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

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  • François 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.

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Bibliographic Info

Paper provided by Federal Reserve Bank of Chicago in its series Working Paper Series with number WP-03-31.

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Date of creation: 2003
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Handle: RePEc:fip:fedhwp:wp-03-31

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Keywords: France ; Debts; Public ; Money;

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  1. 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 745-76, August.
  2. Garber, Peter M, 1990. "Famous First Bubbles," Journal of Economic Perspectives, American Economic Association, vol. 4(2), pages 35-54, Spring.
  3. 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.
  4. Christopher A. Sims, 2001. "Fiscal consequences for Mexico of adopting the dollar," Proceedings, Federal Reserve Bank of Cleveland, pages 597-625.
  5. Neal,Larry, 1994. "The Rise of Financial Capitalism," Cambridge Books, Cambridge University Press, number 9780521457385, November.
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Cited by:
  1. François Velde, 2006. "Chronicles of a deflation unforetold," Working Paper Series WP-06-12, Federal Reserve Bank of Chicago.

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