December 22, 2025 • 33 mins
In this special two-part series, John Stepek and Merryn Somerset Webb tell the extraordinary story of John Law: a fugitive Scots gambler who became the most powerful financier in France and helped invent the modern monetary system. From murder and exile to paper money, banking revolutions and spectacular collapse, Law’s life reveals why today’s financial system works the way it does—and why it sometimes blows up. It’s history, scandal and monetary theory rolled into one irresistible tale.
We used a range of sources for this podcast but two key books to read if you'd like to find out more are:
John Law: A Scottish Adventurer of the Eighteenth Century (2018), by James Buchan
John Law: Economic Theorist and Policy-Maker (1997), by Antoin Murphy
See omnystudio.com/listener for privacy information.
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Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:02):
Bloomberg Audio Studios, podcasts, radio news. Okay, look back through
the history of money, and quite often it seems like
nothing is happening, long long bits of calm, and then
suddenly there's a catalyst of some kind. Stuff changes, right,
and you get everything exploding, things flipping, a period of chaos,
and then everything seems to reinvent itself. John Law, John,
(00:24):
you know all about John Law. His history reflects exactly that.
So what we're trying to do here over this holiday
and over two episodes is tell his story, which tells
us a lot about money, right, Yeah, and we need.
Speaker 2 (00:38):
To take two whole episodes to do it. This is
a special series, folks, Join Law Stories, the story of
bast a fugitive scotsman clearly identify with that quite closely.
Briefly became the most powerful man in France and the
richest I'm the richest, yeah, which is even more important.
And then doing so he changed both my literary and
arguably European her study forever.
Speaker 1 (01:01):
Wow, it's a big story, So stay with us for
it because his rise and it's for us not just
about history, is it. It's about the monetary system that
we live in today. Okay, John Law. He might not
be as respected as like Adam Smith, but he pretty
much laid the foundation for the monetary system that we
(01:21):
use today, right, So you could arguably say that his
thinking is more important than a lot of that academic muk.
Speaker 2 (01:29):
Yeah, you could, and actually and whatever else he was,
he was a gambler, sometime moderor he was also a practitioner.
He did what he believed, and of course, as we'll
find it, that didn't necessarily work to his advantage.
Speaker 1 (01:43):
All the time, I think you know, you're already giving
away the fact that despite the fact he's a murderer, gambler,
the beginning of the end of monetary systems, and all
sorts of other appalling things. John rather likes John Law.
Speaker 2 (01:56):
I think I'm really quite fond of it.
Speaker 1 (01:58):
It's the charisma every time.
Speaker 2 (02:02):
Well, yes, yes, perhaps chapter one the beginning, Well, is
this horrible, doesn't borne? Well, let's wind by call the
way back to April sixteen seventy one and John Law
(02:22):
is born in Edinburgh. He was one of twelve children,
four of whom died in childhood. His dad, William Law,
was a goldsmith, and his mum, Jean Campbell, was William's
second wife, and she had three sisters and they'd all
married well, so he's basically from my kind of upper
merchant class background. So in sixteen eighty three, when John
Law's twelve, his father William, goes to France because he's
(02:45):
got a kidney stone. He has to get an operation.
The chances are that he'll die under the knife, but
it's his only chance, and there happens to be a
company of barber surgeons of great reputation in France who
do this kind of thing the time. So before he leaves,
he puts his affairs in order, says goodbye easy, eight
kids and his wife, and then heads off to France.
(03:07):
And as it turns out, unfortunately, he does die when
the operating.
Speaker 1 (03:10):
Table, leaving behind eight kids.
Speaker 2 (03:13):
Leaving behind eight kids, and so Gene takes over the
family business, and she also avoids getting married again so
it's not to have to sign the business over to
her husband. And at this point goldsmiths are all ready
in banking, so when he joins Brothers, takes over the
kind of goldsmith side of things, actually making stuff out
of gold. But Jane and join sort of jointly kind
(03:37):
of operate the banking side of the business, so lending money.
This is already something that goldsmith's are starting to do.
Speaker 1 (03:46):
So we're not into fractional reserve banking at this point,
not quite yet.
Speaker 2 (03:50):
Well not formally, but actually goldsmiths really are lending out money.
It's not like they have to have a one to
one correspondence. There's not one hundred percent reserve requirements, and
people know that people need credit, and there's no way
you could do that and have all the gold still
sitting there in the bank and demand at any time.
I mean, there's actually an interesting called bailment, and this
(04:12):
is where if you want your goldsmith to look after
your gold, you put it in a bag and you
give it to them, and that means that you want
that gold back. But if you give them loose coins
and there's an understanding that that money can be lent
out and it's not necessarily the same gold coins, it's
you're going to get back. So basically, if everyone came
to the goldsmith's at once and wanted all the money back,
it wouldn't be there immediately that day.
Speaker 1 (04:34):
I reckon I would won my own gold coins back.
Speaker 2 (04:37):
I mean, I think you probably would at this time,
because a lot of them are debased.
Speaker 1 (04:40):
But people's maybe chipped in kleptics out.
Speaker 2 (04:43):
Yeah, so I mean you kind of maybe want to
use the bailment.
Speaker 1 (04:47):
If as a child he's already learned about gaging, interest rates,
monopolies gold. Yeah, yeah, he's kind of off before it.
Speaker 2 (04:55):
Yeah, he's that because I suppose another interesting in one
of the core things would being a goldsmith is that
he's used to that world where gold is an object.
So it's it's jewelry, it's plates, it's things like that,
but it's also got a separate financial function. Does this
thing called moneyiness somewhere that is a kind of abstract
(05:16):
property of the gold And he appreciates that there's a
difference between the gold object and gold has money, and
that's probably already kicking around and his brain a wout
of thought. A look the things he has a tear away.
His mum actually sends him off to a boarding school
in a little village called Egoshum, which is still about
an hour and a half drive from Edinburgh, and at
(05:37):
least part of it, according to sources at the time,
is to keep him away from the temptations at the
big city. He's interested in things like gambling, and it
does get to a point where he comes back he's
sixteen because of the bet that yeah, exactly, yes, class
war even then, but he comes back and they have
(05:58):
a falling out him In his muther there actually is
a kind of court case over it. It sounds like
he's almost like trying to divorce her and get his
inheritance so that he can be free, and she says
in the court documents that actually the true cause of
his deserting of my family was because of my motherly
reprehending him for biding late out at night and going
to the lottery and other games. So basically he's just
(06:21):
a naughty boy and she's kind of fed up beating.
Speaker 1 (06:24):
Sixteen sixteen seventeen, and a lot of mothers in Edinburgh
today similar feelings.
Speaker 2 (06:30):
Yes, I can imagine there's a lot of pushing pull,
but it doesn't ever fully go to court, and it
does eventually get settled by the time he's twenty one
in sixteen ninety two. But the point is, I think
this illustrates that a he's already someone who's very much
pushing the boundaries and excited about getting out from under
(06:51):
and making his name in the world, and also that
he's someone who kind of enjoys taking risks and actually
probably isn't that careful with money despite his upbringing. So
(07:12):
sixteen ninety two, John Law's twenty one and he's finished
his education, He's inherited the money that he's owed from
his mother and he goes down to London in the
company of a chap called John Campbell, who's a fellow
Scott who wants to set up a goldsmith's in London.
Now he does this and that actually eventually becomes Cook's Bank,
and John Law himself ends up living in Saint Martin's
(07:33):
in the Field, which for anyone who's not based in
London is pretty much where charing Cross station is today,
and at that point it actually was a field.
Speaker 1 (07:42):
It's quite a brave move, even as a young man
to move from Edinburgh to London. Quite a journey, yeah,
alien place to scott'stand as it is today.
Speaker 2 (07:53):
If I had remember the mood I went to London
for the first time when I was twenty one. Thinking
about it, I think it's a brave move. I think
he is clearly ambitious at this point. I would say
he's more reckless than anything else, for reasons we'll see
in a moment. I think basically just wants to have fund,
because he spends a lot of his time gambling, to
the point where he actually has to write back to
his mum and handover a chunky his inheritance in exchange
(08:16):
for more cash.
Speaker 1 (08:18):
Basically she must have been fit up by that point,
if you would think, when you actually it's weird.
Speaker 2 (08:22):
Through their lives, they don't have a major falling out again,
and she doesn't disinherit him or anything like that. So
although he's leading somewhat forcibly dissolute life, and he's kind
of known as a dandy and a ladies man, and
he does like gambling and partying and all the rest
of it, she doesn't ever actually cut him off.
Speaker 1 (08:42):
Maybe the other kids are worse.
Speaker 2 (08:44):
I mean possibly possibly, they'd have to try quite hard.
So down in London he gets known as bow Law.
A bow is a dandy, a kind of it boy,
a kind of man about town.
Speaker 1 (08:55):
In bau right b e A U.
Speaker 2 (08:57):
Yes, as beautiful, I guess. And then we come to
a massive turning point. It's fair to say that if
this hadn't happened, John Law might just have ended up
as another London society man, maybe dabbling in politics, maybe
pushing money making schemes around exchange Alley with the other
stock jobbers. Instead, he's about to embark in the path.
We'll put him in a position to play financial alchemist
(09:20):
with one of the biggest economies in Europe. Chapter two
the due in April sixteen ninety four. John Law is
(09:40):
twenty three and he gets involved in the life of
a fellow dandy called Edward bow Wilson. Edward bo Wilson
is just another it boy, like John Law, another dandy,
and people are really intrigued by him because he's spending
an awful lot of money down in London. Even the
load of the family that he comes from is not
(10:02):
well off. They're sort of gentry, but they're the lower
end of the gentry, so for perspective, he's thought to
be spending something in the region of about four thousand
pounds a year, which in current money is about six
hundred and seventy five thousand pounds a year, And in
terms of what people were saying about them at the time,
there's the equivalent of a local gossip columnist who writes
(10:23):
to his employers and Devon, who like to be kept
up to date on the news in London, and he
tells them that Wilson is the subject of the general
chat of the town. He has no gamester, neither is
he known to keep women company, and it cannot be
yet discovered how he came to live at so prodigious
an extravagancy. We never get to find out where Wilson's
(10:43):
money comes from, because in the ninth of April sixteen
ninety four, he enjoined fight at Bloomsbury Square and join
stabs him in the stomach with an iron and steel
sword of a value of five shillings, which about forty
pounds to day, into a depth of two inches. That's
all according to court documents, and he dies immediately, which
strikes me as a tiny bit odd. But I don't
know any about anatomy.
Speaker 1 (11:04):
Okay, so this is really unlucky.
Speaker 2 (11:06):
It is unlucky. We don't know why they fought. A
later theory claimed that Elizabeth Villiers, who was King Williams's mistress,
was involved, but there's no evidence for that, and it
lightly originated the century afterwards. And there's also a scandalous
pamphlet from the seventeen twenties, and then this suggests that
(11:26):
Wilson was actually living an affair with a nobleman who
was the person paying for his lifestyle, and that Law
killed Wilson to silence and so effectively he was acting
as a kind of eighteenth century hit man. But that
seems to just be pure gossip meant to damage Law's
reputation at the time, and a more plausible, if somewhat
less dramatic account mentions a Missus Lawrence and she was
(11:50):
a friend of Laws, and she was the landlady of
a house where Wilson's sister lived. Wilson then discovered that
Law was keeping a mistress there, and he told his
sister to leave, and Missus Longs took offense, probably because like, oh,
what are you accusing me of running some kind of
you know, broadle or something. An argument followed and that's
where the duel came from. So basically Law might have
(12:11):
been defending his friend's honor, which I think is probably
quite believable because he's clearly still quite hot headed and reckless,
but I mean, ultimately we don't know the real reason.
After the fight, Law is arrested and the key legal
(12:32):
question is whether it was a planned duel or a
spontaneous fight. The duels were common but illegal, and I mean,
this will seem a bit weird. That's what premeditation is
what made it murder and therefore punishable by hanging, whereas
a kind of heat of the moment impulse fight meant
it was manslaughter, and basically basically knows days you got
away with manslaughter. So Law claimed that Wilson attacked him
(12:53):
suddenly in Bloomsbury Square, and that would have made it
self defense. But the prosecutors argued that it was pre
arranged and that kind of they showed letters and things
to show that they had ongoing feud, so it was
kind of cut and dried from that point of view.
So the jury agreed, they convicted them a murder and
they sent them to hang. Now the king reprieved them
because the low jewels were technically illegal. They were also
(13:16):
sort of seen as a way that young men let
off steam, so no one was actually they can of
execute people for them. But Wilson's family appealed and that
left join Law kind of rotten in prison. The jails
then were privately ruined, so he was able to pay
for better quarters. So you know, in certain parts of
the prison, poor people were kept and they were awful,
(13:37):
whereas the bit that he was in was probably a
little bit more pleasant, maybe like a kind of three
star B and B. So he remained there for nine
months while the appeals dragged on and on and in
the background, because he was quite well connected or from
a well connected family, Scottish politicians were lobbying the king
for his release, while at the same time, Wilson's side
was lobbying for him to be hung, and the king
(13:57):
was kind of stuck in the middle. You get the
sense that the king just wished the problem would go away.
And as early as kind of made that year, you've
got officials hinting in documents that law could easily escape
from this prison, and it was kind of stupid of
him to just be hanging around waiting to see whether
he'd get a pardon or not. But I think that's
a little bit unfair because obviously he's a society guy,
(14:18):
he's a gentleman, and if he does escape from prison,
that's going to make him a fugitive. So you can
see why he might have thought, well, I'd rather wait
for this pardon, which is surely forthcoming at any minute,
but in the end of appeal doesn't go his way.
He sends to be hung. There's a quote in Johnson's
recollections in which he recalls that one of the King's
right hand men told him that the King wouldn't pardon
(14:39):
Law without the consent of Wilson's brother. But he also
said that I think the King is willing he should
be saved, provided it can be done in such a
manner as that his majesty did not appear in it.
And then at that point, reading between the lines, King
William tacitly gives permission for him to be bailed out.
Speaker 1 (14:58):
Fascinating the King's sound in this case, right, It is.
Speaker 2 (15:01):
Interesting, But I suppose we need to remember that Law
is basically a foreign national who's under threat of execution
in a foreign country. So the Scottish legal authorities were
almost bound to say something, even if Law wasn't as
well connected. And he actually, you know, he is quite
well connected.
Speaker 1 (15:17):
So he get that.
Speaker 2 (15:18):
So the Law makes his escape, or rather the sounds
of it, he's rescued Johnston. That's the Scottish Secretary estate
we mentioned earlier reports that the king's right hand man
came up to him and whispered to me in a
crowd that my friend was at liberty but had been
very slow to understand matters and prayed me to keep
the secret, which I did until King William's death. And
from that point we don't know exactly where Law goes.
Speaker 1 (15:41):
That's the point, isn't it, John Really.
Speaker 2 (15:42):
Well, it's yes, yes, when you go on the run.
But yes, this is a major turning point in his life,
probably the major turning point, because it's his fugitive status
that will eventually drive him to France, which is where
he will create monetary history Chapter three, Law on the Lamb.
Speaker 1 (16:21):
There's a gap before he arrived in France, such a
refined his monitary and physical thinking.
Speaker 2 (16:26):
Yes, this is when he does that. Also while he's
in jail, this is probably when he meets his long
term partner, Katherine Knowles, who is oddly enough a great
great granddaughter of Mary Berlin, who was Anne Berlin's big sister,
the one who got away from Henry the eighth, and
actually introduces the tantalizing prospect that just maybe John Law's
(16:47):
children had showed her blood in them, depending on exactly
who was the father of Mary's kids, benby Catherine's brother Charles,
who's a sort of dissolute upper class scoundrel, is in
jail at the same time as Law from mother and
his brother in law, and so you have to assume
that this is how they meet, because she just sort
of appears in his life in the historical record otherwise.
(17:08):
And this is something I find really interesting about Law
in general. He never gets married, so they're happily living
together kind of like essentially out of wedlock. He's born
a Protestant, but he converts to Catholicism purely for political purposes.
But it's so interesting how does wars being fought over
religion all over the place at this point, And I
(17:30):
just find it fascinating what I kind of unusually free
thinking individual he seems to be. And I don't know,
Messa where that comes from. And perhaps there were a
lot more people like that in Scotland and England and
France of the time that we traditionally think.
Speaker 1 (17:50):
If he changing religion between Pritain and catholic back then,
it did shows a kind of open mindedness and a
lack of being but not being widded to an ideology
any type that you could say that more or less
the same, but we won't go there on this. Customers,
you know you're not wedded to a particular ideology. Open minded,
you're thinking freely. You've escaped from prison, Yes, got your
(18:11):
girl with you, a prison cavern's with them. We don't
know where he's gone. But he turns up in.
Speaker 2 (18:17):
Well, he turns up in general. But I think the
other thing he kind of contextualized stuff a little bit
at this point. So sixteen ninety four, while he's in jail,
This is also when the Bank at England gets established.
So England and France are basically both skint because they've
spent so much money on either being at war with
each other or the other European powers. So England's fiscal
(18:38):
problem dates back to Charles the second. So he'd been
borrowing money from the goldsmiths and they would lend the
money deposited with them to the crown and it would
be secured against tax revenues coming during the near future.
So it's basically an early but very very primitive form
of government debt. But by sixteen seventy two, a combination
(18:59):
the war and good living means that Charles is out
of money, and so he suspends interest payments to the
goldsmiths and an event which is known as the stop
of the Exchequer. And as it turns out, the payments
are never fully made and there are running court cases
right up until the seventeen hundreds. But in the immediate
term it bankrupts several big goldsmiths and also means that
(19:19):
many wealthy families lose their money because they had been
depositing it with the goldsmiths and that had been lent
to the king. So anyway, that has a big shadow
over the Crown's credit worthiness. And so comes sixteen ninety three,
the king has changed. It's King William now in the
middle of the Nine Years War, which is a big
European war which is basically France versus everyone else, and
(19:42):
England's at war again, and William needs to raise money
to rebuild the navy after a defeat. But of course
the remaining Goldsmiths have no interest in financing the crown anymore.
But at the same time, the London financial sector, if
you like, is buzzing. People have got lots of ideas
about how to raise money. Let's talking lotteries talks about
lots of other kinds of schemes, but the scheme that
(20:02):
does eventually get support is the idea to set up
the Bank of England. So the idea is to establish
a bank that will sell shares to raise one point
two million pounds in that money, so one point two
(20:23):
million a lot more than that today's money from shareholders,
and in exchange they'll get an eight percent annual interest
rate which is backed by tax revenues raised on excise
duties from ships coming up and down the Thames. Basically,
and that's the start of a kind of more formal
way of raising debt for the country in a way
(20:45):
that doesn't purely rely on the whims of the crown.
We used since it has a bit, it has a bit.
Where as she's getting your institutionalized and your institutions are
starting to get built. Was in France, you still get
this very kind of old system. Louis the fourteenth has
already experiment to be paper money and then bind it
(21:05):
because he didn't trust it. The tax is raised largely
from the poor. Nobles and the clergy are exempt. The
tax raison powers are sold to people who then pay
for the right to raise the taxes, but then when
they're collecting them, obviously there's massive scope for corruption involved
in that, and so you get a much older, less efficient,
more corrupt and also more vested interests kind of system
(21:29):
of financing the country in France. So that's kind of
where we are at that point. So I think that's
just useful for thinking about what happens next.
Speaker 1 (21:39):
If you see an organization set up out with the crown, yeah,
supposedly independent or a separate organization, but also allowed to
raise money, yeah, with the power of the state behind it,
that would definitely start thinking.
Speaker 2 (21:54):
Okay, so that's the state of the public finances in
England and France, and that's a very idea who they differ.
So now let's get back to John Law of an
Escape from Prison. Okay, So if this was a film,
this is the point which we'd break into training montage,
(22:15):
except rather than having Rocky punching bits and meat, we'd
have Join Law darting about Europe with his wife Catherine,
also not his wife, his lady partner. And so between
about sixteen ninety five and seventy oh five they spend
ten years going around Europe. They spend a lot of
time in France, they spend some time in Holland, there's
various other places they may or may not have been,
(22:36):
And most of the time he's basically funding their lifestyle
by hosting high end society gambling games. He's very good
with statistics, he's very good with understanding probability, which I
mean he wants to be. When you read some of
the things that people were getting excited about at the time,
but they're talking bit like he's calculating the odds of
(22:56):
rolling a seven with two dice, and you're kind of
like thinking, how did know when el know how to
do that? But you know, it's that sort of thing,
and he also wanted to be able.
Speaker 1 (23:04):
To do that instinctively. It's amazing, really, yeah.
Speaker 2 (23:07):
I and also taking the interest to write it down
because there are a lot of people writing a book
probability and gaming in particular at this point. The other
thing that's interesting is that he twigs that in certain
games what you need to be as the banker, So
a lot of the time he's not actually gambling so
much as being the house on the behalf of a
lot of rich people who probably not engage with probability. Particularly,
(23:30):
and that's the other way he's making his money. But
at the same time he's not just doing that. He's
learning about financial markets. So you know, in Holland, he's
sort of learning about shotting, he's learning about futures options
because you know, the financial markets and Amsterdam are extremely
sophisticated by the standards of the time. He's also spent
a lot of time thinking about money because obviously his
goldsmith and background means that he knows a fair bit
(23:52):
about basic banking already. I think something that's real and
poly point out is that none of this is coming
out of the blue. But the biggest drivery all this
actually and all this monetary theory stuff is the fact
that England and France have been and the rest of
you know, Europe has been in war for three or
four decades. So the governments are incredibly indebted and they
(24:12):
keep looking for schemes and ways to raise more money,
and so there's all kinds of schemes going around and
there's all kinds of thinking about it. So during this time,
John Law actually pitches Land banks to three different countries.
He pitches them England, he pitches it to France, and
he also pinches it to Scotland, and Scotland is the
place where in seventeen oh four he ends up back there,
(24:35):
and he's actually up in front of Parliament or sending
his ideas to Parliament because Scotland is looking for ways
to raise more money because it's gone bank up because
of an ill advised colonial scheme, the burn in mind.
He can go back to Scotland because Scotland and England
obviously are two separate countries, so the fact he's wanted
in England doesn't mean that he's a fugitive in Scotland.
(24:55):
But also by this point he has actually reached an
agreement with Robert Wells, Wilson's brother that he will scrap
his appeal and he's no longer going to pursue him
for the death penalty. So Lowie hasn't got a formal
pardon yet and won't receive one for quite some time.
It's less of a pressing problem for him. So back
(25:17):
in Scotland is where he publishes his monetary Treatise, which
is Money in Trade, which is basically his idea of
how money works. So Phelix Martin and need for Chancellor,
both of whom are respected financial historians and former guests
on this podcast make the point that laws thinking does
advance the concept of money. And there's one key quote
(25:39):
that they pull out, which is this money is not
the value for which goods are exchanged, but the value
by which they are exchanged. So, in other words, Laws
making the point that money is not a thing in itself,
it's the financial technology that makes everything else work. And overall,
that's his view of the world, that is that money
(26:01):
is the problem where there isn't enough of it. Money
is the kind of oil you need to make things
go round.
Speaker 1 (26:08):
What do you think his driver was? I mean, if
the way you've just described him, he could have stayed
in Amsterdam and made an absolute fortune trading right. I
was like, he would have been a phenomenal trader. He
could have made a fortune doing that. What was his
driver behind doing all this? Do you think he's have
to state is after power, after more money than you're
going to ever make shorting stuff on Amsterdam.
Speaker 2 (26:27):
I think that's a really interesting question, But I honestly
think it's the ideas that drove him. I mean that
there is a quote a camera who it's from, but
one of his contemporaries points is not the money that
he was basically interested in. It was his ideas. He's
basically a world improver. One of the problems we tie
in your currency to gold, and it was a problem,
(26:47):
and it would be a problem, is it sometimes you
run out of gold. And I think one of the
things that we forget because we've had paper money for
a while, so we recognized paper money's foible's relative to gold.
Gold and precious metal had a lot of problems too.
They were constantly being devalued and constantly having the relative
values change. One of the things that John Law does
(27:09):
is he goes back into the history books and looks
at how much the price of silver has changed. And
one of the reasons that he talks about a land bank,
and this is the idea basically that you issue a
paper currency that is effectively a mortgage on land. It's
not very practical, which is one reason why it doesn't
take off. But the point is that the land is
almost like the kind of stones of Yap. It never
(27:29):
would actually change hands. Is just a thing that backs
the iowe you. And his idea is that, well, actually
we should use land because a that's where all of
the wealth of the economy actually comes from and b
At that time, the price of land was much less
volatile than the price of silver, so he's actually talking
about anchoring the paper currency to an asset which is
(27:50):
a much more stable background value. So basically, I think
he's very much an idealist and he's excited by economic
ideas and excited by theory at the same time. There
are lots of people like them, you know. So Daniel
Defoe is not just you know, you know, the writer
of Robinson Crusoe. He's also a kind of political pamphleteer,
and he's also they call them projectors. But it's not
(28:13):
his guy's coming up with mad ideas for raising money
or not so mad. I mean, that's where the Bank
of England came from. Wasn't a default idea, but it
was the idea of the guy who would actually later
go on to do Scotland's ill fated Darians game.
Speaker 1 (28:27):
Yes, shape us from the Improved is absolutely so.
Speaker 2 (28:30):
Yeah, it's a time of intellectual ferment. And John Law
happens to be one of the flowers that grows most
rapidly from that particular.
Speaker 1 (28:40):
Flower weed weed.
Speaker 2 (28:42):
Yes, he's proposal for this Land Bank, Money and Trade Considered.
That's published anonymously by Joins aunt Agnes, who runs a
printing business which holds the local monopoly in printing bibles
as well. By the way, everyone in politics knows who's
behind it. And despite the fact that his reputation is
(29:02):
obviously controversial and he does have some high profile supporters,
and his scheme does get a hearing in the Scottish
Parliament alongside several others. However, they cut along and complicated
story shot. It's not something that he go into for
this podcast. Scotland doesn't go ahead when monetary reform and
instead it's somewhat reluctantly agrees to you to night with
England in seventeen oh seven, and that's partly to be
(29:24):
like the economy and specifically the elites who'd lost a
lot of money in the Darian scheme.
Speaker 1 (29:34):
Okay, so here we are. He's still in Scotland. Is
he still in Scotland for the active Union?
Speaker 2 (29:39):
He is not because what happens, but obviously the Actor
Union is coming up and he's still a fugitive.
Speaker 1 (29:46):
He can't stay in Scotland.
Speaker 2 (29:48):
Exactly because it might become part of England and so
that's when he moves to buy looks at it. That's
when he moved to Genoa.
Speaker 1 (29:56):
Ply his descendants still calling for independence, I.
Speaker 2 (30:02):
Would explained something. So he goes to Genoa. During this time,
they had two kids, and by seventeen eleven he's got
one hundred and forty thousand lera in the bank. Now,
Corny James Buckin's book, a laborer earns one or two
lera a day, so let's call that in the minimum wage. Now,
(30:22):
the minimum wage in the UK's about twelve quid an
hour at the moment. I wasn't going to multiply that
to a day. But even if you take twelve quid
for an hour and you multiply that by one hundred
and forty thousand, then you are looking at somewhere between
eight hundred and fifty grandy about one point seven million.
So he's definitely a well off guy. He's got a
lot of liquid assets, and this seems to being built
(30:42):
up through the same sort of thing, so like running games. Also,
I think he's probably involved in supplying armies because again
there's kind of a war going on, and he's also
making a lot of contacts, so there's a lot of people,
a lot of factions. The Jackieby in Scotland are very
fond of him, even though though he doesn't really doesn't
(31:04):
see me have very high convictions in terms of political stuff.
It's like he's kind of nice to Jacobates because they're
nice to him. He's quite a loyal person, really, somebody
helps him out than he tends to do. Likewise, but
again you don't get the sense that he's terribly ideological
in terms of party politics or anything like that. He's
kind of more obsessed with his ideas about monetary and
(31:28):
economic reform, because during this time he is also trying
to shop his ideas around. So he's tried in Scotland
and failed. He approaches the Ducas Savoy with a similar
idea for a kind of central bank type organization. He
nearly gets the scheme going in Turin, but again that
doesn't happen. And so as far as we can see,
(31:49):
France is currently engaged in the war succession that comes
to an end in seventeen thirteen, and at this point
he moves back to Frances lucas you can get and
now because they're not a war anymore. And it's also
very clear that Louis the fourteenth is on his last legs,
it's going to be a succession. France is very, very,
(32:11):
very badly off. Deb is running at something like to
one hundred percent of GDP, which reminds me of somebody
else that we can them right now, and so basically
he sees the opportunity to get his ideas maybe taken up.
And what is actually one of the biggest economies in
Europe at this point, so France.
Speaker 1 (32:31):
Is kind of at again this might sound familiar, but
reform or crisis stage absolutely when they decide to go
for a reform or as we will find out, yeah,
well a bit of both.
Speaker 2 (32:41):
Why not both exactly? So France is desperate for fresh
ideas on how to deal with it's lacking money, and
John Law is desperate to see his ideas put into practice.
He's been knocked back by Scotland, he's been knocked back
by Savoy, but maybe he can find a home for
(33:02):
his thoughts in France and we'll find out how that
went in the next episode.
Bloomberg Audio Studios, podcasts, radio news. Okay, look back through
the history of money, and quite often it seems like
nothing is happening, long long bits of calm, and then
suddenly there's a catalyst of some kind. Stuff changes, right,
and you get everything exploding, things flipping, a period of chaos,
and then everything seems to reinvent itself. John Law, John,
(00:24):
you know all about John Law. His history reflects exactly that.
So what we're trying to do here over this holiday
and over two episodes is tell his story, which tells
us a lot about money, right, Yeah, and we need.
Speaker 2 (00:38):
To take two whole episodes to do it. This is
a special series, folks, Join Law Stories, the story of
bast a fugitive scotsman clearly identify with that quite closely.
Briefly became the most powerful man in France and the
richest I'm the richest, yeah, which is even more important.
And then doing so he changed both my literary and
arguably European her study forever.
Speaker 1 (01:01):
Wow, it's a big story, So stay with us for
it because his rise and it's for us not just
about history, is it. It's about the monetary system that
we live in today. Okay, John Law. He might not
be as respected as like Adam Smith, but he pretty
much laid the foundation for the monetary system that we
(01:21):
use today, right, So you could arguably say that his
thinking is more important than a lot of that academic muk.
Speaker 2 (01:29):
Yeah, you could, and actually and whatever else he was,
he was a gambler, sometime moderor he was also a practitioner.
He did what he believed, and of course, as we'll
find it, that didn't necessarily work to his advantage.
Speaker 1 (01:43):
All the time, I think you know, you're already giving
away the fact that despite the fact he's a murderer, gambler,
the beginning of the end of monetary systems, and all
sorts of other appalling things. John rather likes John Law.
Speaker 2 (01:56):
I think I'm really quite fond of it.
Speaker 1 (01:58):
It's the charisma every time.
Speaker 2 (02:02):
Well, yes, yes, perhaps chapter one the beginning, Well, is
this horrible, doesn't borne? Well, let's wind by call the
way back to April sixteen seventy one and John Law
(02:22):
is born in Edinburgh. He was one of twelve children,
four of whom died in childhood. His dad, William Law,
was a goldsmith, and his mum, Jean Campbell, was William's
second wife, and she had three sisters and they'd all
married well, so he's basically from my kind of upper
merchant class background. So in sixteen eighty three, when John
Law's twelve, his father William, goes to France because he's
(02:45):
got a kidney stone. He has to get an operation.
The chances are that he'll die under the knife, but
it's his only chance, and there happens to be a
company of barber surgeons of great reputation in France who
do this kind of thing the time. So before he leaves,
he puts his affairs in order, says goodbye easy, eight
kids and his wife, and then heads off to France.
(03:07):
And as it turns out, unfortunately, he does die when
the operating.
Speaker 1 (03:10):
Table, leaving behind eight kids.
Speaker 2 (03:13):
Leaving behind eight kids, and so Gene takes over the
family business, and she also avoids getting married again so
it's not to have to sign the business over to
her husband. And at this point goldsmiths are all ready
in banking, so when he joins Brothers, takes over the
kind of goldsmith side of things, actually making stuff out
of gold. But Jane and join sort of jointly kind
(03:37):
of operate the banking side of the business, so lending money.
This is already something that goldsmith's are starting to do.
Speaker 1 (03:46):
So we're not into fractional reserve banking at this point,
not quite yet.
Speaker 2 (03:50):
Well not formally, but actually goldsmiths really are lending out money.
It's not like they have to have a one to
one correspondence. There's not one hundred percent reserve requirements, and
people know that people need credit, and there's no way
you could do that and have all the gold still
sitting there in the bank and demand at any time.
I mean, there's actually an interesting called bailment, and this
(04:12):
is where if you want your goldsmith to look after
your gold, you put it in a bag and you
give it to them, and that means that you want
that gold back. But if you give them loose coins
and there's an understanding that that money can be lent
out and it's not necessarily the same gold coins, it's
you're going to get back. So basically, if everyone came
to the goldsmith's at once and wanted all the money back,
it wouldn't be there immediately that day.
Speaker 1 (04:34):
I reckon I would won my own gold coins back.
Speaker 2 (04:37):
I mean, I think you probably would at this time,
because a lot of them are debased.
Speaker 1 (04:40):
But people's maybe chipped in kleptics out.
Speaker 2 (04:43):
Yeah, so I mean you kind of maybe want to
use the bailment.
Speaker 1 (04:47):
If as a child he's already learned about gaging, interest rates,
monopolies gold. Yeah, yeah, he's kind of off before it.
Speaker 2 (04:55):
Yeah, he's that because I suppose another interesting in one
of the core things would being a goldsmith is that
he's used to that world where gold is an object.
So it's it's jewelry, it's plates, it's things like that,
but it's also got a separate financial function. Does this
thing called moneyiness somewhere that is a kind of abstract
(05:16):
property of the gold And he appreciates that there's a
difference between the gold object and gold has money, and
that's probably already kicking around and his brain a wout
of thought. A look the things he has a tear away.
His mum actually sends him off to a boarding school
in a little village called Egoshum, which is still about
an hour and a half drive from Edinburgh, and at
(05:37):
least part of it, according to sources at the time,
is to keep him away from the temptations at the
big city. He's interested in things like gambling, and it
does get to a point where he comes back he's
sixteen because of the bet that yeah, exactly, yes, class
war even then, but he comes back and they have
(05:58):
a falling out him In his muther there actually is
a kind of court case over it. It sounds like
he's almost like trying to divorce her and get his
inheritance so that he can be free, and she says
in the court documents that actually the true cause of
his deserting of my family was because of my motherly
reprehending him for biding late out at night and going
to the lottery and other games. So basically he's just
(06:21):
a naughty boy and she's kind of fed up beating.
Speaker 1 (06:24):
Sixteen sixteen seventeen, and a lot of mothers in Edinburgh
today similar feelings.
Speaker 2 (06:30):
Yes, I can imagine there's a lot of pushing pull,
but it doesn't ever fully go to court, and it
does eventually get settled by the time he's twenty one
in sixteen ninety two. But the point is, I think
this illustrates that a he's already someone who's very much
pushing the boundaries and excited about getting out from under
(06:51):
and making his name in the world, and also that
he's someone who kind of enjoys taking risks and actually
probably isn't that careful with money despite his upbringing. So
(07:12):
sixteen ninety two, John Law's twenty one and he's finished
his education, He's inherited the money that he's owed from
his mother and he goes down to London in the
company of a chap called John Campbell, who's a fellow
Scott who wants to set up a goldsmith's in London.
Now he does this and that actually eventually becomes Cook's Bank,
and John Law himself ends up living in Saint Martin's
(07:33):
in the Field, which for anyone who's not based in
London is pretty much where charing Cross station is today,
and at that point it actually was a field.
Speaker 1 (07:42):
It's quite a brave move, even as a young man
to move from Edinburgh to London. Quite a journey, yeah,
alien place to scott'stand as it is today.
Speaker 2 (07:53):
If I had remember the mood I went to London
for the first time when I was twenty one. Thinking
about it, I think it's a brave move. I think
he is clearly ambitious at this point. I would say
he's more reckless than anything else, for reasons we'll see
in a moment. I think basically just wants to have fund,
because he spends a lot of his time gambling, to
the point where he actually has to write back to
his mum and handover a chunky his inheritance in exchange
(08:16):
for more cash.
Speaker 1 (08:18):
Basically she must have been fit up by that point,
if you would think, when you actually it's weird.
Speaker 2 (08:22):
Through their lives, they don't have a major falling out again,
and she doesn't disinherit him or anything like that. So
although he's leading somewhat forcibly dissolute life, and he's kind
of known as a dandy and a ladies man, and
he does like gambling and partying and all the rest
of it, she doesn't ever actually cut him off.
Speaker 1 (08:42):
Maybe the other kids are worse.
Speaker 2 (08:44):
I mean possibly possibly, they'd have to try quite hard.
So down in London he gets known as bow Law.
A bow is a dandy, a kind of it boy,
a kind of man about town.
Speaker 1 (08:55):
In bau right b e A U.
Speaker 2 (08:57):
Yes, as beautiful, I guess. And then we come to
a massive turning point. It's fair to say that if
this hadn't happened, John Law might just have ended up
as another London society man, maybe dabbling in politics, maybe
pushing money making schemes around exchange Alley with the other
stock jobbers. Instead, he's about to embark in the path.
We'll put him in a position to play financial alchemist
(09:20):
with one of the biggest economies in Europe. Chapter two
the due in April sixteen ninety four. John Law is
(09:40):
twenty three and he gets involved in the life of
a fellow dandy called Edward bow Wilson. Edward bo Wilson
is just another it boy, like John Law, another dandy,
and people are really intrigued by him because he's spending
an awful lot of money down in London. Even the
load of the family that he comes from is not
(10:02):
well off. They're sort of gentry, but they're the lower
end of the gentry, so for perspective, he's thought to
be spending something in the region of about four thousand
pounds a year, which in current money is about six
hundred and seventy five thousand pounds a year, And in
terms of what people were saying about them at the time,
there's the equivalent of a local gossip columnist who writes
(10:23):
to his employers and Devon, who like to be kept
up to date on the news in London, and he
tells them that Wilson is the subject of the general
chat of the town. He has no gamester, neither is
he known to keep women company, and it cannot be
yet discovered how he came to live at so prodigious
an extravagancy. We never get to find out where Wilson's
(10:43):
money comes from, because in the ninth of April sixteen
ninety four, he enjoined fight at Bloomsbury Square and join
stabs him in the stomach with an iron and steel
sword of a value of five shillings, which about forty
pounds to day, into a depth of two inches. That's
all according to court documents, and he dies immediately, which
strikes me as a tiny bit odd. But I don't
know any about anatomy.
Speaker 1 (11:04):
Okay, so this is really unlucky.
Speaker 2 (11:06):
It is unlucky. We don't know why they fought. A
later theory claimed that Elizabeth Villiers, who was King Williams's mistress,
was involved, but there's no evidence for that, and it
lightly originated the century afterwards. And there's also a scandalous
pamphlet from the seventeen twenties, and then this suggests that
(11:26):
Wilson was actually living an affair with a nobleman who
was the person paying for his lifestyle, and that Law
killed Wilson to silence and so effectively he was acting
as a kind of eighteenth century hit man. But that
seems to just be pure gossip meant to damage Law's
reputation at the time, and a more plausible, if somewhat
less dramatic account mentions a Missus Lawrence and she was
(11:50):
a friend of Laws, and she was the landlady of
a house where Wilson's sister lived. Wilson then discovered that
Law was keeping a mistress there, and he told his
sister to leave, and Missus Longs took offense, probably because like, oh,
what are you accusing me of running some kind of
you know, broadle or something. An argument followed and that's
where the duel came from. So basically Law might have
(12:11):
been defending his friend's honor, which I think is probably
quite believable because he's clearly still quite hot headed and reckless,
but I mean, ultimately we don't know the real reason.
After the fight, Law is arrested and the key legal
(12:32):
question is whether it was a planned duel or a
spontaneous fight. The duels were common but illegal, and I mean,
this will seem a bit weird. That's what premeditation is
what made it murder and therefore punishable by hanging, whereas
a kind of heat of the moment impulse fight meant
it was manslaughter, and basically basically knows days you got
away with manslaughter. So Law claimed that Wilson attacked him
(12:53):
suddenly in Bloomsbury Square, and that would have made it
self defense. But the prosecutors argued that it was pre
arranged and that kind of they showed letters and things
to show that they had ongoing feud, so it was
kind of cut and dried from that point of view.
So the jury agreed, they convicted them a murder and
they sent them to hang. Now the king reprieved them
because the low jewels were technically illegal. They were also
(13:16):
sort of seen as a way that young men let
off steam, so no one was actually they can of
execute people for them. But Wilson's family appealed and that
left join Law kind of rotten in prison. The jails
then were privately ruined, so he was able to pay
for better quarters. So you know, in certain parts of
the prison, poor people were kept and they were awful,
(13:37):
whereas the bit that he was in was probably a
little bit more pleasant, maybe like a kind of three
star B and B. So he remained there for nine
months while the appeals dragged on and on and in
the background, because he was quite well connected or from
a well connected family, Scottish politicians were lobbying the king
for his release, while at the same time, Wilson's side
was lobbying for him to be hung, and the king
(13:57):
was kind of stuck in the middle. You get the
sense that the king just wished the problem would go away.
And as early as kind of made that year, you've
got officials hinting in documents that law could easily escape
from this prison, and it was kind of stupid of
him to just be hanging around waiting to see whether
he'd get a pardon or not. But I think that's
a little bit unfair because obviously he's a society guy,
(14:18):
he's a gentleman, and if he does escape from prison,
that's going to make him a fugitive. So you can
see why he might have thought, well, I'd rather wait
for this pardon, which is surely forthcoming at any minute,
but in the end of appeal doesn't go his way.
He sends to be hung. There's a quote in Johnson's
recollections in which he recalls that one of the King's
right hand men told him that the King wouldn't pardon
(14:39):
Law without the consent of Wilson's brother. But he also
said that I think the King is willing he should
be saved, provided it can be done in such a
manner as that his majesty did not appear in it.
And then at that point, reading between the lines, King
William tacitly gives permission for him to be bailed out.
Speaker 1 (14:58):
Fascinating the King's sound in this case, right, It is.
Speaker 2 (15:01):
Interesting, But I suppose we need to remember that Law
is basically a foreign national who's under threat of execution
in a foreign country. So the Scottish legal authorities were
almost bound to say something, even if Law wasn't as
well connected. And he actually, you know, he is quite
well connected.
Speaker 1 (15:17):
So he get that.
Speaker 2 (15:18):
So the Law makes his escape, or rather the sounds
of it, he's rescued Johnston. That's the Scottish Secretary estate
we mentioned earlier reports that the king's right hand man
came up to him and whispered to me in a
crowd that my friend was at liberty but had been
very slow to understand matters and prayed me to keep
the secret, which I did until King William's death. And
from that point we don't know exactly where Law goes.
Speaker 1 (15:41):
That's the point, isn't it, John Really.
Speaker 2 (15:42):
Well, it's yes, yes, when you go on the run.
But yes, this is a major turning point in his life,
probably the major turning point, because it's his fugitive status
that will eventually drive him to France, which is where
he will create monetary history Chapter three, Law on the Lamb.
Speaker 1 (16:21):
There's a gap before he arrived in France, such a
refined his monitary and physical thinking.
Speaker 2 (16:26):
Yes, this is when he does that. Also while he's
in jail, this is probably when he meets his long
term partner, Katherine Knowles, who is oddly enough a great
great granddaughter of Mary Berlin, who was Anne Berlin's big sister,
the one who got away from Henry the eighth, and
actually introduces the tantalizing prospect that just maybe John Law's
(16:47):
children had showed her blood in them, depending on exactly
who was the father of Mary's kids, benby Catherine's brother Charles,
who's a sort of dissolute upper class scoundrel, is in
jail at the same time as Law from mother and
his brother in law, and so you have to assume
that this is how they meet, because she just sort
of appears in his life in the historical record otherwise.
(17:08):
And this is something I find really interesting about Law
in general. He never gets married, so they're happily living
together kind of like essentially out of wedlock. He's born
a Protestant, but he converts to Catholicism purely for political purposes.
But it's so interesting how does wars being fought over
religion all over the place at this point, And I
(17:30):
just find it fascinating what I kind of unusually free
thinking individual he seems to be. And I don't know,
Messa where that comes from. And perhaps there were a
lot more people like that in Scotland and England and
France of the time that we traditionally think.
Speaker 1 (17:50):
If he changing religion between Pritain and catholic back then,
it did shows a kind of open mindedness and a
lack of being but not being widded to an ideology
any type that you could say that more or less
the same, but we won't go there on this. Customers,
you know you're not wedded to a particular ideology. Open minded,
you're thinking freely. You've escaped from prison, Yes, got your
(18:11):
girl with you, a prison cavern's with them. We don't
know where he's gone. But he turns up in.
Speaker 2 (18:17):
Well, he turns up in general. But I think the
other thing he kind of contextualized stuff a little bit
at this point. So sixteen ninety four, while he's in jail,
This is also when the Bank at England gets established.
So England and France are basically both skint because they've
spent so much money on either being at war with
each other or the other European powers. So England's fiscal
(18:38):
problem dates back to Charles the second. So he'd been
borrowing money from the goldsmiths and they would lend the
money deposited with them to the crown and it would
be secured against tax revenues coming during the near future.
So it's basically an early but very very primitive form
of government debt. But by sixteen seventy two, a combination
(18:59):
the war and good living means that Charles is out
of money, and so he suspends interest payments to the
goldsmiths and an event which is known as the stop
of the Exchequer. And as it turns out, the payments
are never fully made and there are running court cases
right up until the seventeen hundreds. But in the immediate
term it bankrupts several big goldsmiths and also means that
(19:19):
many wealthy families lose their money because they had been
depositing it with the goldsmiths and that had been lent
to the king. So anyway, that has a big shadow
over the Crown's credit worthiness. And so comes sixteen ninety three,
the king has changed. It's King William now in the
middle of the Nine Years War, which is a big
European war which is basically France versus everyone else, and
(19:42):
England's at war again, and William needs to raise money
to rebuild the navy after a defeat. But of course
the remaining Goldsmiths have no interest in financing the crown anymore.
But at the same time, the London financial sector, if
you like, is buzzing. People have got lots of ideas
about how to raise money. Let's talking lotteries talks about
lots of other kinds of schemes, but the scheme that
(20:02):
does eventually get support is the idea to set up
the Bank of England. So the idea is to establish
a bank that will sell shares to raise one point
two million pounds in that money, so one point two
(20:23):
million a lot more than that today's money from shareholders,
and in exchange they'll get an eight percent annual interest
rate which is backed by tax revenues raised on excise
duties from ships coming up and down the Thames. Basically,
and that's the start of a kind of more formal
way of raising debt for the country in a way
(20:45):
that doesn't purely rely on the whims of the crown.
We used since it has a bit, it has a bit.
Where as she's getting your institutionalized and your institutions are
starting to get built. Was in France, you still get
this very kind of old system. Louis the fourteenth has
already experiment to be paper money and then bind it
(21:05):
because he didn't trust it. The tax is raised largely
from the poor. Nobles and the clergy are exempt. The
tax raison powers are sold to people who then pay
for the right to raise the taxes, but then when
they're collecting them, obviously there's massive scope for corruption involved
in that, and so you get a much older, less efficient,
more corrupt and also more vested interests kind of system
(21:29):
of financing the country in France. So that's kind of
where we are at that point. So I think that's
just useful for thinking about what happens next.
Speaker 1 (21:39):
If you see an organization set up out with the crown, yeah,
supposedly independent or a separate organization, but also allowed to
raise money, yeah, with the power of the state behind it,
that would definitely start thinking.
Speaker 2 (21:54):
Okay, so that's the state of the public finances in
England and France, and that's a very idea who they differ.
So now let's get back to John Law of an
Escape from Prison. Okay, So if this was a film,
this is the point which we'd break into training montage,
(22:15):
except rather than having Rocky punching bits and meat, we'd
have Join Law darting about Europe with his wife Catherine,
also not his wife, his lady partner. And so between
about sixteen ninety five and seventy oh five they spend
ten years going around Europe. They spend a lot of
time in France, they spend some time in Holland, there's
various other places they may or may not have been,
(22:36):
And most of the time he's basically funding their lifestyle
by hosting high end society gambling games. He's very good
with statistics, he's very good with understanding probability, which I
mean he wants to be. When you read some of
the things that people were getting excited about at the time,
but they're talking bit like he's calculating the odds of
(22:56):
rolling a seven with two dice, and you're kind of
like thinking, how did know when el know how to
do that? But you know, it's that sort of thing,
and he also wanted to be able.
Speaker 1 (23:04):
To do that instinctively. It's amazing, really, yeah.
Speaker 2 (23:07):
I and also taking the interest to write it down
because there are a lot of people writing a book
probability and gaming in particular at this point. The other
thing that's interesting is that he twigs that in certain
games what you need to be as the banker, So
a lot of the time he's not actually gambling so
much as being the house on the behalf of a
lot of rich people who probably not engage with probability. Particularly,
(23:30):
and that's the other way he's making his money. But
at the same time he's not just doing that. He's
learning about financial markets. So you know, in Holland, he's
sort of learning about shotting, he's learning about futures options
because you know, the financial markets and Amsterdam are extremely
sophisticated by the standards of the time. He's also spent
a lot of time thinking about money because obviously his
goldsmith and background means that he knows a fair bit
(23:52):
about basic banking already. I think something that's real and
poly point out is that none of this is coming
out of the blue. But the biggest drivery all this
actually and all this monetary theory stuff is the fact
that England and France have been and the rest of
you know, Europe has been in war for three or
four decades. So the governments are incredibly indebted and they
(24:12):
keep looking for schemes and ways to raise more money,
and so there's all kinds of schemes going around and
there's all kinds of thinking about it. So during this time,
John Law actually pitches Land banks to three different countries.
He pitches them England, he pitches it to France, and
he also pinches it to Scotland, and Scotland is the
place where in seventeen oh four he ends up back there,
(24:35):
and he's actually up in front of Parliament or sending
his ideas to Parliament because Scotland is looking for ways
to raise more money because it's gone bank up because
of an ill advised colonial scheme, the burn in mind.
He can go back to Scotland because Scotland and England
obviously are two separate countries, so the fact he's wanted
in England doesn't mean that he's a fugitive in Scotland.
(24:55):
But also by this point he has actually reached an
agreement with Robert Wells, Wilson's brother that he will scrap
his appeal and he's no longer going to pursue him
for the death penalty. So Lowie hasn't got a formal
pardon yet and won't receive one for quite some time.
It's less of a pressing problem for him. So back
(25:17):
in Scotland is where he publishes his monetary Treatise, which
is Money in Trade, which is basically his idea of
how money works. So Phelix Martin and need for Chancellor,
both of whom are respected financial historians and former guests
on this podcast make the point that laws thinking does
advance the concept of money. And there's one key quote
(25:39):
that they pull out, which is this money is not
the value for which goods are exchanged, but the value
by which they are exchanged. So, in other words, Laws
making the point that money is not a thing in itself,
it's the financial technology that makes everything else work. And overall,
that's his view of the world, that is that money
(26:01):
is the problem where there isn't enough of it. Money
is the kind of oil you need to make things
go round.
Speaker 1 (26:08):
What do you think his driver was? I mean, if
the way you've just described him, he could have stayed
in Amsterdam and made an absolute fortune trading right. I
was like, he would have been a phenomenal trader. He
could have made a fortune doing that. What was his
driver behind doing all this? Do you think he's have
to state is after power, after more money than you're
going to ever make shorting stuff on Amsterdam.
Speaker 2 (26:27):
I think that's a really interesting question, But I honestly
think it's the ideas that drove him. I mean that
there is a quote a camera who it's from, but
one of his contemporaries points is not the money that
he was basically interested in. It was his ideas. He's
basically a world improver. One of the problems we tie
in your currency to gold, and it was a problem,
(26:47):
and it would be a problem, is it sometimes you
run out of gold. And I think one of the
things that we forget because we've had paper money for
a while, so we recognized paper money's foible's relative to gold.
Gold and precious metal had a lot of problems too.
They were constantly being devalued and constantly having the relative
values change. One of the things that John Law does
(27:09):
is he goes back into the history books and looks
at how much the price of silver has changed. And
one of the reasons that he talks about a land bank,
and this is the idea basically that you issue a
paper currency that is effectively a mortgage on land. It's
not very practical, which is one reason why it doesn't
take off. But the point is that the land is
almost like the kind of stones of Yap. It never
(27:29):
would actually change hands. Is just a thing that backs
the iowe you. And his idea is that, well, actually
we should use land because a that's where all of
the wealth of the economy actually comes from and b
At that time, the price of land was much less
volatile than the price of silver, so he's actually talking
about anchoring the paper currency to an asset which is
(27:50):
a much more stable background value. So basically, I think
he's very much an idealist and he's excited by economic
ideas and excited by theory at the same time. There
are lots of people like them, you know. So Daniel
Defoe is not just you know, you know, the writer
of Robinson Crusoe. He's also a kind of political pamphleteer,
and he's also they call them projectors. But it's not
(28:13):
his guy's coming up with mad ideas for raising money
or not so mad. I mean, that's where the Bank
of England came from. Wasn't a default idea, but it
was the idea of the guy who would actually later
go on to do Scotland's ill fated Darians game.
Speaker 1 (28:27):
Yes, shape us from the Improved is absolutely so.
Speaker 2 (28:30):
Yeah, it's a time of intellectual ferment. And John Law
happens to be one of the flowers that grows most
rapidly from that particular.
Speaker 1 (28:40):
Flower weed weed.
Speaker 2 (28:42):
Yes, he's proposal for this Land Bank, Money and Trade Considered.
That's published anonymously by Joins aunt Agnes, who runs a
printing business which holds the local monopoly in printing bibles
as well. By the way, everyone in politics knows who's
behind it. And despite the fact that his reputation is
(29:02):
obviously controversial and he does have some high profile supporters,
and his scheme does get a hearing in the Scottish
Parliament alongside several others. However, they cut along and complicated
story shot. It's not something that he go into for
this podcast. Scotland doesn't go ahead when monetary reform and
instead it's somewhat reluctantly agrees to you to night with
England in seventeen oh seven, and that's partly to be
(29:24):
like the economy and specifically the elites who'd lost a
lot of money in the Darian scheme.
Speaker 1 (29:34):
Okay, so here we are. He's still in Scotland. Is
he still in Scotland for the active Union?
Speaker 2 (29:39):
He is not because what happens, but obviously the Actor
Union is coming up and he's still a fugitive.
Speaker 1 (29:46):
He can't stay in Scotland.
Speaker 2 (29:48):
Exactly because it might become part of England and so
that's when he moves to buy looks at it. That's
when he moved to Genoa.
Speaker 1 (29:56):
Ply his descendants still calling for independence, I.
Speaker 2 (30:02):
Would explained something. So he goes to Genoa. During this time,
they had two kids, and by seventeen eleven he's got
one hundred and forty thousand lera in the bank. Now,
Corny James Buckin's book, a laborer earns one or two
lera a day, so let's call that in the minimum wage. Now,
(30:22):
the minimum wage in the UK's about twelve quid an
hour at the moment. I wasn't going to multiply that
to a day. But even if you take twelve quid
for an hour and you multiply that by one hundred
and forty thousand, then you are looking at somewhere between
eight hundred and fifty grandy about one point seven million.
So he's definitely a well off guy. He's got a
lot of liquid assets, and this seems to being built
(30:42):
up through the same sort of thing, so like running games. Also,
I think he's probably involved in supplying armies because again
there's kind of a war going on, and he's also
making a lot of contacts, so there's a lot of people,
a lot of factions. The Jackieby in Scotland are very
fond of him, even though though he doesn't really doesn't
(31:04):
see me have very high convictions in terms of political stuff.
It's like he's kind of nice to Jacobates because they're
nice to him. He's quite a loyal person, really, somebody
helps him out than he tends to do. Likewise, but
again you don't get the sense that he's terribly ideological
in terms of party politics or anything like that. He's
kind of more obsessed with his ideas about monetary and
(31:28):
economic reform, because during this time he is also trying
to shop his ideas around. So he's tried in Scotland
and failed. He approaches the Ducas Savoy with a similar
idea for a kind of central bank type organization. He
nearly gets the scheme going in Turin, but again that
doesn't happen. And so as far as we can see,
(31:49):
France is currently engaged in the war succession that comes
to an end in seventeen thirteen, and at this point
he moves back to Frances lucas you can get and
now because they're not a war anymore. And it's also
very clear that Louis the fourteenth is on his last legs,
it's going to be a succession. France is very, very,
(32:11):
very badly off. Deb is running at something like to
one hundred percent of GDP, which reminds me of somebody
else that we can them right now, and so basically
he sees the opportunity to get his ideas maybe taken up.
And what is actually one of the biggest economies in
Europe at this point, so France.
Speaker 1 (32:31):
Is kind of at again this might sound familiar, but
reform or crisis stage absolutely when they decide to go
for a reform or as we will find out, yeah,
well a bit of both.
Speaker 2 (32:41):
Why not both exactly? So France is desperate for fresh
ideas on how to deal with it's lacking money, and
John Law is desperate to see his ideas put into practice.
He's been knocked back by Scotland, he's been knocked back
by Savoy, but maybe he can find a home for
(33:02):
his thoughts in France and we'll find out how that
went in the next episode.
Host
Merryn Somerset Webb
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