Stocks and News
Home | Week in Review Process | Terms of Use | About UsContact Us
   Articles Go Fund Me All-Species List Hot Spots Go Fund Me
Week in Review   |  Bar Chat    |  Hot Spots    |   Dr. Bortrum    |   Wall St. History
Stock and News: Hot Spots
  Search Our Archives: 
 

 

Wall Street History

https://www.gofundme.com/s3h2w8

AddThis Feed Button

   

03/28/2003

John Law and the Mississippi Company, Part I

The 200th anniversary of the Louisiana Purchase is fast
approaching (April 30 being the commonly accepted date) and a
friend reminded me that to properly tell the story I should really
examine the life of John Law, a great monetarist who was also
responsible for one of the great bubbles of all time, the 1720
fiasco known as the Mississippi Company.

I have to be honest with you folks, this is a pretty heavy story in
some respects and I don’t know how many parts I will be telling
it in, but today we’ll start with the beginning, normally a good
idea in these matters.

John Law was born in Scotland, 1671 (one of my sources says
1670). His father William had apprenticed with a goldsmith, the
money dealers of the day, and later became a highly successful
one himself. Typical of the time, John was one of 12 children,
though only four survived childhood. William’s first wife had
died giving birth and John ended up being the eldest of the
survivors.

As William’s wealth grew he did what all the moneyed folk did
back then, purchase a few estates. John then began working for
his father when he was 14 and spent three years learning the
principles of banking. It was clear that this “physically
attractive,” “agreeable,” and “magnetic” lad who stood six feet
(very tall for those days) had quite an aptitude for math. He also
became a real favorite of the ladies, who called him Beau Law.

But by 1688 his father was very ill and William went to Paris
seeking treatment, only to die there with his family back in
Scotland. John was of an age to attend university but opted to
take some revenue from one of the family estates instead and
then headed to London. According to one friend, young John
proceeded to gamble and womanize, becoming “nicely expert in
all manner of debaucheries.”

In fact with his mathematics ability and cool demeanor, Law was
a gambler that all the other players emulated, often staking their
own money off of his bets. One of the popular card games of the
day was faro, where players must defeat a single opponent, the
talliere, or banker, to win. Law loved to be the banker, where he
could pit his wits against the rest. Author Janet Gleeson
describes the action in her book “Millionaire.”



“Each player chooses one, two, or three from a deck of cards on
the table before them, using gold louis d’or as their stake.
Slowly the croupier takes his pack, discards the uppermost card,
plays the next two – the loser and the winner – and places them
in front of him. Winning depends on players having selected the
same number as the second card dealt by the croupier (suits are
irrelevant), so long as he does not deal two cards of the same
face value, in which case the banker also wins. The dealing
continues, players betting on every draw until three cards remain.
The room is transfixed for the final turn, when the players must
guess the cards in order of appearance. Inevitably, Law triumphs
over most.”

Most assume that Law had nothing but good fortune on his side.
As time goes on, though, and as his reputation spreads, others
believe he must be cheating. The answer probably lies
somewhere in between, but there is no doubt he was using his
math acumen to figure out when the odds were stacked in his
favor. In other words, John Law, due to his being one of the few
of his day to understand complex probability theory, was really
one of the first card counters.

Well, aside from his gambling prowess, as noted earlier Law was
a man about town, consorting with actresses that he met not only
in the gambling parlors but at the theatre as well.

Excessive gambling took its toll, however, and as he got more
and more reckless, soon he found himself going through his
inheritance. He also had built up quite a bit of debt so he rushed
home to his mother at Lauriston, the family estate in Scotland.

Mrs. Law was sharp and a terrific businesswoman so through her
own financial maneuvering she was able to keep her son out
debtor’s prison. John then returned to London, more determined
than ever to master the finer aspects of gaming. He became a
better card counter and mastered the odds at dice, the latter a
game called “hazard,” similar to craps.

But on April 9, 1694, John Law killed Edward Wilson in a duel
and John’s life came crashing down.

Wilson, who also had the nickname ‘Beau’ and was jealous that
he didn’t have the looks or skill that Beau Law had, was
nonetheless one of London’s real “dandies.” [To totally digress,
in 1966 Herman’s Hermits had a hit with “Dandy,” a song
written by Ray Davies of the Kinks, that best describes the term.]

Law crossed paths with Wilson over the latter’s sister, who had
moved in to the boarding house where Law was living with his
mistress. Edward Wilson gave Law grief over his living
arrangement and the sister left, earning the scorn of Law’s
landlady, who didn’t want her own reputation tarnished. [Sounds
like this would make for a good play, eh?]

Anyway, Wilson and Law decided to hold a duel one night after
the two had been drinking and Law killed Wilson with his sword.
Law was arrested, though by all (admittedly sketchy) accounts
Wilson was the aggressor, so Law’s case was built on the act of
self-defense. But the jury found him guilty and sentenced him to
death by hanging.

Eventually, King William III cancelled the death sentence but
due to the fact the Wilson clan was well-connected, Law still
faced civil charges and he was transferred to another prison to
await his fate. But it became depressingly clear to him that he
was facing the rest of his days behind bars so he tried to escape.
Unfortunately, he was caught filing down his bars.

Here is where the details get more than a bit murky. Suffice it to
say, though, that Law’s own supporters carried quite a bit of
weight themselves and finally he was able to conspire with some
prison officials who allowed him to escape his sleeping
(drugged) guards. Law, now a fugitive, managed to flee to
France.

Upon reaching the continent, he traveled all over Europe and
renewed his gambling and gallivanting, though in the mornings
he studied up on economics. Law spent time in key tourist
centers where it was easy to find wealthy residents who became
his next victims, but destinations such as Amsterdam, Venice and
Genoa were also major centers of finance and this pricked his
curiosity even further.

Law first visited Paris in 1697 and immediately frequented the
parlors, of course. One visitor of the time said of gambling, “It is
a great misfortune for a stranger not to be able to play, but yet a
greater to love it.”

Law also partied with intelligent women in the salons. Samuel
Johnson said of the time, “a man is in general better pleased
when he has a good dinner on his table than when his wife talks
Greek,” but women in Paris enjoyed more independence.

Around 1700 Law had a run-in with local authorities and he
returned to Edinburgh. In his classic “Extraordinary Popular
Delusions & the Madness of Crowds,” Charles Mackay
described his predicament.

“During his residence in Paris he rendered himself obnoxious to
D’Argenson, the lieutenant-general of the police, by whom he
was ordered to quite the capital.”

Now as a fugitive you might be thinking how could he return to
Scotland? Law was safe because the union between England and
Scotland wasn’t formalized as yet, but when he didn’t receive the
pardon he sought, and as the completion of the union drew near,
Law was forced to flee back to Paris.

At this point Law pursued one of those independent women,
Katherine Seigneur, a descendant of Henry VIII’s second wife
Anne Boleyn. Only one problem, Katherine was married. At the
same time Law was once again a success at the gaming tables,
which meant he was picking up a new set of enemies, one of
whom was a good friend of Katherine’s. So Katherine left her
husband and ran away with Law to Italy.

Law proceeded to make a killing in places like Genoa, Rome,
Florence, Turin and Venice, the latter being known as “the
brothel of Europe.” After 10 years he had accumulated some
20,000 pounds, a huge sum for the time. And when he wasn’t at
the tables he was doing more research on the art of finance,
developing the theories that we will begin to explore next week.

Sources:

“Extraordinary Popular Delusions & the Madness of Crowds”
Charles Mackay
“Millionaire” Janet Gleeson
“The Political Economy of France at the Time of John Law”
Earl J. Hamilton
“The Memoirs, Life and Character of the Great Mr. Law”
W. Gray (from 1721 don’t know what the ‘W’ stands for)
“An Historical Study of Law’s System” Andrew McFarland
Davis
“Devil Take the Hindmost” Edward Chancellor
“Europe: A History” Norman Davies
“Great Bubbles” Edited by Ross B. Emmett

Brian Trumbore



AddThis Feed Button

 

-03/28/2003-      
Web Epoch NJ Web Design  |  (c) Copyright 2016 StocksandNews.com, LLC.

Wall Street History

03/28/2003

John Law and the Mississippi Company, Part I

The 200th anniversary of the Louisiana Purchase is fast
approaching (April 30 being the commonly accepted date) and a
friend reminded me that to properly tell the story I should really
examine the life of John Law, a great monetarist who was also
responsible for one of the great bubbles of all time, the 1720
fiasco known as the Mississippi Company.

I have to be honest with you folks, this is a pretty heavy story in
some respects and I don’t know how many parts I will be telling
it in, but today we’ll start with the beginning, normally a good
idea in these matters.

John Law was born in Scotland, 1671 (one of my sources says
1670). His father William had apprenticed with a goldsmith, the
money dealers of the day, and later became a highly successful
one himself. Typical of the time, John was one of 12 children,
though only four survived childhood. William’s first wife had
died giving birth and John ended up being the eldest of the
survivors.

As William’s wealth grew he did what all the moneyed folk did
back then, purchase a few estates. John then began working for
his father when he was 14 and spent three years learning the
principles of banking. It was clear that this “physically
attractive,” “agreeable,” and “magnetic” lad who stood six feet
(very tall for those days) had quite an aptitude for math. He also
became a real favorite of the ladies, who called him Beau Law.

But by 1688 his father was very ill and William went to Paris
seeking treatment, only to die there with his family back in
Scotland. John was of an age to attend university but opted to
take some revenue from one of the family estates instead and
then headed to London. According to one friend, young John
proceeded to gamble and womanize, becoming “nicely expert in
all manner of debaucheries.”

In fact with his mathematics ability and cool demeanor, Law was
a gambler that all the other players emulated, often staking their
own money off of his bets. One of the popular card games of the
day was faro, where players must defeat a single opponent, the
talliere, or banker, to win. Law loved to be the banker, where he
could pit his wits against the rest. Author Janet Gleeson
describes the action in her book “Millionaire.”



“Each player chooses one, two, or three from a deck of cards on
the table before them, using gold louis d’or as their stake.
Slowly the croupier takes his pack, discards the uppermost card,
plays the next two – the loser and the winner – and places them
in front of him. Winning depends on players having selected the
same number as the second card dealt by the croupier (suits are
irrelevant), so long as he does not deal two cards of the same
face value, in which case the banker also wins. The dealing
continues, players betting on every draw until three cards remain.
The room is transfixed for the final turn, when the players must
guess the cards in order of appearance. Inevitably, Law triumphs
over most.”

Most assume that Law had nothing but good fortune on his side.
As time goes on, though, and as his reputation spreads, others
believe he must be cheating. The answer probably lies
somewhere in between, but there is no doubt he was using his
math acumen to figure out when the odds were stacked in his
favor. In other words, John Law, due to his being one of the few
of his day to understand complex probability theory, was really
one of the first card counters.

Well, aside from his gambling prowess, as noted earlier Law was
a man about town, consorting with actresses that he met not only
in the gambling parlors but at the theatre as well.

Excessive gambling took its toll, however, and as he got more
and more reckless, soon he found himself going through his
inheritance. He also had built up quite a bit of debt so he rushed
home to his mother at Lauriston, the family estate in Scotland.

Mrs. Law was sharp and a terrific businesswoman so through her
own financial maneuvering she was able to keep her son out
debtor’s prison. John then returned to London, more determined
than ever to master the finer aspects of gaming. He became a
better card counter and mastered the odds at dice, the latter a
game called “hazard,” similar to craps.

But on April 9, 1694, John Law killed Edward Wilson in a duel
and John’s life came crashing down.

Wilson, who also had the nickname ‘Beau’ and was jealous that
he didn’t have the looks or skill that Beau Law had, was
nonetheless one of London’s real “dandies.” [To totally digress,
in 1966 Herman’s Hermits had a hit with “Dandy,” a song
written by Ray Davies of the Kinks, that best describes the term.]

Law crossed paths with Wilson over the latter’s sister, who had
moved in to the boarding house where Law was living with his
mistress. Edward Wilson gave Law grief over his living
arrangement and the sister left, earning the scorn of Law’s
landlady, who didn’t want her own reputation tarnished. [Sounds
like this would make for a good play, eh?]

Anyway, Wilson and Law decided to hold a duel one night after
the two had been drinking and Law killed Wilson with his sword.
Law was arrested, though by all (admittedly sketchy) accounts
Wilson was the aggressor, so Law’s case was built on the act of
self-defense. But the jury found him guilty and sentenced him to
death by hanging.

Eventually, King William III cancelled the death sentence but
due to the fact the Wilson clan was well-connected, Law still
faced civil charges and he was transferred to another prison to
await his fate. But it became depressingly clear to him that he
was facing the rest of his days behind bars so he tried to escape.
Unfortunately, he was caught filing down his bars.

Here is where the details get more than a bit murky. Suffice it to
say, though, that Law’s own supporters carried quite a bit of
weight themselves and finally he was able to conspire with some
prison officials who allowed him to escape his sleeping
(drugged) guards. Law, now a fugitive, managed to flee to
France.

Upon reaching the continent, he traveled all over Europe and
renewed his gambling and gallivanting, though in the mornings
he studied up on economics. Law spent time in key tourist
centers where it was easy to find wealthy residents who became
his next victims, but destinations such as Amsterdam, Venice and
Genoa were also major centers of finance and this pricked his
curiosity even further.

Law first visited Paris in 1697 and immediately frequented the
parlors, of course. One visitor of the time said of gambling, “It is
a great misfortune for a stranger not to be able to play, but yet a
greater to love it.”

Law also partied with intelligent women in the salons. Samuel
Johnson said of the time, “a man is in general better pleased
when he has a good dinner on his table than when his wife talks
Greek,” but women in Paris enjoyed more independence.

Around 1700 Law had a run-in with local authorities and he
returned to Edinburgh. In his classic “Extraordinary Popular
Delusions & the Madness of Crowds,” Charles Mackay
described his predicament.

“During his residence in Paris he rendered himself obnoxious to
D’Argenson, the lieutenant-general of the police, by whom he
was ordered to quite the capital.”

Now as a fugitive you might be thinking how could he return to
Scotland? Law was safe because the union between England and
Scotland wasn’t formalized as yet, but when he didn’t receive the
pardon he sought, and as the completion of the union drew near,
Law was forced to flee back to Paris.

At this point Law pursued one of those independent women,
Katherine Seigneur, a descendant of Henry VIII’s second wife
Anne Boleyn. Only one problem, Katherine was married. At the
same time Law was once again a success at the gaming tables,
which meant he was picking up a new set of enemies, one of
whom was a good friend of Katherine’s. So Katherine left her
husband and ran away with Law to Italy.

Law proceeded to make a killing in places like Genoa, Rome,
Florence, Turin and Venice, the latter being known as “the
brothel of Europe.” After 10 years he had accumulated some
20,000 pounds, a huge sum for the time. And when he wasn’t at
the tables he was doing more research on the art of finance,
developing the theories that we will begin to explore next week.

Sources:

“Extraordinary Popular Delusions & the Madness of Crowds”
Charles Mackay
“Millionaire” Janet Gleeson
“The Political Economy of France at the Time of John Law”
Earl J. Hamilton
“The Memoirs, Life and Character of the Great Mr. Law”
W. Gray (from 1721 don’t know what the ‘W’ stands for)
“An Historical Study of Law’s System” Andrew McFarland
Davis
“Devil Take the Hindmost” Edward Chancellor
“Europe: A History” Norman Davies
“Great Bubbles” Edited by Ross B. Emmett

Brian Trumbore