John Law

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Joined: Mon 28. Feb 2011, 11:17
PostPosted: Mon 23. May 2011, 19:07
John Law

In its modern form, the paper money is intrinsically linked to a name: John Law.
Even before there was paper currency Law: The Chinese use it since the Song dynasty (960-1279) and in Sweden it was introduced 1661st
John Law was born in 1671, as the son of a goldsmith in Edinburgh .In this time goldsmiths also took advantage of simple banking functions. They held gold against depository receipts, which in turn could circulate as money and granted Kredit.Law was so heavy from childhood wounding with money vertraut.1694 Law duel a man in a duel and had to flee out of England, because got threaten with the death penalty .He went to Scotland, as the death penalty imposed does not apply there . Especially since the founding of the Scottish East India Company had become a disaster. The Scots have long exploited by the British and suppressed, had gathered with thousands of patriotic commitment of capital to start their own overseas company in Panama. You should break the monopoly of the English and Scottish supply of cheap goods from overseas. Three ships and a Scottish colony should be the beginning. Scotland but had not received enough financial power to perpetuate this society without the support of England. So waived, and forbade King William III.von England any support. After almost a year, half of the settlers died in Panama .The company had had to be stopped, Scotland was poorer than ever before.
After this fiasco Law developed the idea of a Scottish National Bank. Law `s proposal keeps the Scottish Parliament busy some time, but was eventually rejected. A year later, he had clarified his idea. The state could still guarantee its currency by a future promise to pay, without the necessity of collateral such as land or gold may be present. Ultimately, he might raise taxes and comply as its obligations. Money that is filled by law only a function if used it would therefore issued. As long as there is in circulation, one must have no reserves. Also, this proposal could not make friends, the Scottish Parliament.
When Law was not pardoned by London, he went to continental Europe and was dedicated to gambling. He was there, always set the position of the Bank. Through his keen intellect, he was able to calculate probabilities and the game quickly to operate a business with calculable profit. He was a tremendous success and was able to accumulate a handsome fortune.
Laws major opportunity came in 1715 when the Duke of Orleans, Regent of France, was legitimate because the Thonfolger Louis XV. only seven years old. Law and Philippe II knew each other from gambling. After the extravagance of the Sun King of France, the debt amounted 3,000 million livres. Every year the state had to pay 142 million livres in interest in total revenue of only 145 million. The traditional methods of the new regents-confiscation of assets, taxes, and deterioration of the money by stretching of the precious metal content, were soon at the end. Government bonds were traded with a nominal value of 100 livres .Now on the market as junk bonds to 21.50 livres was a true genius in demand.
Law has developed a compelling and sophisticated multi-stage plan that allowed each hedge fund or private equity management great credit hätte.1716 Law, the first state bank, the Banque Generale, ones too were shares of State Bank against Staatsanleihenaus-but he issues is not the market price and at face value back. By decree of the Regent were now accepts only the notes of the Banque Generale as payment for taxes. Law also promised that the notes would always be covered by coins to the "real" value and that any spending of more notes than he had coins, death deserve. He made it to the new notes enjoyed higher confidence than the coins, the gold content was indeed reduced under certain circumstances. Already in 1717 paid the money changers coins with a value of 115 livres for a 100 livres note of the Banque Generale.
The last and most brilliant act in the drama helped France to its debt to get rid of the stock market. Law established a state-owned enterprises, the company of the India, which was the monopoly of all former state-owned companies awarded. They also received the exclusive coinage for nine years, the tobacco monopoly. This represented the Compagnie des Indes most of the economic activities of the French state. A capital increase should be 25 million livres to the people and brought the company's capital be increased from 100 to 125 million livres. Law promised a dividend of 50 million livres. Based on the total capital was 40% of the state. In addition, bonds of society could only be paid for by the return of old government bonds. Since these bonds were current but at a fraction of their face value, the actual return was to be achieved in exchange of government bonds at 200%!
The other event was inevitable. The issue was oversubscribed six times. It took weeks, could be to determine who had received an allocation. The shares of the Compagnie des Indes rose rapidly in value. On the French stock exchange shops, which were in close proximity, were converted to brokerages. Merchants and citizens gave up their Beschäfftigungen to devote himself entirely to speculation.
Since the paper money was received, printed Philippe II in 1719 now a billion more tickets, an increase of money in circulation to 16-fold. In the episode gave Law and the Regent always new capital from. Paper money was already provided, to pay them. The new "wealth" spread to the middle of, wages and prices rise, luxury goods became the new standard. The "New Economy" had arrived and caused that apparently all of France wurde.Successtales wealthy from ordinary people who had made much money, spread like wildfire.
ANY madness to an end: In the spring of 1720 the bubble burst. It began when the Prince de Conti is no allocation for a new issue of the Compagnie des Indes received. The well-known man returned the favor in his own way. He collected all the notes, that he could find, and presented them in three coaches of the Banque Royale (that was the Banque Generale from 1718) can be exchanged for gold. Although Philip II later forced the Prince, 2 / 3 of the gold transferred to the bank again, but the damage was done. From now on, the suspicion grew. A few rich could invest their assets in valuable goods exchange and abroad bring. The large mass was running the bank, the doors to exchange the existing notes into valuable assets. More coercive measures of the Regent made the only thing bleaker, as the prohibition on can not hold more than 500 livres in gold.
John Law, until recently the richest and most admired man in the world had found to be, and shortly thereafter left the country deeply in debt under the protection of the regents.

The France-disaster seemed a long time. In the next 200 years there was no more like madness in the world, and even today, the French stock investments over quite suspicious.

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