Welcome back to another exclusive sneak preview of the Hue Jackson School of Scam Artistry!

Well, friends, we’ve seen just about everything in our time together… cryptocurrency, pickpockets, card sharks, art thieves, midgets, quacks, forgers, escape artists, and more. But I had to leave this one for just now. The timing seemed right to me. Our Hall of Fame Scammer this week ended up completely ruining France – which should also merit him a Nobel Peace Prize, Hollywood Walk of Fame star, and commemorative marble temple somewhere, in my opinion.

JOHN LAW: BANKER, ECONOMIST, REALTOR, AND GAMBLER

BORN: April 21, 1671, Edinburgh, Scotland

DIED: March 21, 1729, Republic of Venice

Scammers are constantly around money. For most, it defines their very existence. As you have seen from numerous lessons in this exclusive audio cassette series, the quest for cash will ruin some… or sometimes ruin others dragged down in their unfortunate shenanigans. To end off this sneak preview series, we’re going to take a look at a man who was so caught up in schemes of wealth and power that he ended up destroying an country’s economy singlehandedly.

Many people shit on the English for myriad reasons (and rightfully so), but this week, for once in their miserable existence, they get a pass, as our protagonist this week was a Scotsman. John Law was born in Edinburgh, one of the most well-educated, cosmopolitan cities of western Europe during the late 17th century. As a young man of privilege, Law was fortunate to attend Edinburgh’s High School, where he received a sterling education; this was particularly useful as he apprenticed into the family banking business, poised to take it over from his father. However, Law, a dashing figure, preferred to gallivant across Scotland and England, especially travelling to London, which meant lots of drinking and gambling.

In 1694, Law fought a sword duel with Edward “Beau” Wilson in Bloomsbury Square, London, over the courtship of a woman, Elizabeth Villiers. Law stabbed and killed his opponent in the duel. Initially sentenced to death for murder, Law and his attorney managed to bargain the charge and sentence down to manslaughter – punishable with merely a fine. However, when Wilson’s brother appealed the sentence and Law was sentenced to prison time, the Scot was forced to flee to the Netherlands. He spent the next several years on the continent, continuing to gamble, drink, and womanize – but also doing a lot of writing.

Law’s theories of economics are the underpinnings of much of the modern financial system today. In particular, he’s renowned for the advent of paper money as part of financial systems across the world. Thanks to the scarcity theory of value, which ties the price of an item relative to its availability to customers in a market, and the real bills doctrine, which advocates for the extension of discounted short-term bank loans when backed by solid, fungible assets, much of Law’s thinking can still be observed in action today. However, Law remains best known for both his theorizing, and later his application, of the creation of a central national bank, which happened during his time in France. In theory, it was actually an excellent idea. In practise, it turned into a giant sham.

In 1714, John Law met Duke Philippe II of Orleans, who became regent the following year when the Sun King, Louis XIV, passed away, leaving the throne to his five-year-old grandson. The Duke was also facing a massive problem in his time as the head of France’s government – the country was in massive, massive debt. Louis XIV’s wars against the Dutch, the Spanish and the Holy Roman Empire had cost the kingdom millions and millions of livres, and the new government was having a difficult time reconciling how to recoup the costs. John Law, who became fast friends with the Duke, felt he had the answer – create a centralized, national bank to control the financial system of France and standardize the lending and borrowing that was taking place by all French subjects and companies. Additionally, since gold and silver were in such short supply, the central bank should use paper money for all its transactions. This was a significant shift in monetary theory – rather than the material of the currency having inherent value, the sudden wide availability of paper cash – a useful tool for providing credit and stimulating economic activity – was enough in itself to now hold value independently. Within two years of its creation, Law’s Banque Générale was nationalized, becoming the Banque Royale, and the value of the livre, which had been fluctuating wildly, finally stabilized. Law figured that payment in paper bills would suffice in part because money would almost always be kept in rapid circulation in a thriving economy; for the few who demanded an exchange of paper bills with gold and silver, the limited supply likely wouldn’t be an issue.

In addition to creating a national bank, Law’s other major contribution to French financial reform was to set up monopoly companies operating out of various French colonies across the globe. The largest of these, the Compagnie d’Occident, more commonly known as the Mississippi Company, operated out of French North America, stretching from the mouth of the Mississippi River and New Orleans all the way north into Canada. As part of its creation, Law received royal approval for 25 years of exclusive trading privileges in the territory, with a lucrative market for animal skins and precious metals. Furthermore, he found financing for the company’s creation through the sale of joint stock. Investors in the company could exchange their cash for stock, but, more notably, could also exchange government bonds for shares in the company. Later, the company would also granted the authority to print French money and mint its own coins, as well as collect taxes on behalf of the French government.

At the time, the bond-stock transfers seemed like a match made in heaven. The Mississippi Company was, apparently, leveraging fantastic revenues and collecting taxes of its own from residents in the colony, while the French government, which needed income to stabilize itself, could lessen its national debt through equity in the company. Moreover, since Law and the Banque Royale could also control the amount of currency in circulation, they could also, theoretically, control the amount of demand for stock in the company. The company grew so rapidly that it ended up taking over similar monopolies in Africa, and later in China and the East Indies. It eventually became known as the Compagnie des Indes, even as it stretched across the globe. Law became an unbelievably wealthy man with the success of the Mississippi Company, and continued his drinking, gambling and womanizing ways while hobnobbing with the elite of the continent all the while. He owned at least 21 castles all over the country, as well as the famous Place Vendôme in Paris’ 1st Arrondissement.

In reality, the actual demand for shares of the Mississippi Company quickly raged out of control; in 1719, shares were selling for around 500 livres, while one year later, they were fetching as much as 15,000. Thousands of new millionaires were created overnight, and even the most impoverished scraped together what little they had in hopes of getting rich quickly with the hottest economic market in Europe. However, Law, the scammer that he was, had vastly been inflating the profitability of the Mississippi Company, and these gigantic streams of revenue were, in reality, a complete load of horseshit. By the end of 1720, the bubble had burst; investors rushed to sell their shares and exchange them for gold and silver coins, resulting in the Banque Royale’s complete and total collapse. Law was forced to flee France and never return, leaving behind staggering amounts of wealth and property, which was confiscated by the French government. The Mississippi Company’s stock was devalued by 50%, and a royal law was passed preventing the exchange of banknotes and stock into gold for a number years after the collapse. Monthly inflation hovered around 23% in early 1720, resulting in food prices skyrocketing, widespread riots, and at least 50 deaths in public tramplings from citizens assaulting bankers and financiers.

France’s decline through the 18th century, culminating in the eventual losses of its North American colonies and the French Revolution, is largely attributable to John Law being a con artist, swindler, scammer, shyster, and charlatan of the highest caliber. Even today, few French financial institutions include the word “Banque” in the name in part because the word is still tainted from Law’s time. Hard to believe that one man could alter the shape of history so severely. As for John Law? He died of pneumonia in Venice, living in abject poverty. A quiet end for a man who, despite all of his personal shortcomings, is still widely regarded in the study of economics today.

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Oh, fuck. I hear sirens. I really hope this isn’t curtains for your friend Hue. Think I’ll go hang on the sidelines with a headset for a while and be incognito as a coach for a little bit. For those of you who ordered next month’s subscription of tapes, expect a refund in, uh… six or seven… uh…

[Car door slams, engine revs, tires screech. The cassette tape unwinds itself and catches fire, for some reason.]

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Information from this article taken from here, here, here, here, here, here, and here. Banner image by The Maestro. 

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Thanks to everyone who’s enjoyed this series over the last few months – it has been a real treat for me to get to tag along with coach Hue Jackson to learn all about the finest points on the art of the scam. The [DFO] CFL Beat returns next week in this same timeslot – I look forward to once again bringing you news about the best football that Canada has to offer!  – The Maestro