These are my notes for the K5M Book Club on the book Money, by Jacob Goldstein.
Chapter 6: John Law Gets to Print Money
Amsterdam’s problem was too many coins. This is very crypto. I just Googled “how many cryptocurrencies are there 2020”:
“So in 1609, jut a few years after the VOC was created, the city of Amsterdam chartered a public bank–a bank not owned by money changers or investors, but by the city itself.”
The city started a bank. What!? Not the country, not a group of people or a business, but the city of Amsterdam. That’s very cool. It’s hard to start a bank (a crypto company just recently became the first blockchain company to charter a US bank, and many have been trying).
“The purpose of the bank was not to make a profit, but to solve Amsterdam’s money problem.”
Is this like the Euro? A currency to reduce the amount of different monies?
“In 1705 [John Law] published a 120 page pamphlet called ‘Money and Trade Considered, With a Proposal for Supplying the Nation With Money.’”
This is fantastic! When the Initial Coin Offering (ICO) craze was a happening a few years ago every new crypto project would launch with a white paper. Because the whole thing was speculation the white paper would outline the problem and then the specific solution of the new project. It would give some high level overview of the product, the architecture, and the plan to go form concept to implementation.
Ethereum launched with a white paper and raised $15.5 million. Quoine (which I have not heard of before) raised $105 million on their white paper. And the best one is Ethereum Useless, a joke, which still raised $257,213.
I love that John Law was just traveling around looking to sell the idea of banks and money all over Europe. His idea for Scotland was genius!
“The new bank, Law argued, should print paper money that was not backed by silver or gold, but by land.”
This idea failed, but I get these instagram ads all the time for becoming a Lord or Laird of Scotland by “owning” a piece of Scottish land.
Highland Titles was founded in 2006 by Dr. Peter Bevis, a Fellow of the Zoological Society of London, and his daughter, Laura. They started by selling plots from the family’s land in order to fund additional tree planting. The mission was simply to restore land that had been devastated by centuries of farming and unsympathetic commercial forestry.A trading company, given a government monopoly on all Dutch trade in Asia. And people could trade by going to the company headquarters and updating the ledger with the company bookkeeper.
Honestly I’m pretty tempted. For $225 I’d get to hang a certificate or a plaque ($53 extra) on my wall that says I’m “Lady Kenneth Michael Merrill” (or Lord or Laird, but Lady is funny).
John Law running around trying to get someone to take him up on this new “bank” concept reminds me so much of Stafford Beer and Project Cybersyn.
Project Cybersyn was a Chilean project from 1971–1973 … aimed at constructing a distributed decision support system to aid in the management of the national economy. The project consisted of four modules: an economic simulator, custom software to check factory performance, an operations room, and a national network of telex machines that were linked to one mainframe computer.
…the never-completed Cybersyn project, which aimed to use computers and a telex-based communication network to allow the government to maximise production while preserving the autonomy of workers and lower management. Although Cybersyn was abandoned after Allende was removed from power by the Pinochet coup in 1973, [Stafford] Beer continued to work in the Americas, consulting for the governments of Mexico, Uruguay and Venezuela.
I’ve been interested in Stafford Beer for years and like John Law he had these grand ambitions for this new technology he knew could be massively important and he travelled around trying to get governments to implement them.
Not to get too off track but Project Cybersyn was abandoned after the 1973 Chilean coup d’état when the CIA, fearing the global influence of a well functioning socialist experiment, assisted Pinochet in his rise to power. The story of US involvement is so much more egregious that Russia’s bot army flooding social media with memes.
Anyway, let’s get back to 1714…
The Duke of Orléans sounds like he was living the best possible life!
“The Duke’s hobbies included working in his home chemistry lab, composing operas, and staying up all night with nobles and opera singers and actresses who got drunk, slept with each other, and ‘said vile things at the tops of their voices.’”
Louis XV is five, so The Duke got to play Regent for eight years (maturity was defined as 13 in 1723 France), then was made Prime Minister, but he died later that year at 49.
Fun Fact: The heart of the Duke of Orléans is now at the Chapelle Royale de Dreux, the necropolis of all the members of the Orléans family. Weird.
“In 1694, the English tried to solve the government money problem in a new way. They had just gone through a revolution in which Parliament demanded limits on the power of the monarch. Now Parliament and the newly installed king and queen took all of these new money technologies that were starting to take off … and created a new kind of bank. They called it the Bank of England.”
This is an interesting story about power. The previous monarch, with all the power, had no incentive to create a bank because divine right gave the power to take whatever was needed from the people.
Once Parliament limited the power of the king and queen, they then needed to implement a fair method of funding the monarchs. So the bank loaned them the money which they paid back with a tax that was approved by Parliament.
Limiting power created an opportunity for innovation that moved money from the most powerful to the people, who now made profits by owning a piece of the bank that loaned their king and queen money. Maybe we should try something like that today?
“A pretty good working definition of money is: it’s the thing you pay taxes with.”
In a world where anyone can now create their own money this is a pretty arguable statement. But maybe we will get into that later…