Millionaire: The Philanderer, Gambler, and Duelist Who Invented Modern Financeby Janet Gleeson
On the death of France's most glorious king, Louis XIV, in 1715, few people benefited from the shift in power more than the intriguing financial genius from Edinburgh, John Law. Already notorious for killing a man in a duel and for acquiring a huge fortune from gambling, Law had proposed to the English monarch that a bank be established to issue paper money with the… See more details below
On the death of France's most glorious king, Louis XIV, in 1715, few people benefited from the shift in power more than the intriguing financial genius from Edinburgh, John Law. Already notorious for killing a man in a duel and for acquiring a huge fortune from gambling, Law had proposed to the English monarch that a bank be established to issue paper money with the credit based on the value of land. But Queen Anne was not about to take advice from a gambler and felon. So, in exile in Paris, he convinced the bankrupt court of Louis XV of the value of his idea.
Law soon engineered the revival of the French economy and found himself one of the most powerful men in Europe. In August 1717, he founded the Mississippi Company, and the Court granted him the right to trade in France's vast territory in America. The shareholders in his new trading company made such enormous profits that the term "millionaire" was coined to describe them. Paris was soon in a frenzy of speculation, conspiracies, and insatiable consumption. Before this first boom-and-bust cycle was complete, markets throughout Europe crashed, the mob began calling for Law's head, and his visionary ideas about what money could do were abandoned and forgotten.
In Millionaire, Janet Gleeson lucidly reconstructs this epic drama where fortunes were made and lost, paupers grew rich, and lords fell into penury -- and a modern fiscal philosophy was born. Her enthralling tragicomic tale reveals two great characters: John Law, with his complex personality and inscrutable motives, and money itself, whose true nature even to this day remains elusive.
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Read an Excerpt
Within the last twenty years commerce has been better understood in France than it had ever before been, from the reign of Pharamond to that of Louis XIV. Before this period it was a secret art, a kind of chemistry in the hands of three or four persons, who actually made gold, but without communicating the secret by which they had been enriched....It was destined that a Scotchman called John Law should come into France and overturn the whole economy of our government to instruct us.
"Essay on Commerce and Luxury"
Money has ever posed problems. Not even love, said Gladstone, has made so many fools of men. Throughout time the most obvious but universal dilemma -- that there is never enough of it -- has confounded everyone, from mendicants to monarchs, and their ministers.
Rarely, however, had the problem seemed more pressing than it did in the late seventeenth century. Money, as most people had always understood it, was silver or gold -- precious metals whose value lay in their intrinsic scarcity. But the fact that coin supplies were limited by the metal that could be dug out of the ground was proving a serious hindrance. Throughout Europe, warfare of vast scale and expense coupled with the extravagant lifestyles of kings had emptied entire treasuries. At the same time the growing population, expansion of trade, and colonization of foreign lands demanded more cash to progress. As rulers plotted invasions, perused peace treaties, and yearned to sponsor new industry, build new palaces, and develop their domains overseas, money and how to create more of it became an obsession. In an age poised between superstition and enlightenment, it became as fashionable to ponder the subject that would soon be christened political economy as the disciplines of philosophy, mathematics, and nature. While on the one hand alchemists strove futilely to turn base metal into gold, on the other entrepreneurs proposed a plethora of ingenious schemes to sidestep the shortage. At the lowliest level, small-change coins made from base metal alleviated the dearth of coins in the streets. On a grand scale, banks and joint-stock companies used the magical device of credit to fund royal debts and colonial expansion by issuing paper banknotes and shares of token rather than intrinsic worth. Thus the frustrating limitations of gold and silver evaporated, but a new, even more baffling problem emerged: the question of how to maintain public confidence in the value of intrinsically valueless paper.
Among monetary philosophers and innovators to confront the problem, John Law stands alone as the most improbable, controversial, yet visionary of financial heroes. He was big in every sense, over six feet tall with ambitions that were larger and more daring than anyone else's. On one level his story is the stuff of romantic legend. He turned his attention to finance after killing a man in a duel over an unfortunate liaison and escaping prison to save his neck. A congenial gambler, prepared to punt on the turn of a card yet burning with mathematical brilliance, he exuded a glamorous, dangerous magnetism. Women were spellbound by his impeccable dress, charming manner, and sexual charisma. Men were intrigued by the ease with which he was able to demystify complex subjects, his nonchalant wit, and his willingness to linger for hours over games of cards and dice. But his ideas and actions invest his life with far more significance than that of a beguiling and ambitious playboy: the things Law made happen still have resonance today.
In an ironic reversal of the concept of the philosopher's stone (the substance by which it was believed gold could be made from base metal), he founded the first national bank of issue in France that made money from paper on a previously unknown scale to revive the ailing economy. He formed the most powerful conglomerate the world had yet seen -- the Mississippi Company -- and encouraged unprecedented numbers of private investors to dabble in its shares. Once initial hesitation had been banished, investors from England, Germany, Holland, Italy, and Switzerland stampeded to Paris to play the markets, and share prices rose from 150 livres to 10,000 in a matter of months. In comparison, the best bull markets of the twentieth century, between 1990 and 1999, when the Dow Jones rose by 380 percent and the Nasdaq by 790 percent, seem paltry. Law sparked the world's first major stock-market boom, in which so many made such vast fortunes that the word "millionaire" was coined to describe them. Almost overnight he had become rich beyond expectation, a heroic figure, fêted throughout Europe, and promoted in recognition of his achievement to the position of France's financial controller -- the most powerful public position in the world's most powerful nation.
Pioneers, so they say, usually end up with arrows in their backs. In Law's case, enemies, inexperience, greed, and destiny conspired against his unconventional genius. The idea that money could be made from speculation rather than drudgery was printed indelibly on the popular consciousness. But having made their fortunes, many began to look for alternative investments, or to feel that paper was no long-term substitute for more traditional, tangible assets. When speculators began to cash in shares and withdraw paper funds to buy estates, jewels, or gold, or to speculate in other escalating foreign share markets, Law, hampered by jealous rivals, was unable to hold back the tide and the stock plummeted as rapidly as it had risen. People who rushed to the bank to convert paper back into coin found insufficient reserves and were left holding an asset that had become virtually worthless.
Over half a million people, equivalent to two-thirds of the entire population of the city of London at the time, claimed to have lost out as a result of John Law. Having sparked the first international stock-market boom, he had also sparked the first international bust. As loudly as he had been lauded a financial savior months earlier, he was branded a knave and ignobly demoted. Sadder, wiser, immeasurably poorer, he spent the rest of his life unsuccessfully trying to convince the world of his integrity, and that the idea behind his schemes was sound. His fall cast long shadows. It was eighty years before France dared again to try to introduce paper money to its economy. For years afterward history judged Law harshly. In the story of money, the chapter on his life embodies the perils of paper, the monumental significance of his economic foresight largely negated by his ultimate failure.
Today, if John Law or his critics could witness commerce conducted in any mall with credit cards, banknotes, and checks -- not a gold or silver coin in sight -- they would see, incontrovertibly, his vision achieved, but recognize also the same inherent weakness. The survival of any credit-based financial system still hinges on public confidence in a way that one based on gold does not. Spectacular financial breakdowns have peppered history ever since the advent of paper credit.
The American investment guru Warren Buffett once said, "If history books were the key to riches the Forbes 400 would consist of librarians." Nevertheless, three centuries after John Law delighted, then devastated investors in his Mississippi stock, an age of comparably varied and ambitious financial innovation unfolds -- witness the introduction of the euro, the opportunity to trade shares on the Internet, and a panoply of monetary instruments, from foreign-currency mortgages to inventive use of derivatives in equity, bond, and currency markets. In such a world Law's story still holds uncanny relevance.
During the period covered in this book English and French currency was based on a similar structure: 240 pennies or deniers = 20 shillings or sous = 1 pound or livre tournois. Coins in common use in France included the gold louis d'or and the silver écu, which were measured and varied widely against the value of the livre. Another common coin was the pistole, a Spanish silver coin worth approximately 10 livres. Exchange rates also varied enormously: a livre was worth between a shilling and 1s. 6d. According to the Bank of England a pound in 1720 is equivalent to about £73 (US$117) today. Therefore a sum quoted in livres can be converted to its approximate equivalent in dollars today by halving it, then multiplying by twelve.
Copyright © 1999 by Janet Gleeson
Meet the Author
Janet Gleeson is the author of the bestseller The Arcanum, as well as Millionaire, The Grenadillo Box, and The Serpent in the Garden. She lives with her family in Dorset.
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Millionaire was written by Janet Gleeson. It is about a man named John Law and takes place in the 1700s. It could definitely be considered a biography, but also lays the foundation for a basic understanding of economics. John Law was a financial genius that pulled France out of debt by introducing paper bank notes, and then let the country down with the first stock market crash that followed the first stock market boom. At the highest point of success, foreigners could go to France and make millions in one day by buying and selling stocks. People became so rich that the term 'millionaire' came about to describe them. This book was a good way for me to understand how our money system works. It paints such a wonderful portrait of the many different economic situations that can occur. This is a wonderful book for someone who is interested in the way that humans react to financial situations. A person who just enjoys biographies would also enjoy this; John Law was an interesting man with a very interesting life.
At the tail end of the technology/Internet bubble burst comes this fascinating cautionary tale about the limits of 'genius' in financial circles. John Law was indeed a philanderer, duelist and gambler par excellence when he introduced the idea of paper money backed by gold and silver coin. What could go wrong if it was fully backed by coin, the currency of the realm? Plenty. Sadly, the things that went wrong then are the same things that go wrong now - excess printing of money, inflation, speculative pressures on paper currency, etc. A fascinating read.
This book shows the background of the attempts by John Law to create a better monetary base for France. The ideas he pursued were doomed by political interventions, and France was left worse off than before. The surrounding scandal rocked the Continent. The book also provides many insights into how political influence on national economics can be developed and exercised. The book is enlivened by many interesting details of John Law's life. How did a Scotsman with a mixed reputation come to be the prime mover in French economics? That would never happen today. You will be fascinated by this tale of how difficulties make for strange political accommodations. Based on this biography of John Law, the real character of the man remains somewhat murky. While this book tells us a lot about the effects he created on the lives of others, what other people had to say about him, and what his environment was like, we get a limited sense of the man himself. Little is recorded of his writing or conversations in this book. In this sense, he reminds me a little of Howard Hughes. What is most clear is that John Law made both his successes and his failures through his persuasiveness (he sought the ear of powerful people, not the other way around) and his personality faults (he was clearly reckless in many ways -- killing a man in a duel, pushing the implementation of his financial schemes too aggressively, and being overly friendly with married ladies). The book glosses over what John Law did that was deliberately harmful in some cases (sending people by force to Louisiana after it was known that a high percentage of the people arriving there died of disease, publishing glowing reports based on no shred of reality about Louisiana to encourage investments, and going along with printing vastly too much paper currency knowing that this would backfire). For a man who came from a Scottish family of clerics, he was amazingly immoral. The ideas he advanced about paper money were pretty simply based on the earlier successful development of such bank-based currency in England. The Mississippi Company scheme was not too much different from an earlier one that had almost bankrupted Scotland involving Panama. Like many innovators, he was taking experience from one country and simply transplanting into another one. Although much is made in the book about him learning the laws of statistics so he could make the gaming odds run in his favor, he clearly took outlandish risks in other areas throughout his life. That is a fascinating insight into his character. I see the man through this book more as sinner than saint. Clearly, his concepts would have eventually been used in France without him. Perhaps pushed by a more responsible person, these concepts would have worked and France would have had better economic development in the 18th century. Clearly, he got his just deserts because he died penniless in terms of cash, and hounded by his enemies. Overcome your misconception that every pioneer is a great woman or man by learning about John Law. Sometimes, they were just one of the first. When the history of the early I
This is a fascinating biography of John Law, 1671-1729, who made a fortune in gambling, then fled England after killing a man in a duel, and settled in Paris where he advocated issuing paper money and set the stage for the first major speculative market, but managed to survive its inevitable collapse. In the process, he and his admirers became rich and the term 'millionaire' was coined. Even Voltaire was impressed. Janet Gleeson has done a superb job in describing John Law's adventures. Despite numerous setbacks and failures, Law persevered towards his objectives which were to become rich, befriend the royal court, and influence the financial policies of empires: English, French, whatever. Gleeson skillfully explains that although Law established a private bank in Paris, which became the state bank, and the Mississippi Company, he failed to anticipate the inflation and the collapse that followed. He escaped to Venice where he died broke.