John Law

There are many other reasons for America's huge growth such as the huge land mass and natural resources, but economic historians argue that Britain's public borrowing monopolized the available capital, reducing the amount of credit available to British businesses.

If you enjoyed this video, you should watch this video on John Law and the Mississippi Company next, which is all about the bubble that was happening in France at the same time.

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Have a great day and see you in the next video.

History does this trick more than once.

John Law's Mississippi bubble eats French savings and leaves the speculators holding land claims.

The Continental Congress prints until the phrase, not worth a continental, is an insult.

Weimar prints until the insult is in a wheelbarrow.

Yes.

In Paris, an exiled Scottish economist named John Law had taken control of the Mississippi Company.

Law was a brilliant but dangerous financial engineer.

His ultimate objective was macroeconomic.

They did it then.

They did it how they let John Law in, as I wrote about.

They're doing it now.

And I have a French buddy who likes to talk to me about bonds, who was a bond trader for a long time, and he, he actually called it that oats would be, uh, outside of, of the Italian bond market.

Not every perpetual promise held.

In 1719, John Law's company took over France's national debt, swapping it for shares bought with paper money from the bank he ran.

In 1720, the paper collapsed and the promise with it.

In 1752, Britain folded many of its debts into one perpetual, the consoles, 3% a year on every 100 pounds.

you know, to solve everybody's problems.

I mean, that was John Law's offer to the King of France, that you put me in charge of your colonies, you put me in charge of your national debt, you put me in charge of your currency and your central bank, and I'll take care of everything.

You'll have plenty of money to spend, and the economy will get back to economic growth.

And we'll make, you know, everybody will make zillions of money.

It describes a character whose initial lie spins completely out of control, ultimately leading to ruin.

Now, this perfectly mirrors the financial dynamics today, but also the massive tangled web of deception of John Law's Mississippi bubble in the early 1720s.

John Law attempted to deceive the public into believing that unlimited paper money could indefinitely substitute for real wealth and gold.

It involved controlling trade policy, big government mercantilist policy, national debt, interest rates, and currency manipulation, as well as the world's first enormous stock market bubble.

And as the deception grew over time, the financial web became so complex and fragile that it completely collapsed.

Richard Cantillon saw right through this, and he shorted John Law's system using sophisticated exchange rate maneuvers and other things and walked away an incredibly wealthy man.

In the aftermath, Cantillon wrote a manuscript which gave the world a textbook in economic theory for the first time.

Our own tangled web also includes a massive national debt, and this is true of many countries, a global bear market in bonds, where bond prices are falling and interest rates are on a very long-term trajectory upwards.

So they, the, the failure here is the really failure of imagination, meaning they couldn't convince people that there's something better, uh, overseas.

And, and trust me, they, they tried, right? They tried, especially in, in the book I've devoted a chapter on, uh, on the famous, um, Mississippi Company bubble that really shapes the French economic and financial life, uh, in, at, at the start of the 20th century when John Law, the finance kinda wizard and who will be giving the position almost like a finance minister of France, tries to reorganize French finances.

And part of that re- reform hinged on developing an economic enterprise in, in Louisiana.

And in order to convince people that, hey, Louisiana is actually a great place to move and, and live, they tried to publish prints and wrote these remarkable pamphlets extolling Louisiana as, as a, as a utopian paradise where there are mountains of gold and silver, and you only need to have a shovel to, to strike rich.

Louis XIV., that magnificent and extravagant monarch, had died, and left his country beggared and in want.

The Duke of Orleans now ruled as regent for little Louis XV., He was at his wits' end to know where to find money, when a clever Scots adventurer named John Law came to him with a new and splendid idea.

This was to use paper money instead of gold and silver.

The regent was greatly taken with the idea, and he gave Law leave to issue the paper money.

All France went mad with eagerness to get some of the paper money which was, they thought, going to make them rich for ever.

Besides issuing paper money, law started what was known as the Mississippi Scheme, or Company of the Indies, in 1717.

Louisiana, which had been received back from Crozat, was handed over to John Law, who undertook to settle the country, and work the gold and silver mines which were supposed to be there.

Law began at once to fill all France with stories of Louisiana and its delights.

Clearly, even a monetarily illiterate public would never consent to this.

Is this another example of government taking the liberty of acting in our interests? John Law's disastrous experiment with fiat money, culminating during his brief tenure as Comptroller General of France in 1720, should have served as a permanent warning to every government thereafter.

But if anything, it's been an inspiration.

The U.S. Fed regime is now over $40 trillion in debt with more on the way.

Of 56 documented hyperinflations, including John Law's and defined according to the Kagan rule, all of them were fiat money economies.

According to prevalent wisdom, economic turmoil follows from anarchy.

How did government achieve what is usually associated with its absence? Madison's Angel Theory of Government In the summer of 1787, Federalists James Madison, Alexander Hamilton, and John Jay led a coup in Philadelphia against the national government of the Articles of Confederation.