John Law’s Paper Pyramid (Part 1)

John Law, the real name Jean Lauriston, a Scottish-born Frenchman is considered to be the author of the first financial pyramid in the history of mankind. We must be thankful to him for the appearance of paper money. Today we will tell about this talented economist and even more genious fraudster.

This vivid personality was born in Edinburgh in 1671. At the age of 20 he moved to England. As he was an inveterate card player and reckless duelist after three years of his wild London life this young man was forced to escape the country because he had killed his opponent in а duel. His escape from London was successful and John Law safely fled from justice to Holland.

We must give him his due because he had never stopped his personal development by regularly visiting libraries and public lectures in European universities. In Amsterdam John thoroughly learned the principles of the banking system and even wrote a scientific research “Money and Trade Considered With a Proposal for Supplying the Nation with Money”.

The idea of the treatise was that for financial system to be improved and to overcome economic stagnation the state needed special banknotes preferably issued by a state bank.

The thing is that in those times trading relationships were mostly natural. Besides natural exchange coined money from precious metals like gold and silver was in turnover. It was necessary to create a universal method of settlement convenient for all.

After living for some time in Holland our hero returned home to Scotland for a while. He unsuccessfully corresponded with representatives of various European authorities offering them to realize his banking reforms.

After living for some time in Holland our hero returned home to Scotland for a while. He unsuccessfully corresponded with representatives of various European authorities offering them to realize his banking reforms. In Edinburgh he got married and together with his family decided to try luck in France. John arrived in Paris as a wealthy man (remember his passion for gambling in which he was very lucky).

In one of the gambling parlors he met the duke of Orleans who almost solely ruled over France at that time, being a regent of а minor king’s son Louis XV. The duke was so fascinated by John’s idea of issuing banknotes that Law’s small private joint-stock bank became a royal (state) bank in three years of its existence in 1719. The bank got the title “General bank” and began a mass issue of banknotes. Paper money quickly gained popularity among trading people; it was accepted for payment more willingly than louis d’ors and livres.

Continue to the Part 2