John Lo is a Scottish financier, prophet, adventurer, banking romantic, credit wizard, father of inflation - that's how people used to talk about him in the 18th century. First, this man turned France into one of the most prosperous countries in Europe, and then drove it into poverty. The first biography of the financier was published during his lifetime and was translated into many languages. The French called him Jean Lass. In other countries he was known as John Law. This article will describe a brief biography of the financier.
Youth
John Law of Lauriston was born in Edinburgh (Scotland) in 1671. The boy's father was a jeweler and moneylender. In 1683, the head of the family bought the small estate of Lauriston, which was accompanied by a title of nobility. In his youth, John was quite attractive, and he was gladly received in the best houses in Edinburgh. Thus, the future financier quickly "mastered all kinds of debauchery." Soon the young man became bored, and at the age of twenty he went to conquer the capital of England.
Speculation and duel
In London JohnLo immediately developed a vigorous activity. He inherited the ability to earn money from his father. John began by speculating in stocks, jewelry, and paintings. In addition, he came up with his own system of playing cards. This brought Lo solid money. John also enjoyed wild success with women and was not distinguished by selectivity in love affairs. His next affair ended in 1694 with a duel. Law killed his rival and was arrested. At the trial, the future financier was sentenced to death. But John escaped from prison and went to Amsterdam. In general, the hero of this article was very lucky.
Change activities
Having arrived in a new city, John Law came to grips with the study of economic theory. On this subject, the young man read quite a lot of authoritative works. He soon published his book. There, the financier spoke about the main reason for the economic stagnation. According to Lo, it was a lack of money. To solve this problem, John proposed introducing paper banknotes and backing them with gold. And it is best that a state institution is engaged in the issuance of banknotes. The financier suggested adopting this idea to almost all European countries. But only one state managed to implement it.
Introduction of the idea
In 1715, after the death of the monarch, the treasury of France was completely empty. Philippe d'Orléans (regent under the great-grandson of Louis XIV) was in shock after counting the public debt. It turned out that this figure reached 3 billion livres. And annual taxes and taxes brought only 250 million. Althoughaccording to the report of the head of the secret police, this amount was three times higher. Just 500 million ended up in the pockets of various bureaucrats.
According to the regent, only John Law's system could help in such a difficult situation. Already in the middle of 1716, the hero of this article opened a bank (albeit not a state one, but a joint stock one) with the right to issue paper money. At the same time, banknotes were freely exchanged for coins made of precious metals at their real face value on the date of issue, and were also accepted for payment of taxes and taxes. That is, John's banknotes have become more solid than silver and gold money.
At that time it was an unprecedented adventure. To ensure all the bills issued by Law in France, there simply was not the necessary amount of silver and gold. However, 12 months after the start of the issue of banknotes in France, there was an economic recovery. Construction resumed, industry developed, trade revived, and low-interest loans were issued.
Another company
But the bank wasn't the Scot's only idea. Early in 1717, John Law created the "Company of the Indies". Law wanted to invest the capital of this company in the development of the Mississippi River basin. The French called it Louisiana after King Louis XIV. This event went down in history as the Mississippi Company.
In the late summer of 1717, John announced the placement of 200 thousand shares. The terms were very favorable: with a face value of 500 livres, the papers were sold for only 250 with a guaranteed redemption in six months at the initial price. Sharessold out instantly. Six months later, their market value was many times higher than the face value. Having redeemed all the securities, John put a solid sum in his pocket. Law's companies were soon given a monopoly on trade in "both Indias". This only increased the market value of the securities and increased the demand for them.
First Stock Exchange
Emission of 50 thousand shares - that's what John Lo soon announced. After the method used last time, the financier decided to make more money. Demand exceeded supply six times as 300,000 bids were received for the purchase of securities. Earls, marquesses, dukes, barons and viscounts besieged the house of the financier, wanting to become part of the we alth of the Indies. Due to this, the Scot's secretary amassed a huge fortune, receiving bribes from them.
The secondary securities market spontaneously appeared. In fact, it was the first stock exchange. Seeing an additional source of income, John organized pavilions near his house. The people hired by Law, who are now called "brokers", began to trade shares in them.
The rate of securities grew exponentially. This was partly facilitated by the fact that the head of state, the Duke of Orleans, was on the board of the company. The we alth of the French grew along with the increase in the price of shares. Naturally, John Law himself made good money on this. The pyramid of the financier has reached its maximum point of growth. But the Scot did not think about it and "bathed" in money. He even bought himself a couple of expensive estates. And John received the title of duke and became the Minister of Finance (in fact,second person in the country). But all good things must come to an end.
Lack of funds
Followed by the Mississippi Company, John had poor control over the management of the bank. And all of its issue went to loans that were invested in the purchase of shares in the company. In turn, the India Company regularly placed new issues of securities, acquiring government bonds with the money received. Thus, the firm became practically the sole creditor of France. But the regent was happy with everything, and he demanded the issuance of more paper money.
Yes, and in the "Company of India" things were not going very well. The development of distant territories of Louisiana was rather slow. Cities were indeed built on the banks of the Mississippi, expeditions were equipped there and ships with settlers were sent. But there was no significant return from this project at all. Only a few knew about the real state of affairs. Due to the catastrophic shortage of immigrants, the regent ordered (by secret order) to send prostitutes, thieves and vagrants to America under escort. But a well-thought-out advertising campaign inspired the French that the ships arriving in the ports of the country were crammed with fabrics, spices, silver and other foreign riches.
Collapse
The arrival of Prince de Conti at the bank was the first bell. He took with him a whole cart of banknotes and demanded to exchange them for coins. John immediately turned to the regent and he persuaded the relative to hold paper money. Although the case receivedwidely publicized, but almost no one attached importance to him, since Conti was not popular among the population. But the most prudent and cautious people began to exchange banknotes for silver and gold. And this despite the authority that John Law possessed at that time. The financial pyramid was soon to fall apart, as the number of exchanges only grew every day.
The bank's tiny reserve of precious metals was melting before our eyes. At the beginning of 1720, Law issued decrees that limited the exchange of banknotes. It was also forbidden to purchase precious stones and jewelry with paper money. In May, banknotes were devalued twice, and then their exchange for coins was completely stopped.
People's hatred
The French immediately disliked Lo. Once a crowd of Parisians demanded that John exchange banknotes for gold. Having been refused, the enraged citizens almost tore the adventurer to pieces. Because of this, Law moved to the Palais-Royal to live under the direct protection of the duke. Soon the financier was removed from public office. Chancellor Dagasso, who had previously been dismissed due to resistance to John's reforms, returned to the government of France. His first decree in his new post was the resumption of the exchange. On June 10, 1720, all the French went to the Royal Bank. After the exchange began, silver and gold became scarce, and copper coins were used. The poor people were happy about this too. With each passing day, passions flared up at the bank. On July 9, the soldiers guarding the establishment lowered the bars so that the crowd could not smash the building. People started throwing stones at them. In turn, the soldiers answeredgun shooting. As a result, one Frenchman died. And a few days later, 15 people were trampled in the crowd…
In August 1720, the Royal Bank was declared bankrupt. Three months later, all of his banknotes were cancelled.
The Indian company did no better. The share price plummeted. Parliament put forward a demand that John Law, as the organizer of the first pyramid scheme, should be tried and executed. But instead of the hero of this article, his brother, William, went to the Bastille. The guilt of the latter was not proven, and the relative of the financier was released.
Move to Brussels
Well, John Law himself left France at the end of 1720. The Scot went to Brussels with his son, leaving his daughter and wife behind. In the new city, John lived quite modestly. His only income was a pension paid by the Duke of Orleans (in France, all of Lo's property was confiscated).
Unexpected offer
In 1721 the financier was in Venice. There he was visited by a Savoyard nobleman who introduced himself as a Russian government agent. He handed John a letter from one of Peter's advisers. In the message, Lo was invited to the Russian service and promised a good advance. But then all John's hopes were connected with the English court, where Russia was treated very hostilely. Therefore, the Scot decided not to risk it and avoided answering. And then hastily left Venice.
Recent years
Lo, for several months after his departure, consoled himself with the hope that the regent would call him back to France to help overcome the crisis. But in 1723, the Duke of Orleans died, and the financier realized that he could no longer return there.
John Law, whose biography was presented above, died in Venice from pneumonia in 1729. Before his death, the Scot wrote a book, A History of Regency Finance. But she saw the light only two centuries later.
