Forum Archive Index - June 2001

["Mike Hudson" <mikehudson@clear.net.nz>]

Reading Peter Maiden’s post on Nortel made this apposite.

I have been reading Janet Gleeson’s biography* of John Law the Scottish goldsmith, philanderer, mathematician, professional gambler, murderer and the father of modern finance. At one time early in the eighteenth century he managed to get himself appointed to the position of Finance Minister of France and during his tenure he basically invented paper money and the stock market. He was responsible for the first market "bubble", the Mississippi Company.

Nearly three hundred years have gone by and nothing has changed, we are still going through the same boom and bust cycles driven by greed and fear. An anonymous rhyme of the time went (translated from the French)

My shares which on Monday I bought

Were worth millions on Tuesday, I thought.

So on Wednesday I chose my abode;

In my carriage on Thursday I rode;

To the ballroom on Friday I went;

To the workhouse next day I was sent.

Also a quote from Sir James Steuart’s An Inquiry into the Principles of Political Oeconomy, Book IV (1770) in relation to the bank that Law founded.

"As long as this bank subsisted, it appeared to the French to be perfectly solid. The bubble no sooner burst, than the whole nation was thrown into astonishment and consternation. Nobody could conceive from whence the credit had sprung; what had created such mountains of wealth in so short a time; and by what witchcraft and fascination it had been made to disappear in an instant, in the short period of one day"

Slightly off topic but I think there is something in it for all of us, don’t you?

Cheers

Mike H

*The Moneymaker by Janet Gleeson published by Bantam $27.95