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Global Recession: Causes, Consequences, Fixes, Part 8





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John Law did the first major experiment with paper currency, in France, during late 1710s. That resulted in 1720 burst of Mississippi bubble, first major market crash in modern history. Just like nowadays, paper currency was adopted as a measure to pay budget deficits and debts, with the hope that paper money can put more money in circulation as compared to gold and silver, resulting into the generation of more wealth, available for everyone. First, a strict gold standard for paper money was adopted, as in recent history, then it moved on to partial coverage of issued money with gold deposits. Finally, the gold standard was totally overlooked and enormous amounts of paper money were issued without appropriate backing with gold reserves, pretty much like today. Result was, when market crashed, the owners of paper money had nothing in their hands except the pieces of paper. When these people, who lost everything in the burst of bubble, got too unruly, French government announced that the holders of paper money can claim gold in exchange for their money. As a result, too much gold was pumped into the market, which caused serious devaluation of gold. The return on this devalued gold was far less then the amount of money it was exchanged for.
Market crashes have become a routine since the gold standard was given up in recent history. Many economists question, if paper money has any real value and we know that the ups and downs in exchange rates do cause serious jolts in market. Like 1720, when market crashes, nowadays, people and investors lose everything. All they are left with are pieces of paper called money, bonds and shares, which in many cases, after crashes, may value next to zero. Another question is, in the wake of astronomically increasing U.S. trade deficit and debt, what if the current gold standard, dollar, crashes. That will result into a global havoc. Not just corporations and investors, country after country and nation after nation will get broke, including United States, the backbone of world economy. That will be very likely to cause third world war, which, most probably, will be a nuclear one, and could very well be the end of this world, and humanity and civilization, as we know it. Greed has caused huge wars, killings and destruction in past, and with weapons of mass destruction so advanced and so many of those available to so many, now, they are enough to destroy this planet several times over.

Please, refer to the Wikipedia article, “Mississippi Company“. It states:
“The “Mississippi Company” (of 1684) became the “Company of the West” (1717) and expanded as the “Company of the Indies” (1719).”
“In May 1716, the Banque Générale Privée (“General Private Bank”), which developed the use of paper money, was set up by John Law.”
“The bank became the Banque Royale (Royal Bank) in 1718, meaning the notes were guaranteed by the king, Louis XV of France.”
“Law exaggerated the wealth of Louisiana with an effective marketing scheme, which led to wild speculation on the shares of the company in 1719.”
“The “bubble” burst at the end of 1720, when opponents of the financier attempted en masse to convert their notes into specie, forcing the bank to stop payment on its paper notes.”
Please, refer to the article, “JOHN LAW’S BANQUE ROYALE AND THE MISSISSIPPI BUBBLE” on “The Currency Collector”. It mentions:
“In the annals of history John Law has been called everything from financial genius
to swindler and con man extraordinarie.”

Law was born in 1671 at Edinburgh, Scotland to a wealthy family of goldsmiths.
At age fourteen he joined the family business, studying banking under his father’s

Returning to Scotland in 1705, he expounded upon his views in a number of
works, the most important of which was a book entitled Money and Trade Considered,
with a Proposal for Supplying the Nation with Money.”

Until John Law’s Banque Royale notes were introduced in 1719, France had never had a circulating
paper currency.”
“That same year he proposed to the Scottish Parliament that a national bank be

By 1715 France had become the richest and most powerful country in Europe.”

There was also the matter of conspicuous consumption and pleasure seeking
among the aristocracy following the lead of the king at Versailles.”

At this time the French government was heavily in debt as a result of the
extravagant wars of Louis XIV, which left France three billion livres in debt.”

Since Law’s proposal promised to achieve both goals, it held obvious appeal to the

Upon establishment, the Banque Gererale was authorized to issue paper money
which was redeemable at face value in gold and silver.”

Law’s idea was to create a bank for national finance and a state company for
commerce that would exclude all private banks.”

Law was granted a charter to create the Compagnie de la Louisiane ou d’Occident
(Company of Louisiana and the West).”

When France eventually sold the colony known to us as the Louisiana Purchase, it
contained land which forms the present day states of Louisiana, Mississippi, Arkansas,
Missouri, Illinois, Iowa, Wisconsin and Minnesota – thereby doubling the size of the
United States overnight.”

After being granted exclusive trading rights in Mississippi the bank and the
Mississippi Company were united, whereupon Law changed the name of the Banque
Generale to the Banque Royale.”
“When Napoleon Bonaparte sold the French Louisiana possessions to the United States in 1803 he did
so to raise money for his European campaigns.”

In the early 1700s word had leaked back to Louis XIV’s court from earlier French
exploration of the Mississippi River and surrounding Louisiana, that the land was an
Eldorado rivaling Mexico for its riches.”
“Stories reporting conditions in the Louisiana region were greatly exaggerated and
enjoyed wide circulation among the credulous and gullible French public.”

Law’s proposal to exploit the resources of Mississippi and Louisiana created
tremendous interest in France and throughout Europe.”

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Born in 1964, business owner, from Woodbridge, VA, owns ExcitingAds! Inc. (http://www.excitingads.com) and blog (https://search.excitingads.com). He was born in Mirpurkhas, Sind, Pakistan. His elementary school was ST. Michael's Convent High School, Mirpurkhas, Sind, Pakistan. Graduated high school from ST. Bonaventure's Convent High School, Hyderabad, Sind, Pakistan. His pre-med college was S. A. L. Govt. College, Mirpurkas, Sind, Pakistan. Graduated from Liaquat University of Medical and Health Sciences, Jamshoro, Sind, Pakistan in 1990. Earned equivalency certification from Educational Commission for Foreign Medical Graduates, Philadelphia, PA in 1994.

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