Esoteric Philosopher: Study of the Endless Path of Wisdom

John Law: Corrupt Scottish Financier

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He obtained control of the companies trading with China and the East Indies. He renamed his entire business interest the Compagnie des Indes, but most people still called it the Mississippi Company. In effect, Law now controlled all trade with France and the rest of the world outside of Europe. Jon Moen.

John Law:
JC: Corrupt Scottish Financier, instrumental to the regime of the corrupt French Regent, Philippe II Duke of Orléans.
The forces of crystallization pour through Paris which is ruled by Capricorn in its personality. DN 73.
The entrance for what might be regarded as cosmic evil was first opened in the decadent days of the Roman Empire (which was one reason why the Christ chose to manifest in those days), was opened wider under the corrupt regime of the Kings of France and, in our own day, has been opened still wider by evil men in every land. RI 754.
The City was named Nouvelle Orleans (New Orleans) in honor of Philippe II, Duc d'Orleans, the regent of France under French King Louis XV.
Sumptuosity and sordidness; revenge, life-weariness, ambition, darkness, putrescence; and, say, in sterling money, three hundred thousand a year,--were this poor Prince once to burst loose from his Court-moorings, to what regions, with what phenomena, might he not sail and drift! Thomas Carlyle.
On the death of Louis XIV, the late king's five-year-old great-grandson was crowned king Louis XV of France and the then forty-one-year-old Philippe became Regent.
Philippe II, Duke of Orléans, Philippe Charles (August 2, 1674 - December 2, 1723) called Duke of Chartres (1674-1701), and then Duke of Orléans (1701-1723) was Regent of France from 1715 to 1723. His regency being the last in the kingdom of France, he is still commonly referred to as le Régent and his regency as la Régence.
Philippe was a professed atheist who read the satirical works of François Rabelais inside a Bible binding during mass, and liked to hold orgies on religious high holidays.
He is most remembered for the debauchery he brought to Versailles and for the 'John Law' banking scandal.éans
East India Company, French: 1664–1769, commercial enterprise planned by Jean Baptiste Colbert and chartered by King Louis XIV for the purpose of trading in the Eastern Hemisphere. It failed to found a colony on Madagascar but established ports on the nearby islands of Bourbon and Île-de-France (now Réunion and Mauritius). By 1719 the company had established itself in India but was near bankruptcy. In that year it was combined under John Law with other French trading companies to make the Compagnie des Indes (see Mississippi Scheme). It resumed independence in 1723. With the decline of the Mughal empire, the French found it necessary to intervene in Indian political affairs to protect their interests. From 1741 the French under Joseph François Dupleix pursued an aggressive policy against both the Indians and the English until they ultimately suffered defeat by Robert Clive. Despite its apparent success, the French company had never been able to maintain itself financially, and in 1769 it was abolished.
East India Company, British:
1600–1874, company chartered by Queen Elizabeth I for trade with Asia. The original object of the group of merchants involved was to break the Dutch monopoly of the spice trade with the East Indies. However, after 1623, when the English traders at Amboina were massacred by the Dutch, the company admitted defeat in that endeavor and concentrated its activities in India. It had established its first factory at Machilipatnam in 1611, and it gradually acquired unequaled trade privileges from the Mughal emperors. Although the company was soon reaping large profits from its Indian exports (chiefly textiles), it had to deal with serious difficulties both in England and in India. During the 17th cent. its monopoly of Indian trade was constantly challenged by independent English traders called “interlopers.” In 1698 a rival company was actually chartered, but the conflict was resolved by a merger of the two companies in 1708. By that time the company had established in India the three presidencies of Madras, Bombay, and Calcutta.
As Mughal power declined, these settlements became subject to increasing harassment by local princes, and the company began to protect itself by intervening more and more in Indian political affairs. It had, moreover, a serious rival in the French East India Company, which under Joseph François Dupleix launched an aggressive policy of expansion. The victories (1751–60) of Robert Clive over the French made the company dominant in India, and by a treaty of 1765 it assumed control of the administration of Bengal. Revenues from Bengal were used for trade and for personal enrichment. To check the exploitative practices of the company and to gain a share of revenues, the British government intervened and passed the Regulating Act (1773), by which a governor-general of Bengal (whose appointment was subject to government approval) was given charge of all the company’s possessions in India. Warren Hastings, the first governor-general, laid the administrative foundations for subsequent British consolidation.
By the East India Act of 1784 the government assumed more direct responsibility for British activities in India, setting up a board of control for India. The company continued to control commercial policy and lesser administration, but the British government became increasingly the effective ruler of India. Parliamentary acts of 1813 and 1833 ended the company’s trade monopoly. Finally, after the Indian Mutiny of 1857–58 the government assumed direct control, and the East India Company was dissolved. The Columbia Encyclopedia, Sixth Edition.  2001.
In 1615 a delegation of highly-educated and distinguished men from the English East India Company visited the Emperor Jehangire. IU1 457.
The East India Company knew this well and built her stronghold on the friendship of the Brahmans, and by paying subsidy to the pagodas; and the British Government is as prudent as its predecessor. It is the castes, and non-interference with the prevailing religions, that secure its comparative authority in India. IU2 642.
JC: Add to that damning account that corrupt Scottish financier John Law, convict and accused murder, was employed to solve the financial ruination [bled dry] of France by corrupt Philippe II, Duke of Orléans. Who promptly sent him to New Orleans [his city] to set up an amalgamation of various banks, finances and the corrupt French East India Company to print money for France and outposts, which led to the bursting of the speculative bubble and to Hyperinflation and ruination of them both, and of course France!
"In effect, Law now controlled all trade with France and the rest of the world outside of Europe." Jon Moen.  
The Banque générale was made the royal bank in 1718:
Law, John, 1671–1729, Scottish financier in France, b. Edinburgh. After killing a man in a duel (1694) he fled to Amsterdam, where he studied banking. Returning to Scotland (1700), he proposed to Parliament plans for trade and revenue reforms and published Money and Trade Considered (1705). His ideas and a proposal for a national bank were rejected, and Law went to France. The finances of France were in critical condition at the death of King Louis XIV, and Law succeeded in winning the support of the regent, Philippe II, duc d'Orléans, for a scheme that promised to reduce the public debt and stimulate French trade and industry. Law believed that credit and paper money, by encouraging investment, would regenerate the French economy. In 1716 the regent chartered Law's private Banque générale and authorized it to issue paper currency. In 1717, Law acquired the monopoly of commercial privileges in the French colony of Louisiana and organized the Compagnie d'Occident, or Mississippi Company, which was consolidated (1719) with the French East India Company and other organizations as the Compagnie des Indes.
The Banque générale was made the royal bank in 1718, and its issues of notes were guaranteed by the state. Finally (1720), Law, made controller general of finances, merged the huge stock company with the royal bank and took over most of the public debt and the administration of revenue. A rash of speculation swept France. Numerous small investors bought stock, which soared to heights far beyond what could be expected in returns from the exploitation of the colonies (see Mississippi Scheme) and from trade with Asia. The bubble burst suddenly. Well-informed speculators sold their stock at huge profits, setting off a frenzy of selling that ruined thousands of investors. The system collapsed (1720), and Law fled France in disgrace. He died in Venice, where he had supported himself by gambling.

John Law and the Mississippi Bubble: 1718-1720
by Jon Moen.
In the early 18th century the economy of France was depressed. The government was deeply in debt and taxes were high. In addition, the French controlled the colony of Louisiana, a vast settlement in the interior of North America. The Louisiana Colony included the Natchez district and the area along the Mississippi Gulf Coast in present-day Mississippi. France was the first European country to settle this area of North America (1699-1763). 
The American land was much larger than France and the French knew little about it. Many did not even know where it was. But many had heard the rumor that this land was rich in silver and gold, the French currency. 
The depressed French economic environment was fertile ground for some of the monetary and economic ideas of John Law (1671 to 1729). Law was a Scottish financier born in Edinburgh. He was a colorful character who has been described as tall, handsome, and vain. He had a passion for women and gambling. 
When Law came to France in 1714, he renewed his acquaintance with the nephew of King Louis XIV, the Duke of Orleans. The duke became Regent of France after the king's death in 1715. The regent served as ruler while the heir to the throne, 5-year-old Louis XV, was still a minor. The duke recalled Law's financial prowess and sought his advice and assistance in straightening out France's financial mess left over from years of reckless spending under Louis XIV. 
This association with the Duke of Orleans would ensure Law's place in history. Not only would Law advance the use of paper money, the French word millionaire would come into use as a result of his most famous scheme — the Mississippi Company. 
In 1716 Law convinced the French government to let him open a bank, the Bank Generale, that could issue paper money, or bank notes. The paper notes would be supported by the bank's assets of gold and silver and would circulate as a medium of exchange. Paper money was a new concept for the French; money to them was silver and gold. Law believed that paper notes would increase the money in circulation, which, in turn, would increase commerce. These conditions would help revitalize and rehabilitate the finances of the French government. 
In August 1717, he organized the Compagnie d'Occident (Company of the West) to which the French government gave the control of trade between France and its Louisiana and Canadian colonies. In Canada, the French would trade in beaver skins. In the Louisiana colony they would trade in precious metals. 
The colony stretched for 3,000 miles from the mouth of the Mississippi River to parts of Canada. It included the present-day states that hug the river: Louisiana, Mississippi, Arkansas, Missouri, Illinois, Iowa, Wisconsin, and Minnesota. The colony of Louisiana's connection to the Mississippi River gave rise to the company's more popular name, The Mississippi Company. 
Law's company had exclusive trading privileges in the territory for 25 years; it could appoint its own governor and officers in the colony and make land grants to potential developers. In turn the company accepted the responsibility of transporting 6,000 settlers and 3,000 slaves to the colony before expiration of its charter. 
The scheme to finance the initial operations of the Mississippi Company was simple. Law would raise the money by selling shares in the company for cash and, more importantly, for state bonds. Law accepted a low interest rate on the bonds which helped French finances while promising the company a more secure cash flow. Simply put, Law came up with a way to finance a big business scheme. The lure of gold and silver brought out many eager investors in the Mississippi Company. 
Later Law would create cash flow from new economic activity. It turns out that the Mississippi Company was a small part of a much grander empire he was about to create. In September 1718 the company acquired the monopoly in tobacco trading with Africa. Law's Bank Generale was taken over by the French government in January 1719 and was renamed the Bank Royale. Law remained in charge, however, and the crown further guaranteed the bank's note issue. In May he obtained control of the companies trading with China and the East Indies. He renamed his entire business interest the Compagnie des Indes, but most people still called it the Mississippi Company. In effect, Law now controlled all trade with France and the rest of the world outside of Europe. 
The company next purchased the right to mint new coins for France, and by October it had purchased the right to collect most French taxes. In January 1720, Law became the Controller General and Superintendent General of Finance. Law now controlled all of France's finance and money creation. He also controlled the company that handled all of France's foreign trade and colonial development. Furthermore, by holding much of the French government's debt, he had created a stable source of income for future business ventures. Law had created Europe's most successful conglomerate. 
Law paid for these activities and privileges by issuing additional shares in the company. These shares could be paid for with bank notes (from his bank) or with government debt. 
The value of shares in the Mississippi Company rose dramatically as Law's empire expanded. Investors from across France and Europe eagerly played in this new market. The financial district in Paris became so agitated at times with investors that soldiers would be sent in at night to maintain order. Shares in the Mississippi Company started at around 500 livres tournois (the French unit of account at the time) per share in January 1719. By December 1719, share prices had reached 10,000 livres, an increase of 190 percent in just under a year. The market became so seductive that people from the working class began investing whatever small sums they could scrape together. New millionaires were commonplace. 
The weak spot in Law's scheme was his willingness to issue more bank notes to fund purchases of shares in the company. Stock prices began falling in January 1720 as some investors sold shares to turn capital gains into gold coin. To stop the sell-off, Law restricted any payment in gold that was more than 100 livres. The paper notes of the Bank Royale were made legal tender, which meant that they could be used to pay taxes and settle most debts. The company was trying to get people to accept the paper notes rather than gold. The bank subsequently promised to exchange its notes for shares in the company at the going market price of 10,000 livres. This attempt to turn stock shares into money resulted in a sudden doubling of the money supply in France. It is not surprising then that inflation started to take off. Inflation reached a monthly rate of 23 percent in January 1720. 
Law devalued shares in the company in several stages during 1720, and the value of bank notes was reduced to 50 percent of their face value. By September 1720 the price of shares in the company had fallen to 2,000 livres and to 1,000 by December. The fall in the price of stock allowed Law's enemies to take control of the company by confiscating the shares of investors who could not prove they had actually paid for their shares with real assets rather than credit. This reduced investor shares, or shares outstanding, by two-thirds. By September 1721 share prices had dropped to 500 livres, where they had been at the beginning. 
The rise and fall of the Mississippi Company became known as the Mississippi Bubble. Indeed, Law is most famous, or perhaps infamous, for his involvement in this prominent financial disaster. A “bubble” in the world of finance is a term applied to an unusually rapid increase in stock prices or the value of some other asset like real estate. The increase is then followed by an equally rapid collapse in prices. The wild fluctuations in prices are usually viewed as irrational and the product of uncontrolled speculation rather than sensible investment practices. The dramatic increase in the NASDAQ stock index, primarily technology stocks, in 1999-2000 and its subsequent collapse in 2000-2004 is sometimes presented as a recent example of a bubble. 
Economists are divided on how to interpret Law's scheme. Charles Kindleberger, an economic historian at Yale University, believes Law's intentions were legitimate and that the Mississippi Company was intended to be a real enterprise. Law's financial arrangements, however, were misguided. Others have noted that Law did help straighten out the convoluted system of French taxation and finance. And, the economist Peter Garber believes that Law's system had more potential than is often believed. 
The story of John Law and the Mississippi Company is as intriguing as any modern financial disaster. In the end, many of the new millionaires were financially destroyed. So was France. It would be 80 years before France would again introduce paper money into its economy. 
Meanwhile, France maintained control of the Louisiana colony until 1763 when it lost the Seven Years' War to England. At the Paris Conference in 1763, all of Louisiana east of the Mississippi River, except the Isle of Orleans, went to England. Louisiana west of the Mississippi and the Isle of Orleans went to Spain. Spain returned its territory to France in 1800 through a secret deal in which the French, under Napoleon Bonaparte, promised to set up Spanish rule in Italy. In 1803, the United States, under Thomas Jefferson, purchased the territory from France in a deal known as The Louisiana Purchase.

John Law was born at Edinburgh in the year 1671. His father was the younger son of an ancient family in Fife, and carried on the business of a goldsmith and banker. He amassed considerable wealth in his trade, sufficient to enable him to gratify the wish, so common among his countrymen, of adding a territorial designation to his name. He purchased with this view the estates of Lauriston and Randleston, on the Frith of Forth on the borders of West and Mid Lothian, and was thenceforth known as Law of Lauriston. The subject of our memoir, being the eldest son, was received into his father’s counting- house at the age of fourteen, and for three years laboured hard to acquire an insight into the principles of banking, as then carried on in Scotland. He had always manifested great love for the study of numbers, and his proficiency in the mathematics was considered extraordinary in one of his tender years. At the age of seventeen he was tall, strong and his face, although deeply scarred with the small-pox, was agreeable and full of intelligence. At this time he began to neglect his business, and becoming vain, indulged in considerable extravagance. He was a great favourite with the ladies, by whom he was called Beau Law, while the other sex, despising his foppery, nicknamed him Jessamy John. At the death of his father, which happened in 1688, he withdrew entirely from the desk and proceeded to London to see the world.
He was now very young, very vain, good-looking, tolerably rich, and quite uncontrolled. It is no wonder that, on his arrival in the capital, he should launch out into extravagance. He soon became a regular frequenter of the gaming-houses, and by pursuing a certain plan, based upon some abstruse calculation of chances, he contrived to gain considerable sums. All the gamblers envied him his luck, and many made it a point to watch his play, and stake their money on the same chances. In affairs of gallantry he was equally fortunate; ladies of the first rank smiled graciously upon the handsome Scotchman—the young, the rich, the witty, and the obliging. But all these successes only paved the way for reverses.
After he had been for nine years exposed to the dangerous attractions of the gay life he was leading, he became an irrecoverable gambler. As his love of play increased in violence, it diminished in prudence. Great losses were only to be repaired by still greater ventures, and one unhappy day he lost more than he could repay without mortgaging his family estate. To that step he was driven at last. At the same time his gallantry brought him into trouble. A love affair, or slight flirtation, with a lady of the name of Villiers exposed him to the resentment of a Mr. Wilson, by whom he was challenged to fight a duel. Law accepted, and had the ill fortune to shoot his antagonist dead. He was arrested the same day, and brought to trial for murder by the relatives of Mr. Wilson. He was afterwards found guilty, and sentenced to death. The sentence was commuted to a fine, upon the ground that the offence only amounted to manslaughter. An appeal being lodged by a brother of the deceased, Law was detained in the King’s Bench, whence, by some means or other, which he never explained, he contrived to escape; and an action being instituted against the sheriffs, he was advertised in the Gazette, and a reward offered for his apprehension. He was described as “Captain John Law, a Scotchman, aged twenty-six; a very tall, black, lean man; well shaped, above six feet high, with large pockholes in his face; big nosed, and speaking broad and loud.”
As this was rather a caricature than a description of him, it has been supposed that it was drawn up with a view to favour his escape. He succeeded in reaching the Continent, where he travelled for three years, and devoted much of his attention to the monetary and banking affairs of the countries through which he passed. He stayed a few months in Amsterdam, and speculated to some extent in the funds. His mornings were devoted to the study of finance and the principles of trade, and his evenings to the gaming-house. It is generally believed that he returned to Edinburgh in the year 1700.
Returning to Scotland (1700), he proposed to Parliament plans for trade and revenue reforms and published Money and Trade Considered (1705). His ideas and a proposal for a national bank were rejected, and Law went to France.
The finances of France were in critical condition at the death of King Louis XIV, and Law succeeded in winning the support of the regent, Philippe II, duc d'Orléans, for a scheme that promised to reduce the public debt and stimulate French trade and industry. Law believed that credit and paper money, by encouraging investment, would regenerate the French economy. In 1716 the regent chartered Law's private Banque générale and authorized it to issue paper currency.
In 1717, Law acquired the monopoly of commercial privileges in the French colony of Louisiana and organized the Compagnie d'Occident, or Mississippi Company, which was consolidated (1719) with the French East India Company and other organizations as the Compagnie des Indes. The Banque générale was made the royal bank in 1718, and its issues of notes were guaranteed by the state.
Finally (1720), Law, made controller general of finances, merged the huge stock company with the royal bank and took over most of the public debt and the administration of revenue. A rash of speculation swept France. Numerous small investors bought stock, which soared to heights far beyond what could be expected in returns from the exploitation of the colonies and from trade with East Asia.
The bubble burst suddenly. Well-informed speculators sold their stock at huge profits, setting off a frenzy of selling that ruined thousands of investors. The system collapsed (1720), and Law left France in disgrace. He died in Venice, where he had supported himself by gambling.

John Law and the Hyperinflation and Speculative Bubble in France c. 1719:
The public and private extravagances of Louis XIV left France with a debt of 3 billion livres when the Regime of Louis XV came to power. Even with an excellent system of centralized administration and finance created by Colbert the new regime was finding it hard to meet the interest payments on the debt. John Law, a Scottish adventurer, was promoting policies which might help the Regime.
John Law was the son of a banker from Scotland. In London John Law was a gambler and playboy who killed a man in a duel. Law was arrested and convicted of murder but he escaped from prison and fled to the Continent. In Amsterdam he studied financial institutions and in 1705 he published a treatise entitled Money and Trade Considered in which he argued that the more money in circulation the greater the prosperity of a country. In his words,
Domestic trade depends upon money. A greater quantity employs more people than a lesser quantity. An addition to the money adds to the value of the country.
Law tried to interest the governments of several countries in his monetary schemes, but only the financially strapped regime of Louis XV gave him an opportunity to implement them. In 1716 Law was granted authority to create the Banque Generale with a capital of 6 million livres. Law raised only 25 percent of the capital in cash and covered the other 4.5 million livres with government debt (billets d'etat) which was worth only one fourth of its face value. So Law capitalization of the Banque Generale really only amounted to about 2.6 million livres.
Law's Banque Generale was authorized to issue interest-paying bank notes payable in silver on demand. It soon had 60 million livres in notes outstanding. The Regime required regional tax payments to be in the form of Banque Generale banknotes so there was a ready market for Law's banknotes. Because these banknotes paid interest and were convenient they sold at a premium over their face value.
The Regime also wanted to develop the territories of Louisiana in North America. Law was granted a charter for the Compagnie de la d'Occident and it was given a 25 year lease on the French holdings of Louisiana. In return the Compagnie was required to settle at least 6,000 French citizens and 3,000 slaves. The Compagnie was also granted a monopoly on the growing and sale of tobacco.
The Compagnie acquired the Compagnie de Senegal, which operated in West Africa, as a source of slaves. It then merged with the French East India Company and the French China Company to form Compagnie de Indes. This company had a virtual monopoly on French foreign trade.
Law's Banque Generale, under the new name of Banque Royale, was added to the combination which Law called his "System."
The Compagnie de Indes issued 200,000 shares at a price of 500 livres each. By 1718 the share price had fallen to 250 livres. In 1719 the Banque pumped up the supply of notes by 30 percent. It also acquired the right to act as the national tax collector for nine years. The Compagnie stock then doubled and redoubled in price.
Law then came with a plan to pay off the troublesome state debt. The Regime would issue notes paying 3 percent interest to its debtors. These debts could then be used to buy stock in Law's Compagnie de Indes. The Compagnie share price rose to 5,000 livres in August 1719 and 8,000 livres in October. People flooded into Paris to buy stock in Law's Compagnie. Speculation in Compagnie stock went wild. Stock was being purchased with only 10 percent downpayment. Fortunes were being made right and left. One beggar made 70 million livres.
John Law became an international celebrity. The Pope sent an envoy to the birthday party of Law's daughter. Law converted to Catholicism and was appointed Controlleur des Finances by the Regime.
Compagnie de Indes shares peaked at a price of 20,000 livres at the end of 1719. In January 1720 two royal princes decided to cash in their shares of the Compagnie. Others decided to follow their example. Law had to print 1.5 million livres in paper money. As Controlleur of Finances, John Law tried to stem the tide by making it illegal to hold more than 500 livres in gold or silver. He devalued banknotes relative to foreign currency to encourage exports and discourage imports. Nevertheless Compagnie de Indes stock fell from 9,000 livres to 5,000 livres. Law was denounced and stripped of his office of Controlleur. As head of the Compagnie de Indes and the Banque Royale he bought up stock and banknotes to try to raise their price, but by June 1720 he had to suspend payments.
John Law fled to Holland in 1720 and his properties in France were seized by the Regime. He lamented,
Last year I was the richest individual who ever lived, today I have nothing, not even enough to keep alive.
The Hyperinflation in France During the Revolution
Hyperinflation in France After the Revolution
In the spring of 1789 the French Assemblee decreed the issuance of 400 million livres of notes, called assignats, secured by the properties which had been confiscated from the Church during the revolution. By the fall of 1789 the Assemblee approved the issuance of 800 million of noninterest-bearing notes and decreed that the limit on such notes was to be 1.2 billion livres. Despite this stated limit, nine months later another 600 million livres was approved and in September 1791 another 300 million. In April of 1791 another 300 million was approved.
Prices rose, but wages didn't keep up and in 1793 a mob plundered 200 stores in Paris. Price controls were imposed (Law of the Maximum). Output decreased and rationing had to be implemented. To force acceptance of its money the French government imposed a 20 year prison sentence on anyone selling its notes at a discount and dictated a death sentence for anyone differentiating between paper livres and gold or silver livres in setting prices.
By 1794 there were 7 billion livres (assignats) in circulation. In May 1795 this total reached 10 billion livres and by July 1795 it had gone up to 14 billion livres.
When the total reached 40 billion livres the printing plates for assignats were publically destroyed. A new type of note, called a mandat, was issued, but within two years these also lost 97 percent of their value. The printing plates for mandats were also publically destroyed. In 1797 both assignats and mandats were repudiated and a new monetary system based upon gold was instituted.

A Comparative Chronology of Money
Monetary History from Ancient Times to the Present Day
1700 - 1749
© Roy Davies & Glyn Davies, 1996 & 1999.
Based on the book: A History of Money from Ancient Times to the Present Day by Glyn Davies, rev. ed. Cardiff: University of Wales Press, 1996. 716p. ISBN 0 7083 1351 5. (Page numbers in the 3rd edition published in 2002 may be slightly different).
1699-1727 Sir Isaac Newton is Master of the Mint
During Newton's period in charge the emphasis of the mint's work changes from coining silver to coining gold.
p 247
1700 Collapse of the Darien Company ruins Scotland's trade hopes
The Scottish company was intended to set up a colonial entrepot at Darien in Panama. The impact of its failure on Scotland's attempts to develop its overseas trade proves a powerful motivating factor in the Act of Union with England in 1707.
p 274
1704 Promissory Notes Act
This confirms the legality in England of goldsmith's notes as negotiable, i.e. payable to the bearer rather than to a named person.
p 251
1705 John Law publishes Money and Trade Considered
After travelling widely on the Continent, Law returns to his native Scotland and publishes Money and Trade Considered: With a Proposal for Supplying the Nation with Money. He argues that metallic money is unreliable in quality and quantity. Bank notes issued and managed by a public bank would remove the brakes on the economy. He is probably the world's first Keynesian; but compare Sir William Petty, 1682.
p 553
1707 Act of Union of England and Scotland
Among the provisions of the act is a stipulation that the United Kingdom should have a uniform coinage - a single currency symbolising and cementing a united kingdom. During the 3 years of recoinage in Scotland the shortfall in currency is made up by the issue of notes by the Bank of Scotland.
p 274-275
1708 Britain sets American colonies' exchange rate for Spanish dollar
The British parliament specifies that 6 shillings should be the maximum rate any of the colonies should use for the Spanish peso or dollar which is widely used as currency by the colonists. However the Act has little effect.
p 459-460
1713 John Law returns to France
His ideas were rejected in Britain but in France he gets the chance to put them into effect.
p 553
1715 Duke of Orleans becomes Regent of France
French public finance is in a parlous state after the wars and extravagance of Louis XIV. State promissory notes fall to a quarter of their nominal value within a year. In desperation the Duke turns to John Law.
p 554
1715 North Carolina makes 17 different forms of money legal tender
All the British colonies in North America tend to suffer from a dearth of the official British coinage. Consequently they use a variety of substitutes including wampum, copied from the native inhabitants, tobacco and other natural commodities, and Spanish and Portuguese coins. The importance of these substitutes varies according to location.
p 38,457
1716 John Law creates France's first public bank
To economize on the use of precious metals Law establishes a note-issuing bank, Law & Co. or the Banque Generale. In contrast to the state's short-term paper Law's banknotes appreciate in value.
p 554
1718 French Regent reorganizes Law's bank
Law's bank becomes the Banque Royale and is given a new charter placing the lucrative note-issuing business more directly under the control of the Regent.
p 554
1719-1720 The Mississippi Bubble
The Mississippi Company had been set up to exploit the wealth of French colonies, especially in Louisiana. In 1719 it is also given a monopoly of trade with the East Indies and China and a speculative boom in the value of its shares ensues. The boom, combined with the over-issue of notes by the Banque Royale, leads to a drain of precious metals from France to London. Law's enemies persuade the Regent to dismiss him from his post as Minister of Finance, the bank stops payment and the boom collapses. The debacle sets back the development of banking in France by about 100 years.
p 264,268,278,554-555
1719-1720 The South Sea Bubble
Contemporary with the Mississippi Bubble a speculative boom takes place in the shares of the South Sea Company, originally set up to break the Spanish monopoly of trade with Central and South America, after it proposes to take over the National Debt. Numerous other companies are set up to take advantage of the speculative mania. The sudden collapse of the boom leads to changes in company law which affect the future development of banking in both Britain and America.
p 264-266
1722 Unsuccessful attempt to alleviate Ireland's chronic shortage of low-value coins
The lack of small money in Ireland has grown to such an extent that manufacturers are obliged to pay their employees in cards signed upon the back, to be exchanged afterwards for money. In August 1722 minting of copper halfpence and farthings for Ireland begins by William Wood in Bristol but ceases after protesters in Ireland demand that the country should have its own mint. Consequently the Irish poor are left to suffer for many years from their own promissory cards.
p 246-247
1722 Royal Prussian Seehandlung founded
The first German state bank is created for the purpose of stimulating foreign trade.
p 566
1723 First issue of notes by the Pennsylvania Land Bank
These are secured by mortgages on the property of the bank owners.
p 461
1727 The Royal Bank of Scotland is founded
The Royal Bank introduces a "cash-credit" system allowing certain applicants for loans to withdraw cash as required, interest being paid only on the amount withdrawn. This is copied by other banks in Scotland and then in England and is the origin of the overdraft.
p 275-276
1727 Tobacco notes become legal tender in Virginia
Certificates attesting to the quality and quantity of tobacco deposited in public warehouses circulate more conveniently than the actual leaf, already used as money for over a century, and these notes are made legal tender.
p 458
1729 Benjamin Franklin's Modest Enquiry into the Nature and Necessity of a Paper Currency
Following the publication of this work Franklin is awarded the contract for printing the Pennsylvania Land Bank's third issue of notes.
p 461
1741 British Parliament decides that the Boston Land Bank is illegal
The Land Bank or Manufactory Scheme is ruled to contravene the Bubble Act of 1720 which is retrospectively extended to cover the colonies.
p 462
1749-1751 Pelham reduces the burden of the British national debt
Henry Pelham, the British prime minister, takes advantage of low market rates of interest to reduce interest payments on the national debt from 4% to 3½% in 1749 and 3% in 1750, and replaces a whole series of annuities by a single 3% consolidated stock or consols in 1751.
Jeremy Condick.

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