How The World’s First Finance Bro Ruined A Nation

Source: How The World’s First Finance Bro Ruined A Nation, hoser, 32:48, uploaded 2025-06-23, playlist index 238.

John Law escaped a death sentence, spent two decades gambling and studying European banking, then took control of France’s money supply, overseas trade, mint, and tax collection. hoser presents his career as a financial experiment that briefly made France look prosperous before inflation, forced conversions, and a run on the bank broke the system. Law left the country in 1720 and spent the rest of his life insisting that the idea had been sound.

A gambler with a monetary theory

Law was born in Edinburgh in 1671 to a prosperous goldsmith. Goldsmiths served as banks in late-seventeenth-century Britain. They stored precious metal, issued promises to pay, and transferred money between customers. Law grew up around that system and learned its numbers. He also developed a taste for gambling, drinking, women, and quick schemes. After his father died, he lost his inheritance, mortgaged the family estate, and killed Edward Wilson in a duel. A court sentenced him to hang. Friends secured a reduced charge, then Law escaped prison and reached Europe by ship.

For the next 21 years he moved between cities including Amsterdam, Venice, Genoa, Turin, Budapest, Edinburgh, and Paris. He gambled, traded, cultivated noble friends, and studied the way each place handled money. His central problem was simple. Gold and silver limited the amount of currency in circulation, whilst a shortage of coin made trade harder. Law wanted money that could expand with the economy.

His proposed answer was a land bank. The currency would draw its value from a state’s land rather than from gold or silver, which would let the government issue more notes against an asset that seemed stable and predictable. In Money and Trade Considered, Law presented the scheme to the Scottish Parliament. Scotland had poor soil, hard winters, little manufacturing, and unused resources. A land-backed currency could finance farms and factories, he argued, then earn revenue from the activity it enabled. Parliament rejected the proposal.

Law kept trying. He argued that Dutch prosperity came from abundant money and cheap credit, which had helped finance the Dutch East India Company. Louis XIV dismissed the land-bank idea. The Duke of Savoy thought it too risky for a small kingdom, though he suggested that France might be receptive. Law’s chance arrived when Louis XIV died in 1715 and the five-year-old Louis XV inherited a government run by a regency headed by Philip II, Duke of Orléans.

France’s debt and the General Bank

Louis XIV had centralised royal authority, fought expensive wars, expanded the civil service and army, established colonies in North America, and built Versailles. Hoser gives France’s debt at three billion livres, roughly the size of its yearly economic output. Farms lay idle, factories closed, bankruptcies spread, and prices fell. The crown collected about 145 million livres a year against expenses of 142 million. At that rate, paying the debt would take a thousand years.

Law had become one of Orléans’s drinking companions and had spent years explaining his financial ideas to him. The regent’s council heard a proposal for a large bank that would create employment and revenue, support agriculture and trade, and increase the population. Some councillors preferred a sovereign default. Others rejected both default and the land bank. The compromise allowed Law to establish a private bank, with control of royal revenue withheld until he had proved himself.

The General Bank opened in Paris in May 1716. Orléans deposited one million livres in gold, which gave the bank an immediate public guarantee. It remained conservative at first. The bank held gold and silver, lent out paper notes, and gained permission for the crown’s taxes to be paid in those notes. Law made paper attractive by keeping its exchange value stable when the crown devalued coins. Within a year, the notes traded at a 15 percent premium over coins.

Law also accepted state-debt certificates in exchange for his notes. A certificate that represented a share of government debt could be exchanged at a premium of almost 23 percent, so people could hand the debt to the bank and expect to gain. Trade increased, taxes arrived more regularly, and the bank began to own debt that the state could now pay down. Branches opened across France. The results made Law credible to the nobility and gave him the political room to attempt the larger scheme.

Louisiana and the Mississippi Company

The next asset was Louisiana, a French colony founded in 1682. Hoser describes a hot, humid settlement with disease, mosquitoes, hurricanes, and alligators. Half of the settlers either died or left during their first year on the Gulf Coast. The crown ran the colony at a loss for 13 years before transferring its commercial rights in 1712 to Antoine Crozat, a wealthy Parisian merchant. Crozat received control over trade, farms, enslaved people, and mines, in return for sending supplies to the settlers. His Western Company lost about one million livres and asked to be released from the charter before it expired.

Law took over the company and gained a monopoly over Louisiana’s trade. Most people in France knew little about the colony, though many assumed that America contained the gold and silver that had made Spain rich. Law encouraged the belief. He displayed ingots said to come from Louisiana, distributed maps of the continent, and arranged parades for miners who were supposedly leaving for America. Few of them went. New Orleans received its name during Law’s control of the colony, after his ally the Duke of Orléans.

To finance the takeover, Law issued 200,000 shares at a nominal value of 500 livres. Investors could pay with state-debt certificates whose market price sat far below their face value. The arrangement made government debt an attractive route into a company that seemed to own a piece of the New World. The company then absorbed more state debt and expanded its privileges. It acquired the African tobacco monopoly in 1718, took over the China and East India companies, and gathered several other trading companies into a single enterprise that people continued to call the Mississippi Company.

In 1717 the Royal Council nationalised the General Bank and renamed it the Bank Royale, with Law still in charge. He now controlled France’s central bank and its overseas trading rights. Aristocrats, servants, merchants, and members of the middle class began trading Mississippi shares. Paris had no formal stock exchange, so much of the trade took place in the street outside the company’s office on Rue Quincampoix. The crowd grew so large that guards patrolled against robbery and murder, gates divided the street between social classes, and rents in nearby houses rose twentyfold. People converted estates, houses, and life savings into shares. Some applicants climbed through Law’s windows or down his chimneys to get a place in the next issue.

A company that became the financial system

The Bank Royale still needed gold and silver behind its deposits. Law wanted control of the rest of the machinery that could change the value of his notes, so he bought the mint from the crown for 50 million livres. He issued 50,000 new shares at 1,000 livres each. About 300,000 people applied. The price rose to 1,800 livres, and the bank issued another 250 million livres in notes to meet the demand.

Law then bought the tax farmers, who collected revenue for a fee, for an annual payment of 52 million livres. He issued another 50,000 shares, and their price reached 3,000 livres. The Regency expected the new system to reduce the national debt. The debt had already fallen from three billion to one and a half billion livres, which made the plan look plausible.

The Royal Bank next offered to purchase the remaining government debt. It printed 240 million livres in September, 360 million in December, and another 200 million in February. Hoser leaves Law’s personal responsibility for each issue open, though the Duke of Orléans approved the expansion. The government paid three percent interest directly to the company, which could use that income for new ventures.

The mechanism now depended on a rising share price. The bank issued paper notes, accepted government debt for those notes, and exchanged company shares for further debt. Law used the excitement around the company to raise the share price, which allowed more notes to enter circulation. The company then bought more government debt, requiring still more notes. The debt moved from the crown to the company, whilst the payments moved from government interest to company dividends. The liability had changed hands and the system had gained a great deal of new money.

In 1719 the share price rose twentyfold, from 500 to 10,000 livres. New money spread through Paris. Middle-class buyers commissioned art and furniture, people wore silk and velvet, and watchmakers arrived from Switzerland to meet demand. A royal edict stopped liveried servants from wearing the same fabrics as their employers. Hoser links this period to the coinage of “nouveau riche” and “millionaire”. Law put much of his own profit into Paris property, which the video values at the equivalent of 350 million US dollars.

The boom also reached farms and workshops. Land that had been idle returned to use, and artisans and farm workers found customers with money to spend. Wages in Paris quadrupled between the beginning of the scheme and its peak. The price of staple goods doubled. The new currency had created activity, yet the expansion had begun to outrun the goods that the economy could supply.

Inflation and the run on gold

Inflation reached more than 20 percent a month in January. Hoser attributes this to the increase in livres in circulation, about one billion during one year and another 1.8 billion the next. The Mississippi Company still depended on real profits. Louisiana produced almost none, and even the company’s other trade could not justify shares trading at a price-to-earnings ratio of about 50.

The financial system had become dependent on the share price, so the government created a legal office to stabilise it. The company bought and sold its own shares around 10,000 livres. Law had studied the Dutch East India Company, whose shares could be used to settle debts and had begun to function like money. He pushed the French system towards the same arrangement. After converting to Catholicism, he became France’s controller general, effectively the prime minister, and formally merged the bank and the company. His next aim was to remove the remaining link between the currency and gold.

Some investors had already started to withdraw. Hoser tells a story about the Prince de Conti, who became angry when Law rejected his application for Mississippi shares and removed so much gold that it took three wagons to carry away. The Duke forced him to return two wagons, though other holders began smuggling gold out of France in carts loaded with plates and jewellery. There were now twice as many notes for each livre of gold or silver. A full conversion would bring the system down.

By February 1720, the government accepted taxes only in banknotes and limited private holdings of coins to 500 livres. A pamphlet denounced people who hoarded metal and encouraged neighbours to report them in exchange for half the confiscated profit. The measures made people suspicious of one another and turned the paper currency from an attractive investment into a state requirement. Another edict fixed Mississippi shares at 9,000 livres, which required more than a billion additional livres to be printed.

The council could not maintain the arrangement. On 1 May 1720 it reduced the official value of the shares from 9,000 to 5,000 livres. Forty-four percent of the value disappeared in a day. Crowds stampeded through Paris, Swiss guards protected the royal family, and a mob destroyed Law’s carriage after mistaking somebody else for him. Fights with the guards caused deaths. When the government finally allowed people to hold coins again, the rush on the Royal Bank crushed 14 people, and the kingdom began minting copper coins because so much gold had left the system.

Exile and the afterlife of the experiment

Law lost the confidence of the public and the support of the nobility. He resigned as controller general, briefly received a provincial governorship, then left France with permission from the Duke of Orléans. He left his wife and children behind. The company lost its rights to mint money and collect taxes, survived as a shell, and saw its shares fall back towards 500 livres. Eleven years after the collapse, the crown took the Mississippi Company back.

The bank was liquidated in 1723 after negotiations over its liabilities and the restructuring of the debt. Louis XV inherited more than a billion livres of it. Some of the debt vanished because the notes that recorded it no longer held monetary value. France lost Louisiana during Louis XV’s reign and returned to a government that struggled to raise revenue, a fiscal weakness hoser connects to the eventual French Revolution. French people distrusted paper money and financial innovation for generations. Gold and silver remained the accepted money, whilst religious institutions dominated finance.

Law left for Brussels, England, and Venice in late 1720. He had placed most of his wealth in Paris property and still hoped to return, though Orléans’s death in 1723 removed his closest political ally. Law gambled and considered the failure. His own conclusion was that the monetary idea remained sound and public speculation had ruined it. He also blamed a plague in southeastern France, which he said had driven people towards gold. The Duke of Lorraine and the Papal States rejected his offers to advise them. Law died in Venice in 1729, poor after once becoming one of the most powerful men in the world.

Hoser ends with a qualified reversal. Law’s scheme collapsed because the company’s claims outran its real profits, the bank printed more notes than its reserves could support, and the state tried to preserve confidence through decrees that produced more distrust. The underlying idea of paper money survived. Nearly every modern economy uses it, which would have pleased Law even after France spent generations remembering the experiment as a warning.

Limits of the account

The note preserves hoser’s chronology, examples, reported figures, jokes, and causal claims as claims made in the video. The automatic captions distort several names, places, financial terms, and numbers, and some of the historical details remain difficult to identify from the transcript alone. The video description links to a source list, though it does not attach individual references to the claims in the narration. The statistics on debt, inflation, death, property values, and the scale of the Mississippi Company should therefore be checked against independent historical sources before they are used as evidence outside this note.

Further reading / references

• hoser’s source list, linked in the video description.