John Law: The Gambler Who Invented Modern Money (Part 1)

Summary

Merryn Talks Money: John Law – The Gambler Who Invented Modern Money (Part 1)

Podcast: Merryn Talks Money
Host: Bloomberg (Merryn Somerset Webb)
Episode Date: December 22, 2025

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Episode Overview

This special two-part episode dives deep into the extraordinary life of John Law, a Scottish gambler, fugitive, and financier whose radical ideas became the bedrock of modern monetary systems. The hosts, with wit and irreverence, trace Law’s tumultuous journey from Edinburgh to the courts of France, exploring how his vision (and notoriety) helped invent the very foundations of money as we know it today.
Main Theme: Understanding how a risk-taking Scotsman’s schemes and insights transformed the principles of finance and central banking, and how these ideas ripple through today’s economic reality.

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Key Discussion Points & Insights

1. The “Catalyst” in Monetary History [02:27–03:54]

• Period of Calm and Sudden Change:

  • The history of money is marked by slow evolution interrupted by explosive transformation—John Law embodies this shift.
  • Quote: “Quite often it seems like nothing is happening… then suddenly there’s a catalyst… and you get everything exploding.” (Co-Host, 02:27)

• Law’s Lasting Impact:

  • John Law is less renowned than Adam Smith but arguably foundational to the monetary system we use today.
  • Quote: “You could arguably say that his thinking is more important than a lot of that academic muck.” (Co-Host, 03:26)

2. Early Life: Wealth, Risk, and Rebellion [04:40–08:55]

• Family & Upbringing:

  • Born 1671, Edinburgh; raised among merchant-class goldsmiths who straddled the worlds of jewelry and early banking.
  • Lived amid credit creation—goldsmiths were already lending (early shadow of fractional reserve banking).
  • Notable Moment: Differentiating between gold as a physical object and gold as “moneyness.”
    • Quote: “He appreciates that there’s a difference between the gold object and gold as Money.” (Narrator, 07:20)

• Formative Habits:

  • Law was a risk-taker from youth, attracted to gambling, nightlife, and breaking convention—much to his mother’s frustration.
  • Quote: “He’s just a naughty boy and she’s kind of fed up.” (Narrator, 08:15)

3. London: Gambler, Dandy, and a Fatal Duel [10:06–18:07]

• Move to London:

  • Law heads to London at 21, mixes in high society, earns the nickname “Beau Law”.

• The Duel:

  • 1694: Law kills Edward “Bo” Wilson in a duel at Bloomsbury Square (circumstances unclear—possibly over a landlady’s honor, not the salacious rumors of the time).
  • Legal technicalities were crucial; premeditated duels were classified as murder, spontaneous fights as manslaughter.
  • Law is found guilty of murder under the former.

• Imprisonment and Escape:

  • Law’s affluent connections afford him better prison conditions, and the Scottish elite plead for his pardon.
  • Eventually, with tacit consent from King William and help from Johnston (Scottish Secretary of State), Law escapes and becomes a fugitive.
  • Quote: “This is a major turning point in his life… it’s his fugitive status that will eventually drive him to France, which is where he will create monetary history.” (Narrator, 18:07)

4. Exile and European Education [21:41–28:39]

• Love and Partnership:

  • During imprisonment, Law meets long-time partner Katherine Knowles—descended from nobility, like Law himself.
  • Law never marries, a rarity for the era; shifts religious affiliation for opportunism, not conviction.

• Financial Intellectualism on the Run:

  • Travels from Genoa to Amsterdam, supporting himself through high-stakes gambling.
  • Absorbs advanced financial market concepts while mingling with top traders in Amsterdam—learns about shorting, futures, busts, and the power of being “the banker.”

• Wider Historical Context:

  • England and France are both financially crippled by decades of war.
  • 1694: Founding of the Bank of England—a critical prototype for central banking, designed to institutionalize public debt and raise funds independent of the monarchy.
  • Quote: “You’re getting your institution… whereas in France you’ve still got this very old system.” (Narrator, 26:27)

5. Law’s Theories and Attempts at Reform [28:39–35:09]

• Land-Bank and Money Theory:

  • Publishes “Money and Trade Considered” in Scotland—one of the first explicit treatises recognizing money’s abstract, non-commodity role.

  • Key Quote: “Money is not the value for which goods are exchanged, but the value by which they are exchanged.” (Cited by Felix Martin and Edward Chancellor, 30:20)

  • Law’s innovation: Suggests a currency secured by land, not gold or silver.

  • Motivated by intellectual passion; more “world improver” than profit-seeker, though he lived richly.

• Failed Efforts in Britain and Savoy:

  • Law’s ideas gain some high-profile support but are ultimately rejected; Scotland chooses union with England over monetary reform.

6. France—A Nation (and a Man) on the Brink [35:30–38:43]

• Relocating as the Political Landscape Shifts:

  • Law, now wealthy and widely connected from years on the continent, moves to France after the War of Spanish Succession.
  • France’s finances are in dire straits: Debt exceeds 100% of GDP, reminiscent of modern fiscal crises.
  • Quote: “France is desperate for fresh ideas on how to deal with its lack of money, and John Law is desperate to see his ideas put into practice.” (Narrator, 38:15)

• Setting Up for the Big Bet:

  • Both Law and France are at a crossroads—ripe for the monetary “Big Bang” Law will soon unleash.

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Notable Quotes & Memorable Moments

| Timestamp | Quote | Speaker |
|-----------|-------|---------|
| 02:27 | “Quite often it seems like nothing is happening… then suddenly there’s a catalyst… and you get everything exploding.” | Co-Host |
| 03:26 | “You could arguably say that (Law’s) thinking is more important than a lot of that academic muck.” | Co-Host |
| 07:20 | “There’s this thing called moneyness somewhere that is a kind of abstract property of the gold and he appreciates that there’s a difference between the gold object and gold as Money.” | Narrator |
| 08:15 | “He’s just a naughty boy and she’s kind of fed up.” | Narrator |
| 18:07 | “This is a major turning point in his life… it’s his fugitive status that will eventually drive him to France, which is where he will create monetary history.” | Narrator |
| 30:20 | “Money is not the value for which goods are exchanged, but the value by which they are exchanged.” | (Citing financial historians on Law’s writing) |
| 38:15 | “France is desperate for fresh ideas on how to deal with its lack of money, and John Law is desperate to see his ideas put into practice.” | Narrator |

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Engaging and Noteworthy Moments

• Law’s duality: Extreme risk-taking in personal life matches his radical financial ideas.
• Irreverent analogies: Training montage scene with Law “darting around Europe with his not-wife Catherine” (27:29) adds levity and pace.
• Modern Parallels:
  • References to fiscal crises and institutional innovation resonate strongly with listeners aware of present-day economic debates.
  • Quote: “France’s debt is running at something like 100% of GDP, which reminds me of somewhere else that we can name right now.” (Narrator, 37:40)
• Humanizing Law: The show balances Law’s notoriety (gambler, murderer, fugitive) with his lasting intellectual impact and personal charm—“calls for charisma every time.” (Co-Host, 04:22)

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Timestamps of Key Segments

• 02:27 – Introduction to monetary history catalysts and Law’s place
• 04:40 – Law’s childhood and family business (early goldsmith banking)
• 10:06 – Move to London, high-society life, and the infamous Bloomsbury duel
• 13:29 – Duel aftermath and Law’s prison/escape drama
• 21:41 – Law’s exile, relationship, and survival across Europe
• 23:52 – Broader financial context: England and France’s fiscal dilemmas
• 28:39 – Law’s time in Amsterdam, gambling, and exposure to modern finance
• 31:42 – Law’s treatises and attempt to reform Scotland’s money system
• 35:30 – Flight to Genoa, further schemes, and move back to France
• 38:05 – France at the edge of reform or crisis; stage set for Law’s next act

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Tone

The podcast is conversational, witty, and accessible—mixing deep, thorough research with lively, playful asides. The irreverence towards history’s “great men” gives the narrative freshness while maintaining enormous respect for the intellectual revolutions of the period.

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Summary for Non-Listeners

If you missed this episode, you’d learn that John Law’s life was more adventurous than most fiction, mixing gambling and murder with seminal theorizing that still shapes our financial system. This first part covers his Scottish roots, scandalous early life, brush with execution, and fugitive wanderings—set against a backdrop of European warfare and financial innovation. The stage is now set for his entry into France, the mother of all monetary experiments, to be explored in Part 2.

Transcript

[Goldman Sachs Podcast Host]

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[Podcast Narrator/Host (John Law Story)]

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[Podcast Co-Host/Commentator (John Law Story)]

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. Now, John Law. John, 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?

[Podcast Narrator/Host (John Law Story)]

Yeah. And we'd need to take two whole episodes to do it. This is a special series, folks. John Lord's story is the story of basically how a fugitive Scotsman clearly identify with that quite closely, briefly became the most powerful man in France.

[Podcast Co-Host/Commentator (John Law Story)]

And the richest.

[Podcast Narrator/Host (John Law Story)]

And the richest, yeah. Which is even more important. And in doing so, he changed both monetary and arguably European history forever. Wow.

[Podcast Co-Host/Commentator (John Law Story)]

It's a big story. So stay with us for it, because his rise and his fall is 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 the likes of Adam Smith, but he pretty much laid the foundation for the monetary system that we use today. Right. So you could arguably say that his thinking is more important than a lot of that academic muck.

[Podcast Narrator/Host (John Law Story)]

Yeah, you could. And actually, whatever else he was, he was a gambler and sometime murderer. He was also a practitioner, he did what he believed. And of course, as we'll find out, that didn't necessarily work to his advantage all the time.

[Podcast Co-Host/Commentator (John Law Story)]

Yeah, 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.

[Podcast Narrator/Host (John Law Story)]

I think I'm really quite fond of.

[Podcast Co-Host/Commentator (John Law Story)]

Calls for charisma every time.

[Podcast Narrator/Host (John Law Story)]

Well, yes, yes, perhaps. Chapter one, the beginning.

[Podcast Co-Host/Commentator (John Law Story)]

Where was this horrible person born?

[Podcast Narrator/Host (John Law Story)]

Well, let's wind back all the way back to April 1671. And John Law is born in Edinburgh. He was one of 12 children, four of whom died in childhood. His dad, William Law, was a goldsmith and his mum, Jean Campbell, was William's second wife. She had three sisters and they'd all married well. So he's basically from a kind of upper merchant class background. So in 1683, when John Law is 12, his father, William, goes to France because he's 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 all the time. So before he leaves, he puts his affairs in order, says goodbye to his Eight kids and his wife and then heads off to France and as it turns out, unfortunately he does die on the operating table.

[Podcast Co-Host/Commentator (John Law Story)]

Leaving behind eight kids.

[Podcast Narrator/Host (John Law Story)]

Leaving behind eight kids. And so Jean takes over the family business and she also avoids getting married again so as not to have to sign the business over to her husband. And at this point goldsmiths are already in banking. So one of John's brothers takes over the kind of goldsmith side of things, actually making stuff out of gold. But Jean and John sort of jointly kind of operate the banking side of the business. So lending money, this is already something that goldsmiths are starting to do.

[Podcast Co-Host/Commentator (John Law Story)]

So we're not into fractional reserve banking at this point, not quite yet.

[Podcast Narrator/Host (John Law Story)]

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 100% reserve requirements. 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 on demand at any time. I mean, there's actually an interesting thing called bailment and this 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, et cetera, that you're going to get back. So basically if everyone came, the goldsmiths up once and wanted all their money back, it wouldn't be there immediately that day.

[Podcast Co-Host/Commentator (John Law Story)]

I reckon I would want my own gold coins back.

[Podcast Narrator/Host (John Law Story)]

I mean, I think you probably would at this time because a lot of them are debased.

[Podcast Co-Host/Commentator (John Law Story)]

Well, other people's may be chipped and clipped, etc. Yeah, I want mine.

[Podcast Narrator/Host (John Law Story)]

Yeah. So I mean you kind of maybe want to use the bailment.

[Podcast Co-Host/Commentator (John Law Story)]

So as a child he's already learned about gouging interest rates, monopolies, gold. He's kind of off before he's 18.

[Podcast Narrator/Host (John Law Story)]

Well, he's brought up in that because I suppose the other interesting sort of one of the core things about being a goldsmith son is that he's used to that world where gold is an object. So it's jewelry, it's plates, it's things like that, but it's also got a separate financial function. There's this thing called moneyness somewhere that is a kind of abstract property of the gold and he appreciates that there's a difference between the gold object and gold as Money. And that's probably already kicking around in his brain. I would have thought a lot of things. He has a tearaway. His mum actually sends him off to a boarding school in a little village called Eaglesham, which is still about an hour and a half's drive from Edinburgh. And at 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. He comes back, he's 16, boarding school.

[Podcast Co-Host/Commentator (John Law Story)]

Went bust because of the VAT, was that?

[Podcast Narrator/Host (John Law Story)]

Yeah, exactly, yes. Class war, even then. But he comes back and they have a falling out, him and his mum. 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 a naughty boy and she's kind of fed up with, at this point.

[Podcast Co-Host/Commentator (John Law Story)]

1617.

[Podcast Narrator/Host (John Law Story)]

He was 1617.

[Podcast Co-Host/Commentator (John Law Story)]

There's a lot of mothers in Edinburgh today who might have similar feelings.

[Podcast Narrator/Host (John Law Story)]

Yes, I can imagine. Anyway, there's a lot of push and pull, but it doesn't ever fully go to court and it does eventually get settled by the time he's 21 in 1692. 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 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, 1692, John Law is 21 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 Scot who wants to set up a goldsmiths in London. Now he does this and that actually eventually becomes Coot's bank. And John Law himself ends up living in St. Martin's in the field, which, for anyone who's not based in London, is pretty much where Charing Cross Station is today at that point, it actually was.

[Podcast Co-Host/Commentator (John Law Story)]

So it's quite a brave move, even as a young man, to move from Edinburgh to London. Quite a journey.

[Podcast Narrator/Host (John Law Story)]

Yeah.

[Podcast Co-Host/Commentator (John Law Story)]

Alien place to Scots then, as it is today.

[Podcast Narrator/Host (John Law Story)]

If I Remember I went to London for the first time when I was 21. 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 Beastly just wants to have fun because he spends a lot of his time gambling to the point where he actually has to write back to his mum and hand over a chunk of his inheritance in exchange for more cash, basically.

[Podcast Co-Host/Commentator (John Law Story)]

God, you must have been fed up by that point.

[Podcast Narrator/Host (John Law Story)]

You would think, wouldn't you? But actually it's weird. Throughout their lives they don't have a major falling out again and she doesn't disinherit him or anything like that. So Louis leading a 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.

[Podcast Co-Host/Commentator (John Law Story)]

Maybe the other kids are worse.

[Podcast Narrator/Host (John Law Story)]

I mean, possibly, possibly. They'd have to try quite hard. So down in London he gets known as Beau Law. A beau is a dandy, a kind of it boy, a kind of man about town.

[Podcast Co-Host/Commentator (John Law Story)]

Beau as in B, E, A, U, right?

[Podcast Narrator/Host (John Law Story)]

B, E, A, U. Yes, as in, well, 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 on a path that will put him in a position to play financial alchemist with one of the biggest economies in Europe. Chapter two did you. In April 1694, John Law is 23 and he gets involved in the life of a fellow dandy called Edward Bo 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 though the family that he comes from is not 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 £4,000 a year, which in current money is about £675,000 a year. And in terms of what people were saying about him at the time, there's the equivalent of a local gossip columnist who writes to his employers in 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 is 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 money comes from, because on 9 April 1694, he and John fight at Bloomsbury Square and John stabs him in the stomach with an iron and steel sword of a value of 5 shillings, which is about 40 pounds today and to a depth of 2 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 anything about anatomy.

[Podcast Co-Host/Commentator (John Law Story)]

Okay, so this is really unlucky.

[Podcast Narrator/Host (John Law Story)]

It is unlucky. We don't know why they fought. A later theory claimed that Elizabeth Villiers, who was King William's mistress, was involved, but there's no evidence for that and it likely originated a century afterwards. And there's also a scandalous pamphlet from the 1720s, and this suggests that Wilson was actually having an affair with a nobleman who was the person paying for his lifestyle and that Law killed Wilson to silence him. So effectively he was acting as a kind of 18th century hitman. 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 Mrs. Lawrence and she was a friend of Law's 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 Mrs. Lawrence took offense, probably because like, oh, what are you accusing me of running some kind of, you know, brothel or something? An argument followed and that's where the jewel came from. So basically, Law might have been defending his friend's honour, which I think is probably quite believable because he's clearly still quite hot headed and reckless. But I mean, ultimately we don't real reason. After the fight, Law is arrested. And the key legal question is whether it was a planned duel or a spontaneous fight. Duels were common but illegal. And I mean, this will seem a bit weird actually. 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 in those days you got away with manslaughter. So Law claimed that Wilson attacked him suddenly in Bloomsbury Square and that would have made it self defence, but the Prosecutors argued that it was prearranged and they showed letters and things to show that they had an ongoing feud. So it was kind of cut and dried from that point of view. So the jury agreed. They convicted him of murder and they sentenced him to hang. Now, the King reprieved him because although duels were technically illegal, they were also sort of seen as a way that young men let off steam. So no one was actually keen to execute people for. But Wilson's family appealed and that left John Law kind of rotting in prison. The jails then were privately run, so he was able to pay for better quarters. So in certain parts of the prison, poor people were kept and they were awful, 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 signed was lobbying for him to be hung. And the King was kind of stuck in the middle. And you get the sense that the King just wished the problem would go away. And as early as kind of May 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, 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 may have thought, well, I'd rather wait for this pardon, which is surely forthcoming at any minute. But in the end, the appeal didn't go his way. He sentenced 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 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.

[Podcast Co-Host/Commentator (John Law Story)]

Fascinating that the King is so interested in this case.

[Goldman Sachs Markets Podcast Host]

Right.

[Podcast Narrator/Host (John Law Story)]

It is 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.

[Podcast Co-Host/Commentator (John Law Story)]

So he gets out.

[Podcast Narrator/Host (John Law Story)]

So Law makes his escape, or rather by the sounds of it, he's rescued Johnston, that's the Scottish Secretary of State. 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.

[Podcast Co-Host/Commentator (John Law Story)]

That's the point, isn't it John, really?

[Podcast Narrator/Host (John Law Story)]

Well it is, 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.

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[Podcast Narrator/Host (John Law Story)]

See mintmobile.com Chapter 3 Law on the Lam.

[Podcast Co-Host/Commentator (John Law Story)]

There's a gap before he arrives in France where Brazil starts to refine his monetary and fiscal thinking.

[Podcast Narrator/Host (John Law Story)]

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 Boleyn, who was Anne Boleyn's big sister, the one who got away from Henry viii. And that actually introduces the tantalising prospect that just maybe John Law's children had chewed their blood in them, depending on exactly who was the father of Mary's kids. But anyway, Catherine's brother Charles, who's a sort of dissolute upper class scoundrel, is in jail at the same time as Law for murdering 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. 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 when he moves to France. But it's so interesting how there's wars being fought over religion all over the place at this point. And I just find it fascinating what a kind of unusually free thinking individual he seems to be. And I don't know necessarily where that comes from. And perhaps there were a lot more people like that in Scotland and England and France of the time than we traditionally think.

[Podcast Co-Host/Commentator (John Law Story)]

But to my it's interesting because when you say if he changing religion between Protestant and Catholic back then it shows a kind of open mindedness and a lack of being, well, not being wedded to an ideology of any type. Although you could say that they're more or less the same. But we won't go there on this podcast. You know, you're not wedded to a particular ideology. You're open minded, you're thinking freely. You've escaped from prison.

[Podcast Narrator/Host (John Law Story)]

Yes.

[Podcast Co-Host/Commentator (John Law Story)]

Got your girl with you, left prison. Catherine's with him. We don't know where he's gone, but he turns up in Genoa.

[Podcast Narrator/Host (John Law Story)]

Well, he turns up in Genoa, but I think the other thing he kind of contextualized stuff a little bit at this point. So 1694, while he's in jail, this is also when the bank of England gets established. So England and France are basically both skinned because they've spent so much money on either being at war with each other or with other European powers. So England's fiscal problem dates back to Charles ii. 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 due in the near future. So it's basically an early but very, very primitive form of government debt. But by 1672, a combination of war and good living means that Charles is out of money. And so he suspends interest payments to the goldsmiths in 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 run in court cases right up until the 1700s. But in the immediate term, it bankrupts several big goldsmiths and also means that many wealthy families lose their money because they had been depositing it it with the goldsmiths and that had been lent to the King. So anyway, that casts a big shadow over the Crown's credit worthiness. And so come 1693, the king's changed. It's King William now. We're in the middle of the Nine Years War, which is a big European war, which is basically France versus everyone else. And 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 any. 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. There's talk of lotteries, there's talks about lots of other kinds of schemes. But the scheme that 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 £1.2 million in that money. So 1.2 million, a lot more than that in today's money from shareholders. And in exchange, they'll get an 8% 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 that doesn't purely rely on the whims of the Crown.

[Podcast Co-Host/Commentator (John Law Story)]

Oh, boy, has that been overused since?

[Podcast Narrator/Host (John Law Story)]

It has a bit. It has a bit. But as you're getting your institutionalized and your institutions are starting to get built, whereas in France you've still got this very kind of old system. Louis XIV has already experimented with paper money and then banned it because he didn't trust it. The tax is raised largely from the poor. Nobles and the clergy are exempt from the tax. Raising 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 can assist them 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.

[Podcast Co-Host/Commentator (John Law Story)]

If you see an organization set up out with the Crown, supposedly independent, or a separate organization, but also allowed to raise money with the power of the state behind it, I would definitely start.

[Podcast Narrator/Host (John Law Story)]

Thinking, okay, so that's the state of the public finances in England and France. And that's a very rough idea who they differ. So now let's get back to John Law having escaped from prison. Okay, so if this was a film, this is the point at which we'd break into a training montage. Except rather than having Rocky punching bits of meat, we'd have John Law darting about Europe with his wife, Catherine. Oh, sorry, not his wife, his lady partner. And so between 1695 and 1705, they spend 10 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 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, to be honest, when you read some of the things that people were getting excited about at the time, they're talking about like he's calculating the odds of rolling a seven with two dice and you're kind of like thinking how did no one else know how to do that? But it's that sort of thing. And he also wants to and to.

[Podcast Co-Host/Commentator (John Law Story)]

Be able to do that instinctively. It's amazing, really. Yeah.

[Podcast Narrator/Host (John Law Story)]

And also taking the interest to write it down because there are a lot of people writing about 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 is 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 engaged with probability particularly. 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 in Holland, he's learning about shorting, he's learning about futures options because the financial markets in Amsterdam are extremely sophisticated by standards at the time. He's also spent a lot of time thinking about money because obviously his goldsmithing background means that he knows a fair bit about basic banking already. I think something that's really important to point out is that. But none of this is coming out of the blue. The biggest driver of all this actually, and all this monetary theory stuff is the fact that England and France have been. And the rest of Europe has been in war for three or four decades. So the governments are incredibly indebted and they 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 to England, he pitches it to France and he also pinches it to Scotland. And Scotland is the place where in 1704 he ends up back there 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 bankrupt because of an ill advised colonial scheme. Now, bear in mind he can go back to Scotland because Scotland and England obviously are two separate countries. So the fact he's wanted an England doesn't mean that he's a fugitive in Scotland. But also by this point, he has actually reached an agreement with Robert Wilson, Wilson's brother, that he will scrap his appeal and he's no longer going to pursue him for the death penalty. So although he 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 in Scotland is where he publishes his monetary treaties, which is money and trade, which is basically his idea of how money works. Felix Martin and Edward Chancellor, both of whom are respected financial historians and former guests on this podcast, make the point that Law's thinking does advance the concept of money. And there's one key quote 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, Law is 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. It's that money is the problem where there isn't enough of it. Money is the kind of oil you need to make things go round.

[Podcast Co-Host/Commentator (John Law Story)]

John, 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, sounds 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 after status, after power, after more money than you can ever make shorting stuff in Amsterdam?

[Podcast Narrator/Host (John Law Story)]

I think that's a really interesting question, but I honestly think it's the ideas that drove him. I mean, there is a quote, I can't remember who it's from, but one of his contemporaries points out it's not the money that he was basically interested in, it was his ideas. He's basically a world improver. One of the problems with tying your currency to gold, and it was a problem, and it would be a problem, is that 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 recognize paper money's foibles 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. I mean, one of the things that John Law does is he goes back into the history books and looks at how much 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 stones of Yap. It never would actually change hands. It's just a thing that backs the iou. 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 balance. 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 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 him. Sir Daniel Defoe is not just the writer of Robinson Crusoe, he's also a political pamphleteer and he's also. They call them projectors, but it's guys coming up with mad ideas for raising money. Or not so mad. I mean, that's where the bank of England came from. It wasn't a Defoe idea, but it was the idea of the guy who would actually later go on to do Scotland's ill fated Darien scheme.

[Podcast Co-Host/Commentator (John Law Story)]

Yeah, save us from the improvers, eh?

[Podcast Narrator/Host (John Law Story)]

Well, absolutely. So, 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. What am I talking about?

[Podcast Co-Host/Commentator (John Law Story)]

Flower. Weed.

[Podcast Narrator/Host (John Law Story)]

Weeds. Weed, yes. His proposal for this land bank, money and trade considered is published anonymously by John's Aunt Agnes, who runs a printing business which holds the local monopoly in printing Bibles as well, by the way. But everyone in politics knows who's behind it, and despite the fact that his reputation is obviously controversial, he does have some high profile supporters. And his scheme does get a hearing in the Scottish Parliament alongside several others. However, to cut a long and complicated story short, it's not something we need to Quentin for this podcast. Scotland doesn't go ahead with monetary reform and instead it somewhat reluctantly agrees to unite with England in 1707. And that's partly to bail out the economy and specifically the elites who'd lost a lot of money in the Darien scheme.

[Podcast Co-Host/Commentator (John Law Story)]

Okay, so here we Are he's still in Scotland? Is he still in Scotland for the active union?

[Podcast Narrator/Host (John Law Story)]

He's not, because what happens? Well, obviously the active union is coming up and he's still a fugitive.

[Podcast Co-Host/Commentator (John Law Story)]

He can't stay in Scotland.

[Podcast Narrator/Host (John Law Story)]

Because it may become part of England. And so that's when he moves to, by the looks of it, that's when he moves to Genoa.

[Podcast Co-Host/Commentator (John Law Story)]

Jeez. Presumably his descendants still calling for independence.

[Podcast Narrator/Host (John Law Story)]

That would explain something. So he goes to Genoa. During this time they've had two kids and by 1711 he's got 140,000 lira in the bank. Now, according to James Barkin's book, a laborer earns one or two lira a day. So let's call that the minimum wage. Now, the minimum wage in the UK is about 12 quid an hour at the moment. I wasn't going to multiply that to a day, but even if you take 12 quid for an hour and you multiply that by 140,000, then you are looking at somewhere between 850 grand to about 1.7 million. So he's definitely a well off guy. He's got a lot of liquid assets and this seems to have been built 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 Jacobites in Scotland are very fond of him, even though he doesn't really doesn't seem to have very high convictions in terms of political stuff. It's like he's kind of nice to the Jacobites because they're nice to him. He's quite a loyal person, really. Somebody helps him out, then 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, that he's kind of more obsessed with his ideas about monetary and 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 Duke of Savoy with a similar idea for a kind of central bank type organization. He nearly gets a scheme going in Turin, but again, that doesn't happen. And so as far as we can see, France is currently engaged in the war of succession that comes to an end in 1713. And at this point he moves back to France, presumably because you can get in now because they're not at war anymore. And it's also very clear that Louis XIV is on his last legs. There's going to be succession. France is very, very, very badly off. Debt is running at something like 100% of GDP, which reminds me of somewhere else that we can name 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.

[Podcast Co-Host/Commentator (John Law Story)]

So France is kind of at again, this might sound familiar, but reform or crisis stage?

[Podcast Narrator/Host (John Law Story)]

Absolutely.

[Podcast Co-Host/Commentator (John Law Story)]

When they decide to go for reform. Or as we will find out later.

[Podcast Narrator/Host (John Law Story)]

Yeah, a bit of both. Why not both? Exactly, sir. France is desperate for fresh ideas on how to deal with its lack of 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 his thoughts in France. And we'll find out how that went in the next episode.

[Goldman Sachs Markets Podcast Host]

Foreign.

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[Podcast Narrator/Host (John Law Story)]

Janice Torres here and I'm Austin Hankwitz. We host the podcast Mind the Business Small Business Success Stories produced by Ruby Studio in partnership with Intuit QuickBooks.

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We're back for season four to talk to some incredible small business owners.

[Podcast Narrator/Host (John Law Story)]

The big thing about working at tech is that it's ever evolving, ever changing. Everyone's a rookie, that's how fast the industry is changing. So what I'm really excited about is to be part of that change. So listen on the iHeartRadio app, Apple Podcasts, or wherever you get your podcasts.