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Strategies & Market Trends : The coming US dollar crisis
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To: ggersh who wrote (26066)1/5/2010 9:50:06 PM
From: Real Man2 Recommendations  Read Replies (1) of 71450
 
Objectively speaking, chances of a good outcome from
all this are grim. They traded futures on tulips during
Dutch tulip mania

From John Law to John Maynard Keynes

by Steve H. Hanke

"Richard Cantillon (1680/90?-1734)—a great economic theorist, financier and advocate of specie-backed money—succeeded in making two fortunes from Law's Mississippi System. The first was made on the rising market for Mississippi Company shares. Cantillon's second fortune was made on exchange-rate speculation. Cantillon spotted a fatal flaw in Law's strategy: the increase in the issue of banknotes unbacked by specie that were required to put a floor under the Mississippi shares at 9,000 livres per share. Accordingly, Cantillon concluded that the monetization of Mississippi shares would result in a surge in the money supply and a sharp fall in the value of the livre against the pound sterling. In consequence, Cantillon took a large speculative position against the French currency—an action that made him a fortune and caused Law to expel him from France.

This brings us back to the present and the Law-Keynes linkage. As ever-larger stimulus packages and intervention strategies are contemplated, it might be worth reflecting on the fate of John Law's Mississippi System."

cato.org
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