when you can charge it

He was called the scoundrel who invented credit. He was a Scottish libertine named John Law who rescued France from ruin, then ruined France again by applying his theory of prosperity based on credit. Law showed us the future and it didn’t work back then, and you can be the judge of its present influence…

…gossip says he encountered Phillipe d’Orleans, nephew and son-in-law of Louis XIV in a bawdy-house, and there, amid the chatter and pouts, expounded his financial theories. These were then transcribed into detailed reports which asserted that wealth could be better created by governmental action than by the free play of individual enterprise.

James Gillray. Loss of the Faro Bank. 1797. cource: WIKI.---Smith’s resignation in a March 14 op-ed drew both praise and criticism from big wigs in the financial realm, including T2 Partners LLC Founder Whitney Tilson, Former Federal Reserve Chairman Paul Volcker and Mayor Mike Bloomberg. An avid Ping Pong player and South African native, Smith started at Goldman as an intern and worked his way up, but resigned after he noticed a "decline in the firm’s moral fiber."--- Read More:http://www.amny.com/urbanite-1.812039/ex-goldman-sachs-exec-greg-smith-could-land-1-million-book-deal-1.3628449

But Law’s own excess of individual enterprise annoyed the police; he and his travel companion, Lady Catherine Senor, were expelled from France as undesirables. They went to Italy, making their headquarters in Venice, the amphibious Las Vegas of eighteenth-century Europe. Law won steadily at games of hazard, and is said to have used private information from Paris to speculate in international exchange.

In August, 1715, at the news that Louis XIV was pushing at death’s door, Law returned to Paris with his head full of projects and his coach groaning with gold worth a million and a half francs. The king died on September 1, and was buried amid scenes of shameless popular rejoicing. He was succeeded by his five year old great grandson, Louis XV. Philippe d’Orleans, John Law’s old companion, was named regent of the kingdom and he found the nation’s finances in a calamitous position. The old king, who was effectively the state, left a total indebtedness of three billion francs. The treasury was empty; the anticipated revenues for the two coming years were already discounted and spent. The regent and his advisers seriously considered declaring the realm bankrupt.

James Gillray. source: wiki. ---Part of Law's moneymaking schemes involved the settlement of the Mississippi Territory for France, something that grew more and more difficult to do as word spread throughout Europe that the region was dangerous, miserable, and nothing at all as described in Law's propaganda. He circulated posters showing a land of plenty, one where diamonds and gold could be scooped off of the ground at will, when in fact much of the Mississippi Territory was swampy, ridden with pestilence, and virtually uninhabitable, with neither gold nor diamonds anywhere to be found. --- Read More:http://www.mindystarnsclark.com/cajun-moon-factfiction.php

Enter John Law who now came galloping to the rescue. He proposed to create, with his own funds, a private bank, guaranteeing to pay off the government debt in twenty-five years. But…. he must have a free hand to his his revolutionary new ideas into practice.

The few banks already existent in Europe were either banks of deposit, safeguarding money, or discount banks, accepting merchants’ promises to pay and issuing against them their own promises, or notes, and limited to specific transactions. Law proposed a bank that would engage in business, collect state revenues, hold monopolies, and offer profitable investments. It would issue bank notes, paper promises, which would circulate everywhere in place of gold and silver. The bank notes would be secured by a gold reserve and by the country’s credit, or its ability to furnish labor and goods.

Prosperity would ensue, for Law insisted, money creates trade under the motto of we need more money to employ more people. If money is a representation of wealth, money is also a force, which may be manipulated to make wealth. The essential component then, is credit, or faith. But credit, as economists were fraught to say, was merely suspicion asleep.

---With no ceiling to Law’s growing influence, he purchased the right to mint French coinage. These coins would have no precious metals in them, which put Law’s theories into full action. Law next assumed legal control over French taxation, as his financial power began to resemble Louis XIV’s governmental authority. By 1720 all financial institutions were under Law’s supreme command. Phillippe bestowed the title “Controller General and Superintendent General of Finance. Success seemed to breed success, but it was all a mirage. He continued to print paper money to fund his growing financial empire. That paper money was guaranteed and founded upon government debt, which grew rapidly. Initial shares of the Mississippi Company were sold for 500 Livres (French currency at the time). The shares value quickly expanded, which brought speculators from all over France and Europe into Paris’ financial district. This became a scary sight for the Parisians, and Phillippe had to order police into the district to maintain control. Within the first year of existence the price per share had increased dramatically from 500 Livres to 10,000 Livres – 190%. Many people aristocratic and commoner alike became Millionaires, as the French termed this new wealthy class.---Read More:http://armchaircapitalist.wordpress.com/category/europe/

The dazzled regent and his council believed Law’s promises and accepted his proposal. The Banque Generale opened in June, 1716 with a capital of six million francs. Shares of the capital were eagerly bought. The bank issued its new bank no

legal tender for all payments, convertible into specie at the holder’s will, and handsomely engraved. Paris was delighted with the novelty and convenience of the notes, the relative security of a paper hoard against thieves. The notes were soon quoted at a premium over specie. And the abundance of fresh money did indeed stimulate a revival of commerce.


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