John Law (baptis 21 April 1671 - March 21, 1729) was a Scottish economist who believed that money was merely a means of exchange that was not a wealth in itself and a nation of dependent wealth on trading. He was appointed General Controller of French Finance under the Duke of Orleans, who served as the regent for the young king, Louis XV.
In 1716 Law founded Banque GÃÆ' Â © nÃÆ' Â © rale, a private bank, in France. Three quarters of the capital consists of government bills and government-accepted records, which effectively make it the country's first central bank. He is responsible for the Mississippi Company bubble and the chaotic economic collapse in France, which has been compared to the 17th century tulip mania in the Netherlands. Mississippi Bubble contemporaries with the South Sea Company bubble in England.
Law is a brilliant gambler and mental calculator. He is known for winning card games by counting possibilities mentally. He derives economic ideas such as the theory of scarcity of values ​​and the doctrine of real bills. According to law, the creation of money will stimulate the economy, banknotes are preferred over coins, and that shares are a form of superior money because they pay dividends.
Video John Law (economist)
Biography
Initial years
Law born in the family of bankers and goldsmiths of Fife; his father, William, had bought Lauriston Castle, a land in Cramond in the Firth of Forth and known as the Law of Lauriston. Law joined the family business at the age of fourteen and studied banking business until his father died in 1688. The law then ignored companies that supported a more extravagant pursuit and traveled to London to live the English dandy lifestyle. He then lost a huge amount of money in gambling.
On 9 April 1694, John Law fought with other English dandy, Edward "Beau" Wilson, at Bloomsbury Square, London. Wilson has challenged the Law over the affection of Elizabeth Villiers. The law killed Wilson with one leap and stabbed his sword. He was arrested, charged with murder and was tried at Old Bailey. He appears in front of the sadistic 'hanging judge', Salathiel Lovell and convicted of murder, and sentenced to death. He was initially jailed in Newgate Prison to wait for execution. His sentence was then changed to a fine, arguing that the offense was just as big as a murder. Wilson's brother appealed and had imprisoned the Law, but he managed to escape to Amsterdam.
Initial economist
Law urges the formation of a national bank to create and improve credit instruments and banknotes supported by land, gold, or silver. The first manifestation of the Law system came when he returned to Scotland and contributed to the debate leading up to the Union Treaty 1707. He published a text entitled "Money and Trade Considered: with a Proposal for Cooking Nations with Money" (1705). The legal proposition for creating a national bank in Scotland was eventually denied, and he went to pursue his ambitions abroad.
He spent ten years moving between France and the Netherlands, dealing with financial speculation. Problems with the French economy provide an opportunity to implement the system.
He has the idea of ​​removing small monopolies and private tax farms. He will create a bank for national finance and state enterprises to trade, in the end to exclude all personal income. This will create a huge monopoly of state-run financial and trade, and the profits will pay off national debt. The Council called to consider Law's proposal, including investors such as Samuel Bernard, rejecting the proposition on October 24, 1715.
Law made his home in Place Louis-le-Grand, a royal square where he hosted and entertained various Parisian nobles. Gaining the attention of famous people like the Duke of Orleans, Law quickly found himself at a high-risk gambling party attended only by the most prosperous people in Paris. His tall stature and elegant dress allowed the Law to lure his way in European financial centers, from Amsterdam to Venice. This journey greatly influenced the Law's theories of monetary policy and the importance of paper money as credit. The legal notion of a centralized bank that will deal with the new form of banknotes is several years before its time. Despite this advanced concept, Law is still fighting for mercantilist beliefs with the promotion of a monopolist through a government charter.
The war waged by Louis XIV left the country completely useless, both economically and financially. Lack of precious metals causes a shortage of coins in circulation, which in turn limits the production of new coins. With the death of Louis XIV seventeen months after the arrival of Law, the Duke of Orleans finally presented the Law with an opportunity to demonstrate his ingenuity. Since, after the devastating War of Spanish Succession, the French economy is stagnant and its national debt crippling, the Act proposes to stimulate the industry by replacing gold with paper credits and then increasing credit supply, and to reduce national debt by replacing it with shares in economic ventures. On May 1, 1716, the Act presented a modified version of its centralized bank plan to Banque Generale which approved a private bank that allowed investors to provide a quarter of investments in currencies and other parts of dead government bonds. The second key feature of the proposal centered on the premise that this private bank could issue its own currency backed by Louis Gold. This allows the currency to be redeemed by the weight of the silver from the original deposit, not the fluctuating value of the livres that has been devalued rapidly.
In May 1716 Law founded Banque GÃÆ' © nÃÆ'  © rale Privà © ("Private Commercial Bank"), which developed the use of paper money. It's one of only six banks that issue paper money, joining Sweden, England, the Netherlands, Venice, and Genoa. The bank was nationalized in December 1718 at the request of Law.
From this new banking platform, Law was able to pursue the monopolist he imagined by asking France to finance the business with 100 million livres in the form of company stock. The incorporation of the Mississippi Company, later renamed the Western Company and eventually became part of the Indian Company, was financed in the same way as the bank.
In this context, the bupati, Philippe d'OrlÃÆ'Â ans, appointed Law as the General of Finance Controller in 1720, effectively giving him control over external and internal trade. The rapid rise of this new global monopoly led to huge speculation and stock prices swelled to more than sixty times their original value.
As a General Controller, the Law instituted many favorable reforms (some of which have lasting effects, while others are soon removed). He tried to break up large lands to benefit the peasants; he abolished internal roads and toll channels; he encouraged the construction of new roads, new industrial starting (even importing craftsmen but mostly by offering low-interest loans), and the rise of foreign trade - and indeed the industry increased 60% in two years, and the number of French ships involved in exports went from sixteen up to three hundred.
Company from the West
Law became the architect of what came to be known as The Mississippi Bubble, an event that would begin by consolidating the Louisiana trading company into a single monopoly (The Mississippi Company), ending with the collapse of Banque GÃÆ' Â © nÃÆ' Â © rale and subsequently devaluing the Company's shares Mississippi.
In 1719, the French government allowed the Law to issue 50,000 new shares in the Mississippi Company at 500 livres with only 75 livres down and the rest because in nineteen additional monthly payments of 25 livres each. Stock prices rose to 1,000 livres before the second installment even matured, and ordinary citizens flocked to Paris to participate.
In October 1719 the Law's Company lent French state 1.5 billion livres at 3% to pay off the national debt, a transaction funded by issuing over 300,000 shares in the company.
Between May and December 1719 the market price of a share rose from 500 to 10,000 livres and continued to rise to the beginning of 1720, backed by a 4% pledge of dividend to the Law. Under rapidly emerging price inflation, the Law sought to hold stock prices at 9,000 livres in March 1720, and then on May 21, 1720 to engineer a controlled reduction in the value of both the record and the stock, the measure itself reversed 6 days later.
When people rushed to convert paper money into coins, Law was forced to close Banque GÃÆ'nà © nÃÆ'  © rale for ten days, then limit the size of the transaction once the bank reopens. But the longer the queue, the stock price of the Mississippi Company continues to fall, and food prices jump as much as 60 percent.
The fractional reserves ratio is one-fifth, and the Kingdom's decree to criminalize gold sales has been set. Then the Kingdom decree stipulates that the gold coin is illegal, which is immediately reversed, causing 50 people to be branded to death. The shares of the company were ultimately worthless, and initially increased the speculation about their value leading to widespread financial pressure, which saw Law laid off in late 1720 from its business as General Controller and his position as President Director Banque GÃÆ'nà © nÃÆ'Ã… © rale.
Downfall
Speculation gives way to panic as people flood the market with future stock trading as high as fifteen thousand livres per share, while the stock itself is maintained at ten thousand livres each. In May 1720, prices fell to 4,000 livres per share, a 73% decline in a year. The rush to convert banknotes into coins causes bank hours and sporadic riots. The squatters now occupy the square of the Louis-le-Grand Palace and openly attack the capitalists who inhabit the area. It was in this state and the night cover that John Law left Paris about seven months later.
The fall of a relatively unknown man comes as fast as his ascension, leaving a vacuum of economic power. The legal theory lived 300 years later and "captures many key conceptual points that are part of modern monetary theory".
Next year
Sharon Condie and Richard Condie 1978 The short-lived Animated National Film Council of Canada (NFB) John Law and Mississippi Bubble is a funny interpretation. The film was produced by NFB in the newly opened Winnipeg studio. It opened in Canadian theaters starting in September 1979 and sold to international television stations. The film received an award at the Tampere Film Festival.
Maps John Law (economist)
See also
- Banque Royale
- early modern France
- Assignat, the bank notes system of the French Revolution
References
External links
- John Law
- Gutenberg's Project of Fiat Money Inflation Edition in France: How...
- John Law: Proto-Keynesian, by Murray Rothbard
- Text on Wikisource:
- "Law, John". EncyclopÃÆ'Â|dia Britannica (issue 11). 1911. Ã,
- "Law, John". New Student Reference Work . 1914.
Source of the article : Wikipedia
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