L is for John Law

I am again focusing on the famous, the forgotten and the misbegotten for Round 21 of the popular ABC Wednesday meme. But finding suitable characters is getting harder, so apologies in advance if there are repeats of previous posts.

A figure from way back for this week’s ABC Wednesday offering – financier, adventurer, duellist and gambler John Law who single-handedly bankrupted France in the 18th century.

Law was born in Edinburgh in 1671, the son of a Scottish moneylender. He joined the family business at the age of fourteen and studied banking until his father died in 1688 when he took himself off to London to live the life of ‘Dandy’.

He lost large sums of money gambling and in 1694 fought a duel with Edward ‘Beau’ Wilson over the affections of a lady. Law ran Wilson through and was charged with murder. He was found guilty and sentenced to death by the hanging-judge Salathiel Lovell but this was commuted to a fine on the grounds that his accounted to no more than manslaughter.

Wilson’s family intervened but before Law could be reimprisoned he escaped to Amsterdam where he continued his banking education.

He returned to Scotland in 1700 with a scheme in his head. He proposed that the government should set up a national bank and issue easily redeemable paper money instead of gold. Once people gained confidence in the bank, the government could increase its wealth by simply printing more money. Unsurprisingly, the canny Scots rejected the idea.

In 1708, Law went to Paris where his charm and skill as a gambler made him a favourite of the Duc d’Orleans. Law persuaded the Duc that he was a financial genius and when the latter became regent after the death of Louis XIV in 1715 Law approached him with the same scheme that the hard-headed Scots had turned down

Law approached him with the same scheme that the hard-headed Scots had turned down

The regent was impressed but the Council of Finance rejected the idea of a national bank. They did, however, allow Law to set up a private bank in the Place Vendôme in Paris.

Law proceeded to sell shares in the bank at a very attractive rate: a quarter in gold and the balance in government bonds which were worth just one-fifth of their face value. The problem was that Law had issued 60 millions’ worth of francs in notes that were secured by just six million francs in gold.

To increase his capital to avoid a run on his bank. he persuaded the regent to grant him a monopoly on land in Louisiana and then encouraged colonists to buy the land by telling them that the Mississippi basin rocks were made of emeralds. This became known as The Mississippi Bubble.

Having established his fortune, Law launched his biggest ever gamble. He offered to pay off all the government’s debts with a loan of 1,500 million livres, charging only 3% interest instead of the usual 4%. The offer was accepted and the former creditors began to reinvest in Law’s bank.

Huge crowds gathered outside Law’s office where he sat with piles of shares ready to be exchanged for gold and the value of the shares increased at such a rate that anyone who could fight their way through the crowds to buy a few could immediately sell them on the streets for several times their purchase price.

Poor men became millionaires overnight and the crime rate soared

Poor men became millionaires overnight and the crime rate soared as people scrambled to get hold of the gold that could be doubled in value in the morning.

The more shrewd of the speculators realised that the bubble would inevitably burst and began to smuggle their profits out of the country.  One Dutch financier dressed himself as a farmer and left with a million francs worth of gold in a farm cart covered with hay.

Confidence was falling and the smaller speculators began to take what profit they could which seriously drained the bank’s resources. Law was forced to issue a statement that he would not exchange more than a 100 livre note per person in exchange for gold and angry crowds began to gather demanding their money back.

the country was on the verge of a revolution and bankruptcy

On 17th July 1720, 1,500 people waited all night outside the bank and in the morning it was discovered that sixteen had died of suffocation. The mob marched on the Palais Royal and though they were eventually dispersed, the country was on the verge of a revolution and bankruptcy.

Law escaped to Brussels where, despite what had happened in France, he was approached by representatives of Peter the Great who invited him to reorganise the finances of the Russian empire. Law wisely declined claiming exhaustion and returned to England in 1721.

He remained on good terms with France’s regent who even arranged a pension for him. When Law asked him how he had dealt with his country’s bankruptcy, he replied: ‘I disposed of it by making a bonfire of the documents.’

Law hoped that he would one day be recalled to France to again take charge of the country’s finances, but that hope was dashed when the regent died in 1723.

He survived his final years by betting anyone £1,000 to a shilling that they could not throw six double sixes in a row. The number of people who took up the challenge kept him in modest means until he died a poor man in Venice in 1729.

Nobody’s prefect. If you find any spelling mistakes or other errors in this post, please let me know by highlighting the text and pressing Ctrl+Enter.

5 comments… Add yours
  • Yorkshire Pudding 27th September 2017

    Law had the hairstyle of a cissy. My apologies if you sport a similar hairstyle Ian.

    Reply
  • abcwednesday21 27th September 2017

    What a story… as well lived life with lots of experiences bad and good.

    Have a splendid ♥-warming ABC-Wednes-day / -week
    ♫ M e l ☺ d y ♫ (abc-w-team)
    http://melodymusic.nl/21-l/.

    Reply
  • Hazel 28th September 2017

    Somehow this story reminds me of Archer’s Not a penny more, not a penny less. Law sounds like a proper asshole to me.

    Reply
  • Bev Baird 29th September 2017

    Hadn’t heard of him – quite the story. Thanks for sharing it. Greed does awful things to people – we can see that now.

    Reply
  • Roger Green 1st October 2017

    John Law has also been the nickname of police.
    ROG, ABCW

    Reply

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