"A famous Scotsman is buried here, and his arithmetic genius, unparalleled in the world, used simple algebraic laws to destroy France."
Author: Brother Jiu, this is the second article of the Character Chronicle.
"Entrepreneurship" background
In 18th-century France, there was a British wanted man who everyone shouted, John Law, whose deception was still unbeatable, and the academic level at that time, which could also be called AAA level, froze the French economy for nearly a century with an economic point of view.
In the early 18th century, France, don't look at the small land area, but the level of belligerence can be described as berserker level, the Netherlands, Spain, Sweden, Denmark, etc., have become the target of France at that time.
Due to the successive wars waged by King Louis XIV of France at that time, the domestic economy of France at that time was in trouble, dragged down by the war, the economy was extremely depressed, and deflation was very serious.
In order to get out of the predicament, the French government at that time also did everything in its power to use financial means to carry out a series of operations, but the purpose was very simple, that is, to ensure that the royal family ate and drank Lazar, and the treasury was relatively full.
One of the measures was to exempt the French royal family and nobles from taxes at that time and preserve the absolute strength and status of the capitalists.
But the treasury needs revenues, so where does that revenue come from? It is not difficult to understand that these incomes of course need to be taken from the people, to put it bluntly, exploitation, exploitation, exploitation.
However, although the French government continued to raise the tax rate and tried to increase the reserves of the national treasury through taxation, these methods were useless, causing the people to complain, causing France at that time, full of crises, leaving an opportunity for people with open brains.
So, at this time, King Louis XIV met an expert in monetary theory, yes, John Law, a native of Edinburgh, England, an English economist who had fled to France.
At this time, John Law was really not a liar, but a young and promising economist, after all, political economy was in his hands, playing pure fire.
In the early economics, political economy was the mainstream, and the mainstream scholars certainly had their own aura, and this identity was extremely confusing and quite harsh at the time.
At the end of the 17th century, in war-torn Europe, John Law was not the economic expert in the office we imagined, wandering around to escape the war, but tall is tall, and life is absolutely impossible to defeat such people.
At this time John Law, under extremely difficult circumstances, issued a unique economic point of view, which he said at the time:
According to France's macroeconomic predicament at that time, it needed money to stimulate the economy, and in the case of insufficient employment, increasing the market money supply could guide and increase employment opportunities without raising the price level, after all, with money, capitalists could buy and hire more labor.
At the same time, the productivity will be greatly improved, after the increase in production capacity, people's pockets will be abundant, the currency and products used for exchange will be both improved, and the market demand for money will also be greatly increased, so as to achieve a balance of full employment and monetary expansion, form a virtuous economic cycle, and the social economy will be stabilized and developed.
This view gradually took its place in the debate, and John Law worked day and night to pick up the lights, open the ultimate 996 model, and constantly export his own economic views, such as increasing bank construction, promoting paper money, accelerating the replacement of metal money, and so on.
He also said that paper money is more conducive to economic development than metal money, more conducive to the regulation of the country's economy by princes and nobles, and to stabilize the position of absolute power of high-class rulers.
These views, to put it bluntly, are addressed to the princes and nobles, and in this regard, John Law's skills in management are already full, and the interests behind the secret door are known at a glance.
Because after the increase in the money supply, the economy gradually prospered, but behind all the prosperity, they all had to face taxes, and at that time, the princes and nobles enjoyed the tax exemption policy, so these currencies will repeat the vicious circle, used for the people, taken from the people, and finally accelerated the recovery of the currency by the national treasury, which is the reality, unfair income distribution still exists, and social contradictions will not change in any way.
The "purpose" is clear
For John Law, the purpose of exploring its eighteen-layer depth is to use his own theory to occupy the brain of the authoritative ruler and control the right to issue money. Although, in terms of his identity at the time, "the purpose is very distant, the reality is very bone", and it is not supported by most people.
But based on his academic background, these remarks have gradually gained the favor of some forces.
In 1715, the Duke of Oleon, the regent of France, affirmed his theory. And believe that if this economic strategy is used, it should be able to get France out of the predicament, solve the problem of national debt financing, and alleviate the current predicament a lot.
John Law, what a heavenly soldier. For those in power of the royal family, it is not a difficult thing to implement, after all, a dead horse is a living horse doctor, you may wish to try it.
At that time, the entire royal family was in a difficult period, as long as they could get money, it was not a problem to set up 10 banks, so with the acquiescence of the French government, in 1716 Johann Lau established a private bank in Paris: the General Bank.
This bank, from the modern eye, is a private bank, but it is precisely because of the existence of John Law's aura that this bank has the right to issue money, and essentially becomes the bank of the royal family, the bank of the state.
Moreover, the currency issued by this bank can be used to exchange coins and pay taxes, which is quite powerful.
So in the early days of the establishment of this bank, the operation was very successful, the ownership of assets increased rapidly, John Law's hand can already embrace more business, no longer the image of a student, successfully completed a gorgeous turn: banker + entrepreneur.
As General Bank became more and more closely related to the royal family at that time, his business continued to expand, and he successively obtained the monopoly of tobacco, the monopoly of African trade and so on, and became a monopoly oligarchy of multiple industries.
Moreover, in 1719, after the successful merger of a number of established oligarchic companies, a company with extensive and powerful integrated business appeared gorgeously: the Indian company continued to obtain excess profits in the field of trade, and the company's shares were successfully issued.
When the size of a company is very large, the state will definitely find a way to control it, which is the theory that has not changed since ancient times, after all, authority can only belong to one category of people.
So in late 1718, the General Bank was nationalized and renamed the Royal Bank, and of course John Law remained the head of the bank, officially becoming the financial spokesman of the French royal family.
When a business is transformed into a state bank, it becomes more monopolistic, not to mention that it looks more like a privately controlled state-owned bank.
In the next two years, John Law successfully turned his ideological theory into a practical printing press, unscrupulously issued a large number of money, and embarked on the peak of his life.
The stocks he controlled by his company also attracted a large amount of money from European countries, which flowed into France, reversing France's predicament, but also laying the groundwork for the next bubble to burst.
Excessive currency issuance will produce inflation, which is an undeniable phenomenon of monetary finance, after a large number of additional currency issuance, although the market will not be immediately chaotic, but the delay in reflection will not wait too long.
Finally "launched"
At the beginning of 1720, inflation rose to an unprecedented rate of 23%, and ordinary people could not buy much with depreciated currency in their hands, and had to sell stocks to make ends meet, followed by a plunge in the shares of Indian companies.
Faced with this situation, John Law certainly would not sit idly by.
At that time, he had become the french financial superintendent and could be said to have an absolute say in the financial aspect.
In order to maintain the price of the Indian company's stock, John Law used the financial power in his hands and relied on the power of the state to stabilize the indian company's stock at the price of 9,000 livres. And from the first quarter of 1720, a large number of money was issued, so that the domestic currency circulation increased exponentially, and if there was money to be afraid of, they studded to buy stocks, in a vain attempt to use money and hit the stock market.
It is only a matter of time before the currency is oversold, inflation is doubling, and when more severe inflation begins to appear, the stock price will plummet, after all, the purchasing power of banknotes per unit price has dropped sharply.
By September 1720, the stock of the Indian Company had fallen to 500 Livols, and the price of the stock, to know, had fallen from 20,000 to 9,000, from 9,000 to 500, a decline that was enough to panic the entire French population.
People started scrambling to keep what they had, everyone was frantically selling stocks, and the entire stock market was on the verge of collapse.
At this time, even the French government could not restore the confidence of the people, and finally could not save the defeat, and the French, who had lost their homes, identified the British John Law as the number one liar, the country fell into turmoil, and the Indian company completely collapsed.
The company, located on the banks of the Mississippi River, came to an end.
For this period of history, named after the Mississippi Bubble, the French banking sector was also completely frozen in the following century, and the britishMan John Law, the so-called economist, died nine years after the economic collapse.
The story of successfully pulling a country into the water with one person's strength is over.
The emergence of the Mississippi bubble caused the banking sector of the entire country to lose credibility among the people, causing a slowdown in The development of France in the following century, the stagnation of industrial expansion, the recovery of the economy and the snail of growth, and the foreshadowing of the next step of social unrest.
To recall briefly, the Englishman was able to accomplish such a magnificent feat, and as far as he was concerned, he did have two brushes.
The use of paper money to deflate deflation could promote economic growth and increase government taxes at a certain level, and indeed make the French treasury at that time solve the urgent need.
But the eventual disorderly expansion made this monetary policy completely out of control, and the economy eventually collapsed.
I'm brother nine, welcome to pay attention, bye-bye.