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World History

A World History of Paper Currency

John Law - Currency Champion

There was no one, perhaps, as key to the widespread use of paper currency in the Western Hemisphere as John Law. The son of a wealthy goldsmith, Law earned the title of Earl of Lauriston at the age of twelve.

Law studied finance and traversed Europe throughout his twenties, having written several works about paper currency, including Memory to Prove that a New Type of Money Can be Better than Gold and Silver.

Law first garnered interest from Vittorio Amedeo III, an Italian duke in Turin, to issue paper money in 1712. After the Duke was appointed King of Sicily, however, the project was dropped.

Law then moved to France, taking 1.5 million Livres with him. At the time, the French Treasury only held 700,000 Livres and had a deficit of 78 million Livres. Wanting to avoid becoming the first European state to ever declare bankruptcy, the government took a chance with Law. Using his own expenses, Law opened the Banque Generale on June 5th, 1715.

Both the bank and the currency enjoyed wild success as the French economy turned around completely by 1718. In this year, the state took over operations and turned Law's bank into the Banque Royale. The government spent foolishly and recklessly while Law was pacified with gifts, honors, and titles.

Soon the government's lavish spending caught up with it and disaster hit the country. Law left the country, but worked from abroad to repair the economic climate. He even refused the large bags of gold coins - the true, safe money of the time - offered by Philip of Orleans. Law again turned France's economy back around, but he was repaid by the ruling party with only slander and mudslinging.