The birth of John Law

Asset price bubbles seems like a never ending part of a cycle that turns manic investing behavior back into its logical senses. Although they appear frequently, people always tend to forget lessons from each successive bubble burst that they are artificially stimulated through a principal source. That source would be an establishment that controls the amount of money or credit circulating in the economy. In modern history, the first propagation of this scenario can be credited to John Law, the inventor of asset price bubbles.

John Law was born in April 21, 1671 in Edinburgh Scotland. His name would later be notoriously connected with the stock price bubble of the Mississippi Company in 1720 and his establishment of France’s Banque Royale. Despite of being convicted with murder for dueling with his rival Edward Wilson over some love disputes and escaping prison, he was entrusted with a near monopoly on France’s money supply through the issuance of official bank notes. John Law’s inclination to gambling made him a great risk taker and since he has control on the supply of credit, He was able to engineer a false sense of valuation by pouring these funds into the Mississippi Co. which at that time is generally a stretch of land from Louisiana all the way up to the central plains and into the Canadian border. John Law accompanied the capital injection with rumors that trade was well established and underway with the Native American tribes that covered the area. Of course none of the stories he tried to float was totally true. As the Banque Royal collapsed, so as the stocks of the Mississippi Company that sent investors into a painful aftermath. Aside from these activities that he created, John Law clearly showed how a central banking authority can possess the power to control a country’s economy and prevent or lead it into a financial disaster. After the disaster in France, John Law Moved to Brussels and finally returned to London where he died as a less financially abled man in 1729.
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