President of the USA, confiscation of gold and silver in
the USA in 1933 is a relatively well known historical event.
Partially banished from the history books, however, but well known to
many Gold Bugs, through articles on the internet and historical texts, is the
story of gold and silver confiscation in France in 1720 by the legendary John Law (baptised
21 April 1671 – died 21 March
are several reference works on John Law, of which one of the older and best
known ones is Extraordinary Popular
Delusions and the Madness of Crowds by Charles
Mackay first published in 1841. However some extremely interesting
details on the gold and silver aspects are available in a more recent well
researched book; Millionaire
by Janet Gleeson published in 1999.
Law’s brilliant mathematical mind enabled him to be a successful
gambler in his early days by calculating the odds, and often taking the bank
in various forms of card games and dice.
Law, by Casimir Balthazar
was also way ahead of his European contemporaries in developing new theories
on banking, involving the issue of paper money alongside the gold and silver
coins which were the monetary systems of his epoch.
a Scot, eventually rose to become the Minister of Finance in France,
appointed by the Regent Duc d’
Orléans, governing on behalf of the dauphin,
later Louis XV, who inherited the throne as a young child.
was also Founder and President of the Royal Bank and the
Bank issued paper money which was in competition with gold and silver coin...
and therein lies the tale.
short essay has no intention of repeating the whole history of Law’s
rise and fall from monetary stardom, which can be pursued in the above quoted
works and elsewhere.
author’s aim here is to concentrate solely on the legal and other
measures that Law took as Finance Minister of France around 1720 in order to
try and save his monetary paper empire versus gold and silver.
was very well aware that a loss of confidence in paper, (bank notes and
shares in the Mississippi Company) would result in a flight to safety into
gold and silver. The following sequence of events in 1719/20 is sourced from
Janet Gleeson’s book, Millionaire referenced above.
Dec. 1719 the share price of the Mississippi Company, which had risen in a
bubble from 150 to 10,000 Livres descended to 7,500.
declared a dividend for shareholders of Livres 200 per share and the price
recovered to 9,000.
markets developed at 15,000 Livres, but Law refused credit to finance
futures, whereupon the price fell. He then revoked his credit ban and the
sales offices were opened in Paris to try and curb
“unregulated” sales and control the market.
equivalent to today’s options, were launched with leverage of 10 to 1.
sold shares in order to buy Primes, crashing the share price from 10,000 to
silver and gold were draining from the bank’s coffers as investors,
anticipating an end to the bubble, sold shares and cashed out into physical.
the end of 1720, some 500 million Livres in silver and gold had been taken
out of the country to London and elsewhere.
in France escalated and the price of land rose 400% in some areas. The price
of staples rose with bread up 500% from 1 to 5 sous within a year.
of Philippe d'Orléans as Regent of France; he stands with his
mistress Marie-Thérèse de Parabère who poses as
Minerva, goddess of Wisdom
Feb 27th measures for 'hoarders.'
were rewarded for any hoarding information, which included the right for the
government’s agents to search any private property for silver and gold.
2 weeks later Law reversed his decision, re-opened the company sales offices
and supported the sales price at 9,000 Livres. There was a rush to sell
shares for paper Livres.
decided to fade out silver and gold coin by reducing their value to zero over
several months - turning to a total paper monetary system.
had gone one step too far and his political support started to collapse.
huge crime wave developed simultaneously as losses led to penury, hardship
May 1720 some 2.6 billion Livres banknotes had been printed.
decided to reduce the price of the shares from 9,000 to 5,000 Livres.
of Livre banknotes would also be reduced by 50%.
3 days of riots, Law resigned, and Orleans restored the value of the shares
and banknotes to their previous levels.
days later the limits of owning gold and silver were lifted, but nobody had
2% of the money still circulating was in silver and gold.
were rationed and vast public bonfires of paper shares and Livres bank notes
were organized by the government to try and restore faith in paper, by
demonstrating to the public that they were reducing the quantity in
circulation, which needless to say did not work.
the foreign exchange market a pound sterling rose from 39 Livres to 92 Livres
in 6 months.
vast quantities of copper coins were minted to replace the lack of coins in
however opened only sporadically and to huge queues of people trying to
exchange paper for gold and silver.
went into exile and his fortunes ebbed and flowed for the rest of his life.
parallels with today’s global fiat monetary system, now arguably close
to the verge of collapse in October 2010, are so amazing as to warrant
this short essay as a heads-up, and to provide a template as to how events
might play out in the next couple of years.
intention is to allow the readers to draw their own conclusions as to how
they might or might not save themselves from a similar potential collapse in
fiat paper monetary system.
can, of course, imagine that many of Law’s measures would not be
acceptable in the 21st century, but a global monetary system collapse may
well lead to surprises?
seldom repeats, but it often rhymes, to paraphrase the famous bonmot of Mark
Disclaimer: This essay is not intended to be a recommendation
for an investment in any asset class, but is merely an attempt to compare a
previous period in history to the present day. The author would like to thank Janet
Gleeson for the permission to use the above referenced information from her