JOHN LAW (1671 – 1729). A Scottish economist, gambler, banker, murderer, royal advisor, exile, rake and adventurer, the remarkable John Law is renowned for more than his unique economic theories. His popular fame rests on two remarkable enterprises he conducted in Paris: the Banque Générale and the Mississippi Scheme. His economic fame rests on two major ideas: the scarcity theory of value and the real bills doctrine of money. (cepa.newschool.edu). He is responsible for the adoptation or use of paper money or bills in the world today.

A scarce Document Signed 1 page. 8 1/8” x 12 ¾”. February 20, 1720.

(color scan available upon request)

Law orders a payment for 2,500 livres. Law urged the establishment of a national bank to create and increase instruments of credit, and the issue of paper money backed by land, gold, or silver. He had the almost socialist idea of abolishing minor monopolies and private farming of taxes and creating a bank for national finance and a state company for commerce and ultimately exclude all private revenue. This would create a huge monopoly of finance and trade run by the state, and its profits would pay off the national debt. The Conseil des Finances , merchants, and financiers objected to this plan. In 1716 Banque Générale (“General Bank”) was set up by Law. It was a private bank, but 3/ 4 of the capital consisted of government bills and government accepted notes. In August 1717, he bought the Mississippi Company, to help the French colony in Louisiana. In the same year Law floated the Mississippi Company as a joint-stock trading company called the Compagnie d’Occident which was granted a trade monopoly of the West Indies and North America.

The bank became the Royal bank (Banque Royale ) in 1718, meaning the notes were guaranteed by the king. The Company absorbed the Compagnie des Indes Orientales, Compagnie de Chine , and other rival trading companies and became the Compagnie Perpetuelle des Indes in 1719. In 1720 the bank and company were united and Law was appointed Controller General of Finances to attract capital. Law’s pioneering note-issuing bank was extremely successful until it collapsed and caused an economic crisis in France and Europe.

Law exaggerated the wealth of Louisiana with an effective marketing scheme, which led to wild speculation on the shares of the company in 1719. In February 1720 it was valued for a very high future cash flow at 10,000 livres . Shares rose from 500 livres in 1719 to as much as 15,000 livres in the first half of 1720, but by summer of 1720, there was a sudden decline in confidence, leading to a 97% decline in market cap by 1721. By the end of 1720 Philippe II of Orléans dismissed Law, who then fled from France. Law died a poor man in Venice in 1729. (john-law.biography.ms).