Merryn Talks Money: John Law, The Gambler Who Invented Modern Money (Part 1)

Joe Weisenthal (0:00)

Hello, Odd Lots listeners. I'm Joe Weisenthal.

Tracy Alloway (0:02)

And I'm Tracy Alloway.

Joe Weisenthal (0:03)

We hope you're enjoying your holiday season, and we're taking a little break ourselves. So we wanted to bring you an episode from one of our fellow podcasts here at Bloomberg.

Tracy Alloway (0:13)

A special holiday present, if you will. This is from the Merryn Talks Money podcast, which is hosted by Merryn Somerset Webb and John Stepek. And it is all about one of the most interesting historical economic figures. It's John Law.

Joe Weisenthal (0:28)

Yeah, that's right. So John Law, 18th century gambler, murderer, economic visionary. I think people say he is sort of the mind behind fiat currency as we know it today. So his influence is still felt and check out the episode.

Tracy Alloway (0:44)

We hope you enjoy it.

SPEAKER_3 (0:48)

Bloomberg Audio Studios, podcasts, radio, news.

John Stepek (0:53)

Okay, look back through the history of money and quite often it seems like nothing is happening, long, long bits of calm and then suddenly there's a catalyst of some kind. Stuff changes, right? And you get everything exploding, things flipping, a period of chaos and then everything seems to reinvent itself. John Law, John, you know all about John Law. His history reflects exactly that. So what we're trying to do here over this holiday and over two episodes is tell his story which tells us a lot about money, right?

Merryn Somerset Webb (1:23)

Yeah, and we'd need to take two whole episodes to do it. This is a special series, folks.

John Law's story is the story of a fugitive Scotsman, clearly I identify with that quite closely, briefly became the most powerful man in France.

John Stepek (1:38)

And the richest.

Merryn Somerset Webb (1:39)

And the richest, yeah, which is even more important. And in doing so, he changed both monetary and arguably European history forever. Wow.

John Stepek (1:47)

It's a big story. So stay with us for it because his rise and his fall is not just about history, is it? It's about the monetary system that we live in today.

Okay. John Law, he might not be as respected as the likes of Adam Smith, but he pretty much laid the foundation for the monetary system that we use today, right? So you could arguably say that his thinking is more important than a lot of that academic muck.

Merryn Somerset Webb (2:14)

Yeah, you could. And actually, whatever else he was, he was a gambler and a sometime murderer. He was also a practitioner. He did what he believed. And of course, as we'll find out, that didn't necessarily work to his advantage all the time.

John Stepek (2:29)

I think you're already giving away the fact that despite the fact he's a murderer, gambler, the beginning of the end of monetary systems and all sorts of other appalling things, John rather likes John Law.

Merryn Somerset Webb (2:41)

I think I'm really quite fond of him.

John Stepek (2:43)

Thoughts for charisma every time.

Merryn Somerset Webb (2:47)

Well, yes. Yes, perhaps. Chapter One. The Beginning.

John Stepek (3:01)

Where was this horrible person born?

Merryn Somerset Webb (3:02)

Well, let's wind back all the way back to April 1671, and John Law is born in Edinburgh. He was one of 12 children, four of whom died in childhood. His dad, William Law, was a goldsmith, and his mum, Jean Campbell, was William's second wife. And she had three sisters, and they'd all married well. So he's basically from a kind of upper merchant class background. So in 1683, when John Law is 12, his father, William, goes to France because he's got a kidney stone. He has to get an operation. The chances are that he'll die under the knife, but it's his only chance. And there happens to be a company of barber surgeons of great reputation in France who do this kind of thing all the time. So before he leaves, he puts his affairs in order, says goodbye to his eight kids and his wife, and then heads off to France. And as it turns out, unfortunately, he does die on the operating table.

John Stepek (3:56)

Leaving behind eight kids.

Merryn Somerset Webb (3:58)

Leaving behind eight kids. And so Jean takes over the family business and she also avoids getting married again so as not to have to sign the business over to her husband. And at this point, goldsmiths are already in banking. So one of John's brothers takes over the kind of goldsmith side of things, actually making stuff out of gold. But Jean and John sort of jointly kind of operate the banking side of the business. So lending money, this is already something that goldsmiths are starting to do.