John Law - The First Financial Engineer - A History of Paper Money and The Mississippi Bubble
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- Опубликовано: 15 дек 2020
- John Law was a Scottish monetary reformer and originator of the “Mississippi scheme” for the development of French territories in America.
After killing an adversary in a duel, he fled to Amsterdam, where he was a professional gambler and learned about banking operations. A decade later he returned to Scotland and wrote his best-known work, Money and Trade Considered, with a Proposal for Supplying the Nation with Money (available on Amazon at this link amzn.to/2Wkts7p). He submitted his banking reform plan to the English and Scottish parliaments, but it was rejected.
After several other rejections, Law received permission in 1716 to try his plan in France. The French government was heavily in debt as a result of the extensive wars of Louis XIV, who died in 1715; and Law’s program, which promised to reduce the public debt, held obvious appeal. With Law, however, lowering the public debt was somewhat incidental. He shared with his mercantilist contemporaries a belief that money is a creative force in economic development and that an increase in its quantity would stimulate a larger national product and would increase national power. He differed from other mercantilists in looking upon a central bank as an agency for manufacturing money in the form of bank notes that would circulate in place of gold and silver, which were scarce.
In Paris, Law founded a bank with authority to issue notes. Later he combined with his bank the Company of the West (better known as the Mississippi Company), which had exclusive privileges to develop the vast French territories in the Mississippi Valley of North America. Law’s plan worked well for a few years but ran afoul of speculative complications and political intrigue, neither of which were directly attributable to Law. As the author of the program, popularly known as the “Mississippi Bubble,” Law was responsible and was forced to flee France in 1720. He died in Venice a poor man.
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What great video, history always repeats it self! Maybe you could do a video about the south sea bubble?
TeslaDan4Freedom
Sir could you please share credible financial newspapers which helps to keep students up to date with everyday news with highest accuracy.
"What can we learn...?" --> Apparently nothing, since this is effectively happening right now.
Please do more documentaries!!😊😊😊😇
Dude did not live a dull life, that's for sure! Also, "speculators of quality" has got to be the best phrase I have heard this pandemic! This dude was Chancellor of the Exchequer, Governor of the Central Bank, Head of the capital markets authority, Minister of international trade, Colonial administrator of America, Head of foreign intelligence, womanizer, murderer, gambler, serial fugitive from justice and stock promoter all in one! What could possibly go wrong? There was never a more inappropriately named man to walk God's green earth! This I swear.
Great Comment.
Dayum boy, where you find this?
great biography, you are so different to the others because you explain the finance principles, not just the public perception
Glad you liked it!
@@PBoyle I had known some of this from Niall Ferguson's The Ascent of Money but you included more details. It is one thing to know the abstract principles, it is quite another to see the more localized dilemmas that obscured the larger processes. You might be interested in the way the Russian Tsarist government tried to steer trade to the trrans-Siberian railway to prop up its inefficiencies for political purposes. Sergei Witte was often considered the economic genius of the later Tsarist era but the way that major politicians favored specific businesses like the railway (albeit a real military value) or the Yalu Timber Concession (including disguised military abilities) as financial projects.
The Cameralist financial idea are often not understood in tracing the history of economic thinking and the intersection of political, economic, and financial interests is not something a lot of current observers are prepared for in the granuality of decision-making.
It's without a doubt the best telling of the John Law story in terms of educating yourself
Definitely one of the smartest people on RUclips. Your content is always interesting 🎉
Wouldn't deflation have solved the coin-shortage problem? Supply and demand: short supply of coin results in increased value of the coin.
Came for the financial lessons stayed for interesting history. Patrick you’re not only very knowledgeable in finance you’re an excellent narrator. I loved the documentary you did on Ponzi and Law.
I wish we spent more time learning things like this in school. THIS is education.
Thank you.
Kick the commie marxists our of your schools, and you will have education.. again
I have a strong feeling every single one of my classmates would have ignored every part of this had it been a lesson. Also it would have taken several days to get by this had it been a lesson.
Living in Frankfurt I enjoyed the pleasure of listening to this video while biking past European central Bank, the sight of which has often made me deeply wonder about the meaning of money.
Thank you very much for the very informative, yet highly entertaining content!
I studied from Scotland: I studied Economic History and Modern Studies at College in Glasgow circa 1973. I wish I'd have had access to your content then. Still, "Every day's a school day".
What a fantastic video. This really made me think deeply about what money is. Please, please, please continue making similar long form videos. God bless
This might be of interest to you also. Please have an open mind, your future self will thank you. :)
ruclips.net/video/s_0ggp41rT4/видео.html&ab_channel=PrestonPysh
You kept my attention for nearly 40 minutes straight with a rivetting story. Incredible video Patrick, I expect I'll be watching it again sometime. It deserves many more views than this. Hopefully this comment helps the algorithm!
I’ve watched this video about four times over the last two and a half years. Rewatched again because I think one of the interesting lessons for today is that the massive increase in money supply did not immediately lead to proportionate inflation for everyday items. Much like in the wake of QE since 2009, when some were predicting hyperinflation, the world enjoyed relatively low (sub 2% average) inflation for the next decade. Massive central bank money printing led at first to misallocation of the new money in speculative assets like stocks and real estate. Only after more than a decade of QE, culminating in the helicopter money in response to the Covid pandemic, did inflation begin to hit commodities.
Richard Cantillon, one of Law’s contemporaries, observed those who receive newly printed money early on tend to benefit in the form of higher wealth and that inflation at first has localised effects on areas close to the primary dealers of his era. It has to filter out into the broader economy before commodity inflation begins to appear, as is the case with inflation in France resulting from Law’s asset bubble. It made millionaires at first but eventually resulted in prices for goods doubling between 1718 and 1720. Sound familiar to anyone following interest rates since the Great Recession?
Law appears to have opted to let the bubble pop in part to create a reverse wealth effect to counter inflation from exogenous shocks like the port lockdowns and accaparement of agricultural commodities.
Well done. Incredibly interesting and mind-blowing. Any number of happenings could be further explained for hours. 40 private owners of the debt...illustrates the never -ending influence of a select few on the masses. The search for ‘sound-money-‘, the inter/play between confidence & currencies, and the underlying Affect it has on the daily life of all. The overwhelmingly irony is still alive today...the gamblers (like John Law) and speculators are still the money changers of today.
Fantastic
20:40 “The meaning of value is related not to its usefulness but to rarity. Diamonds are significantly less value able than water which is required for human life but water is less valuable than diamonds because it’s availability is far greater excess than the demand for it.”
Brings me back to high school AP Macroeconomic days! Law of supply and demand baby.
Hey Patrick I came across your channel from the interview you had with Coffeezilla just wanted to say you gave me some hope and opened something I didn't see but knew that it existed.
I came from cofeezilla too .. no regrets : )
The most interesting part I found in this is that after having heard about all the complaints about money not being backed by gold anymore being bad the society where money was literally made from gold ended up trusting it less than notes backed by gold in the form of coins because of the clipping issue.
Also generally interesting to see how we see money today isn't a given
@BoBandy Which is worth more than gold. Who do you trust when in trouble ? A kg of metal, or the government ? I think you'd see that when everyone is starving, yellow pretty metal is just as useless as its weight in poop.
@@ypierro Trusting in government is a fools idea. Specially about food, during the Great Depression the government ordered milk and livestock be destroyed. If you still had your gold you could buy what little food was left. I’d trust yellow metal over career criminals.
They preferred the paper money because it was meant to be directly exchangeable for a fixed amount of gold or silver. Coins were meant to be that fixed entity, but as you said, people would clip and shave them, so they weren't an ideal solution to the problem.
What the people did not sign up for though, was the complete abolishment of gold as a store of value. The concept of value held in gold and silver was alive and well, they just thought they'd moved to a better implementation - one that couldn't be devalued by clipping and shaving. Unfortunately it suffered from another problem - in the end a central authority could devalue it at will by decoupling it from the precious metals.
Thoroughly enjoyed this. Riches to rags, to riches back to (almost) rags. Heck of a concept and idea.
Excellent video, congratulations.
I leaned about John Law through Charles Mackay : " Extraordinary popular delusions and the madness of crowds" ( 1852 edition).
A great book!
What I have learn are:
(i) Be careful with paper "money" and the conter-party risks; you dont know when it dies of sudden death. What I dont know is how to time when the £, $USD or Euro meets its demise.
(ii) Pattern of bubble and human insanity with respect to speculation and greed. The BTC spectacular raise may bear some resemblance to what happened in John Law's time.
(iii) Ability to re-invent oneself like Mr John Law.
(iv) When SHTF, governments will stop you to take your gold outside the country.
Please add more at wills. God Bless.
Found your channel recently, can’t stop watching. So interesting and the topics you cover so thoroughly is scratching an itch I didn’t even know I had. Thank you .
It was really interesting. Personally, I didn't know about this guy and now I am just wondering how I missed this. Thanks a lot.
The "CONfidence Man" never goes out of style.
Kinda funny how they keep being nationalized
It is an incredible historical financial lesson! Thank you Mr Boyle.
I am interested in your understanding of The Great Reset. Thank you.
what a story!!!!! Congratulations for your presentation
This is an incredible story. Thank you for taking the time to do this
This whole thing sounds like a Mad Lad story, especially the "Law's aim was to take on experiments with a nation's fortune", that and he escaped from jail (for murder) - a minor inconvenience in John Law's life.
Many of the things he did are considered unacceptable in this day and age.
It wasn’t technically murder as it was after a duel. « Consensual murder »
@@louisdorigny1 There’s no such thing as consensual murder
@@charliemccallum4808 but there was. Times change, people change and so do practices^^
@@charliemccallum4808 Then what is a consensual duel to the death?
Thanks for this clear explanation. I've always been fascinated with this historic episode, and think it would make for a great historical comedy-drama, sort of like "Blackadder meets The Big SHort".
Thank you! Your content has been so enlightening and appreciate a real education approach. Finally getting to learn about a passion that has been breeding in me for years but lacked a real understanding of these complex concepts. Keep it up!
John Law, founder of Modern Monetary Theory.
Note the British South Seas bubble was also at this time, as well as speculation in Holland.
Great video Patrick, you've got an excellent knack for keeping both the history and economics interesting without being hyperbolic
Patrick, this was an absolutely incredible story! What a great job you did telling this story!
Loved this video! one of my favourites that you've done, your channel gets better and better
im interested in an overview of speculative bubbles, their origins, mechanics, how it propagates/continues and finally how it (eventually?) pops
the story also hammered into me the importance of credit availability and interest rates in pushing up asset prices
Awesome video, it's so crazy he doesn't have a movie yet, or at least a decent documentary. well, now he surely has a good documentary video tho :)
For me the lesson learned from this, is that money is an ever-changing technology, it only has value as long as people believe it has. John Law's mistake, or rather France's 'mistake' was that it was a monarchy. If there is no friction in government, if a couple of powerful people is left unchecked and especially if they control money, they will always abuse it in the long run.
Also, I really like the story of the first paper money in China, would love to here that from you too :)
Such a simple concept, but enlightening to hear it explained again
Thank you for the video. Amazing.
Thanks Patrick, I love your historical content. It sparks an enjoyment of finance that sometimes gets lost in day to day tasks. Being reminded of people like John Law reinforces the power of tire kicking, introspection, and remaining inquisitively engaged with the world
Thank you for what you do Patrick. I first learned about you from the Tom Nash interview. Now I’m really glad I did. Learning new things daily.
Thank you for this history lesson, absolutely loved it 😊 love the content you share with us, always interesting stuff
This is a superb telling of a story I've read in many places, will check Millionaire... This channel is a fantastic resource, please keep the content coming. Thank you
Thank you Patrick for imparting such interesting information so eloquently.
You are a credit to your family and educators.
I’m Massively impressed ! Having watched this video for a second time I believe it is the best of the several histories on RUclips . Thank you Mr Patrick Boyle
Mr,. Patrick I am so grateful to your channel. Many Thanks!
This is the best telling. of the John Law strory I have ever heard. Very well done.
Absolutely love informational videos like this! Thank you and keep up the good work!!!
This video is the best concise history of this I have found
We all really benifit from your lectures, I am greatful for this, please keep up the good work!
Thank you, Patrick.
You are the best...
This is the most interesting thing I’ve heard in years. Love your channel, it’s what I listen to when I wake up.
A fascinating history lesson! Every minute of listening was interesting. Thank you so much! Please make more of these long form videos! 👏👏👏
Videos keep getting better and better
STEM and Finance/Economy today are always taught starting from complex principles that are just thrown at you like if it's so easy, it makes everything look so much harder than things really are. It always made me run away. But I learned a couple years back, none of these fields are to be afraid of and are fairly accessible once you deconstruct how principles and tools were brought in not over the course of a single man's life, but over and after centuries of failures, sometimes milleniums. Glad I found you to tell the tales of economy and finance so that it has exactly this effect on me: it makes things a lot easier to apprehend. Incredible work, thank you soooo much!
Marvelous, ty Patrick. Enjoyed it.
OMG All of this in one lifetime. I'm knackered just listening to it. Thanks for sharing
Funny how an Engineer says Holland success is due to Saw Mill, while a Finance Specialist says Holland success is due to it's innovation in paper money and credit.
Thanks a lot for the new edge of history understanding. The finance one.
Wow mr Boyle you always teach me something new everyday I watch your blog
Very enthralling history and amazing storytelling. Thanks so much!
just ordered your books Corporate Finance and Derivatives for Trading Floor
Another fantastic video by Patrick. Thank you for all the informative content.
I kick myself for not discover your channel earlier.
This is a yr old. Only finding it now. And absolutely loved it. Thank you
I totally enjoy listen to you read the old history then i reading myself. Thank you
This was your best video I know about. I shared it with all of my friends.
What an incredible video and story. Having recently spent a week in Paris, including a day at Versailles, I can visualise this all happening in the places I walked around! Well done 👏👏👏👏
These are really high quality documentaries
This was excellent. The thoroughness was unexpected but very appreciated.
Fantastic your work is a wonderful discovery. Thank you
Patrick, it is clear to me that you are, like me, a very well educated man. Thus, I want to give you those kudos that ensue. Your's are of the highest quality versus others who post on RUclips. You have my congratulations, respecting your posts.
You are a gifted orator and educator. Thanks for taking the time to make this excellent content!
I love the hunchback vignette! It has all been done before if one bothers to look at history.
Love your videos - so interesting and informative you’ve got me hooked. Off to make a cuppa and get the biscuits ready to watch your Ponzi scheme video. Keep up the good work - and by the way - nice tailoring.
What great content. Good work Patrick, keep it up.
brilliant guy - and thank you for contributing to our knowledge and erudition!
Thanks Patrick! Never knew the reason behind the notches on coins, very informative talk!
Absolutely fascinating! Thank you! I am saving to video to watch it again!
Glad you enjoyed it!
Patrick, thanks for all the research and such great content :)
This is an insanely interesting story. I knew bits but Holy crap. Excellent job recounting and explains the economics involved too
Unbelievably interesting. Maybe top 3 videos I’ve ever seen. A great piece of history told in a gripping style.
Wonderful story told by an impressive storyteller!
Great story, very well summarized!
Great presentation. Shows the influence of pivotal figures in history. I would like to see a biography of Isaac Newton, both as mint inspector and as loser in a financial bubble.
As always, a fantastic delivery. A lovely story, and histically & factually detailed. Organised perfectly. Explaining how we reached the situation we find ourselves in 👊😎
Amazing story
Amazing story and great video, I like hearing about Scotlands role in finance
This channel has some absolutely fascinating content 10/10n - Top job Patrick.
Exquisitely explained. Bravo ! 🙏🏻
Great video, Patrick! Thanks for sharing
Your videos are always a treat. Thank you.
Excellent description of economics principles using interesting true stories.
Exceptional, really great contribution, thank you! 👍👍
He provided a method of relating to one another with paper money. As long as people were pulled into the belief they could relate to one another with paper money, it worked. He generally used the power of the image in advertising to help pull people into a relationship with money. His risky claims about instant withdrawals was only saved by a larger relationship with the Crown. John Law depended heavily on talking to each level of the class system in their own language, he was anonymous (at some points) to the public and well known to the upper class. He pulled people into a moneyed relation with the class system and the monarchy could use speculative incentives to drag people across the world. John Law was the proverbial horse society used to achieve their respective goals and all his success depended on taking riskier and riskier attempts to keep the peace around money.
Tying money to scarce land was pretty cool. Like all European stories, France riots at some point.
You're missing the innate behaviour of peoples needing to project value onto things.. ideas, currency, identity, status.. I think this is the missing link in all successful schemes.. make it appealing enough.. so people bond / project a value to it at a societal scale.. eg BTC, Mississippi shares, blue is better than red & Gucci hand bags thus completing the illusion.. we need to believe..
Lol, as always in history. "France riots at some point"
very helpful Patrick; it took me a few days to complete watching this video. Very informative
This was so much fun, thanks for uploading!
First learned about the Mississippi Bubble from "Extraordinary Popular Delusions and the Madness of Crowds" by Charles Mackay. Although the sources are not the most accurate from it being written in 1841, it was still an exiting read.
About 15 minutes in now. Loving it so far. Looking forward to finishing the video And seeing what other interesting content your library offers! Keep up the good work!
Fascinating story, and very well told. I thoroughly enjoyed this. Thanks for sharing
EXCELLENT! You are a great storyteller, Patrick.
Tbank You Patrick what a fantastic. Storey!
Awesome vidoe bro, could you do one on the south sea bubble, that would be dope af!
Once again an excellent job! Very interesting life story.
Very nice. I learned a lot about monetary policy before this from the book by Liaquat Ahamed on central banks “Lords of Finance: the bankers who broke the world”.... which is about the beginnings of modern central banking mostly in the pre WWI and interwar period.