| Years ago, in a middle school classroom in a different | | | | In 1716, King Louis XV of France gave Law the |
| world, a young teacher taught a lesson on European | | | | opportunity to implement his strategy to use paper |
| history. One day was the story of John Law, a | | | | money. Law's plan was to create a government run |
| gambler turned economist who reached celebrity | | | | financial monopoly and use it's profits to pay of the |
| status only to wind up in exile penniless. The teacher | | | | exorbitant national debt incurred by ongoing wars |
| made the story fascinating! The word swashbuckling | | | | waged by the king. |
| comes to mind and it inspired me to read The Count | | | | Is it just me, or DOES THIS SOUND FAMILIAR? |
| of Monte Cristo by Alexandre Dumas, the guy who | | | | Law was appointed Controller General of Finances |
| also wrote The Three Musketeers. | | | | and started the Banque Generale Privee (General |
| The part of the story about the economic collapse | | | | Private Bank) which ultimately was changed to the |
| of France and the Mississippi Bubble were temporarily | | | | Banque Royale (Royal Bank). Because the economy |
| memorized for fill-in-the-blank test taking purposes, a | | | | was so strapped, there was a shortage of precious |
| not no uncommon middle school history tactic. Dear | | | | metals which led to a shortage of coins in circulation. |
| Mrs. "Long-gone Memory" did her job. Fast forward | | | | The solution was to print paper money as a fiat |
| 30 years and the objective of the lesson plan has | | | | currency or government notes guaranteed by the full |
| been accomplished. I get it now. What John Law did | | | | faith and credit of the king. The plan was a success |
| to France's economy is happening in America. | | | | at first and Law was rewarded by being given |
| Whoever coined the phrase "history repeats itself" | | | | control of France's holdings in America, the Louisiana |
| knew what they were talking about once again... | | | | Territory, using the name the Mississippi Company |
| John Law was born in Edinburh, Scotland into a | | | | which soon became the richest company in France. |
| wealthy family of bankers and goldsmiths. When his | | | | With the stock prices skyrocketing they figured it |
| father died, he took over the family business but ran | | | | was a good time to print more fiat currency. Paris |
| it into the ground spending money like a drunken | | | | was a boomtown and many people were living high |
| sailor and chasing women. His extravagant exploits in | | | | on the hog. |
| luxury ultimately led him to gambling, which didn't | | | | What happened next was, inflation started to creep |
| work out so well. | | | | in and the paper money was losing it's buying power. |
| In a dispute over a lady by the name of Elizabeth | | | | When a decline in confidence of the economy |
| Villiers, Law killed a man in a dual and was given the | | | | started to rear it's head, people wanted their coins |
| death penalty. He somehow managed to escape and | | | | back and there was a run on the bank. Or they |
| fled to Amsterdam where he studied finance. He | | | | bought up valuables like gemstones and jewelry. By |
| published a thesis called Money and Trade Considered | | | | the end of 1720, the bubble had finally burst and |
| where he argued that printing more paper money | | | | everyone wanted to get rid of their worthless paper |
| and putting it into circulation would greaten the | | | | money. |
| wealth of a country. | | | | |