gladly. Law - as a son of a money lender - was probably aware of these dangers. It could not succeed however from 1719 on against the raffgierigen decision makers in of Paris no more. Of themunrestrained expansion of the note and share issue still heated the speculation blister up, which should lead into the disaster.

John Law was one of the most fascinating personalities of its time. Of attractive appearance, intelligently and charmingly, with perfect manners, at the same time a coolly calculating Draufgänger, he had in each salonthat struck volée of Europe success has. At the threshold between the rigiden baroque culture of Ludwig XIV. and the lasziven Rococo standing, Law embodied both sides. Its conception of being able to steer with only one financial conglomerate the economy of a whole country corresponded still completely to thinking the sun king.With its adventurous private life however it already led over to the world cotton wool from and appears to us as a forerunner Giacomo Casanovas.


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