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Government equity and money: John Law’s system in 1720 France

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  • Francois R. Velde

Abstract

John Law?s System was a radical restructuring of French public finances, carried out from 1716 to 1720. It involved on the one hand a conversion of the existing French public debt into something like government equity, on the other hand the replacement of commodity money with fiat money. For strategic reasons, Law supported the equity at too high a level, resulting in uncontrolled money creation. The System ended with the recreation of a public debt at, surprisingly, the same level as before.

Suggested Citation

  • Francois R. Velde, 2003. "Government equity and money: John Law’s system in 1720 France," Working Paper Series WP-03-31, Federal Reserve Bank of Chicago.
    • Handle: RePEc:fip:fedhwp:wp-03-31
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    References listed on IDEAS

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    1. Sargent, Thomas J & Velde, Francois R, 1995. "Macroeconomic Features of the French Revolution," Journal of Political Economy, University of Chicago Press, vol. 103(3), pages 474-518, June.
    2. Riley, James C. & McCusker, John J., 1983. "Money supply, economic growth, and the quantity theory of money: France, 1650-1788," Explorations in Economic History, Elsevier, vol. 20(3), pages 274-293, July.
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    6. Sims, Christopher A, 2001. "Fiscal Consequences for Mexico of Adopting the Dollar," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 33(2), pages 597-616, May.
    7. Greif, Avner & Milgrom, Paul & Weingast, Barry R, 1994. "Coordination, Commitment, and Enforcement: The Case of the Merchant Guild," Journal of Political Economy, University of Chicago Press, vol. 102(4), pages 745-776, August.
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    Cited by:

    1. François R. Velde, 2009. "Chronicle of a Deflation Unforetold," Journal of Political Economy, University of Chicago Press, vol. 117(4), pages 591-634, August.
    2. William Quinn & John D. Turner, 2023. "Bubbles in history," Business History, Taylor & Francis Journals, vol. 65(4), pages 636-655, May.
    3. Bignon, Vincent & Flandreau, Marc, 2018. "The Other Way: A Narrative History of the Bank of France," CEPR Discussion Papers 13138, C.E.P.R. Discussion Papers.
    4. Yang Hu & Les Oxley, 2017. "Exuberance in Historical Stock Prices during the Mississippi and South Seas Bubble Episodes," Working Papers in Economics 17/08, University of Waikato.
    5. James Harold, 2010. "Comment on "Immigrant Entrepreneurs in U.S. Financial History, 1775-1914" (by Thomas K. McCraw)," Capitalism and Society, De Gruyter, vol. 5(1), pages 1-6, July.

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    Keywords

    France; Debts; Public; Money;
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