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    Guinness World Record Holder for largest book signing ever, Orrin Woodward is a NY Times bestselling author of And Justice For All along with RESOLVED & coauthor of LeaderShift and Launching a Leadership Revolution. His books have sold over one million copies in the leadership and liberty fields. RESOLVED: 13 Resolutions For LIFE made the Top 100 All-Time Best Leadership Books and the 13 Resolutions are the framework for the top selling Mental Fitness Challenge personal development program.

    Orrin made the Top 20 Inc. Magazine Leadership list & has co-founded two multi-million dollar leadership companies. Currently, he serves as the Chairman of the Board of the LIFE Leadership. He has a B.S. degree from GMI-EMI (now Kettering University) in manufacturing systems engineering. He holds four U.S. patents, and won an exclusive National Technical Benchmarking Award.

    This blog is an Alltop selection and ranked in HR's Top 100 Blogs for Management & Leadership.




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John Law: Paper Money & Inflation

Posted by Orrin Woodward on May 24, 2013

John Law has been called a knave, fool, and an evil genius. Probably all are true in some sense, but probably most accurately, he is another person who sought utopia in something for nothing (SFN). Printing money is not the same as producing goods. Somehow, however, the lure of SFN, continues tempting governments to print paper and call it real value by government fiat. Simply stated, this results in a devaluing of all the money in the system, making every productive citizen a loser by the government’s unconscionable actions. Nonetheless, inflationary policies, like printing fiat money along with the newer methods involving digits on the computer screen, continue to bilk billions from hard-working Americans.

Most Americans know little about the underlying principles of inflation, but intuitively, they wonder why they work harder every year and yet seem to get further behind. In an effort to educate North America on the evils of inflation, I will share a portion of an article from Adam Hamilton. This article wonderfully explains one of the best documented cases of inflation on record – John Law and France in the 18th century. To truly create a LeaderShift, we must learn what the State is doing to our money, economy, and freedoms. LIFE Leadership is monthly providing CDs, books, and seminars to educate North Americans on their history, liberties, and the need for leadership.

Sincerely,

Orrin Woodward: LIFE Leadership

There are many fabulous examples of this phenomenon throughout history, including Germany after the First World War.  One of the most entertaining ones surrounds the British rogue John Law in the early 1700s.  John Law was forced to flee England in order to avoid prosecution for some alleged crimes.  He traveled around Europe and eventually settled in France, where his powerful personality, incredible mind, and command presence ultimately brought him to the attention of the King of France.

Law convinced the King and the French monetary authorities that in order to have a perpetual business boom, all they needed to do was print enough fiat currency so that business was assured of having access to the capital it needed.  Law stated that a stable gold-backed currency, which by its very nature stops meddlesome government bureaucrats from living beyond their means, was too archaic and far inferior to his new fiat currency theme.  He assured the French ruling class that because the government would print money when more was needed and buy it back when there was a surplus of money, that there would not be inflation and business would have the optimum amount of capital to thrive.  Unfortunately, the French powers that be bought into Law’s inflationist plan and executed the necessary monetary policy to make it happen.

Initially, Law’s plan seemed to be working brilliantly.  In the 1720s, France experienced an incredible boom as vast amounts of new fiat capital flowed into the existing markets.  Prosperity seemed to be everywhere, and the French stock market was exploding.  Soon, ordinary folks were quitting their jobs to hang out on the street where securities were traded and they became day traders.  Charles Mackay reports in his 1841 magnum opus “Extraordinary Popular Delusions and the Madness of Crowds” that one deformed hunch-backed man made large amounts of money renting out his slumped back as a mobile writing table for the frenzied stock jobbers buying and selling French equities on the street!  The wild stories that came out of this particular mania are endlessly fascinating!

John Law became the most famous and loved man in France, accruing enormous wealth for himself.

He then convinced the French government to join him in forming a company to develop the fabled wealth of the Mississippi River, of which the French controlled the gateway with their colony of New Orleans.  The Mississippi company was floated and everyone in France wanted to own shares of this hot new IPO.  They were convinced that they would be able to retire in a year or two because of the legendary wealth that the Mississippi company would generate.  Like hungry sharks boiling around a wounded whale, the people of France started a bidding war that propelled the Mississippi company stock and other French equities to dazzling heights.

Of course, since France was printing inherently worthless fiat money with both hands, the prices of everything in France were rising dramatically.  Gresham’s Law, the timeless axiom that bad money drives good money out of circulation, came into full effect.  Gold coins were hoarded and smuggled out of France, and paper fiat currency was spent as rapidly as it was received.  Eventually the gold hemorrhage became so bad that the French government, on John Law’s advice, outlawed gold.

In the meantime, like all exponential parabolic manias, the French bubble soon collapsed.  The aftermath of the disastrous inflationary policy of creating money out of nothing was brutal, and the Mississippi Scheme is one of the most widely studied speculative manias and bubbles in all of history.  The country of France and the French people bore the consequences of this monetary inflationary nightmare for decades, and some would argue France has never regained the prominence it had before the greatest inflationist of all time, John Law, took the reigns.

The man whom kings used to wait to consult was widely known as the “eldest son of Satan” in France after the bitter fruit of rampant fiat monetary expansion became apparent.  Provocatively, reading accounts of the Mississippi Mania in France and its sister South Sea Bubble in England, which arose at the same time, is eerie in that the parallels with the US NASDAQ tech bubble of early last year are startling and profound.  The lessons of history are never learned by governments and they continually repeat these same mistakes.

31 Responses to “John Law: Paper Money & Inflation”

  1. Trevor Long said

    Thank you Orrin for the great post! SFN sounds like a nice way of saying fraud. No wonder John Law was to be known as the “eldest son of Satan” When will we start being concerned that Satan is still having children?

  2. Jill Heller said

    Thanks for the insightful information and correlation with whats happening in the stock market with NASDAQ. I had just got back from a 2 mile jog and really pushed myself hard thinking that if Orrin can push himself hard on his workouts I then can as well so you give me inspiration and get me to the brink of exhaustion and I get back home to read your latest blog article while cooling down and for some odd reason the lady from years back by the name of Susan Powder came into my thoughts screaming, “STOP THE INSANITY” You bring sound truths for us to ponder and help enlighten the masses of the country to finally Wake up and Stop the insanity! Thank you so much for your research and teachings for us to help in the endeavor of waking up our brothers and sisters with your book Leadershift with Oliver DeMille and change the way this broken country has been running for far too long! May God Bless you to reach the Masses around the world to make a difference and reach more than a million people!

  3. Jason Dames said

    Wow!!! The Camels are in all kinds of tents:-) Lol Thx orrin for giving futher information about John Law. I had never heard of him until the camel in the tent cd. A Leader shift is coming. God bless

  4. Ken Hendon said

    History was a drag in school, but you, Orrin make so interesting. Your lessons all have value in our lives today. Team and Life are all about real value. There is a lot of fiat leadership in the world today. Thanks for being the gold standard in leadership!

  5. Clint Fix said

    Why is it that we continue to use fiat currencies and pursue inflationary tactics when not one time in history has a fiat currency ever survived? Why is the modern world so arrogant to believe that somehow we can make fiat currency work when we’ve seen two hyper-inflationary periods already in U.S. history?

    I’m scared of what’s going to happen when the results from increasing our base money supply from $800 billion to $3 trillion in only a few years comes to a head. Currency crisis? Will it result in a freedom shift or force shift? I don’t see a way around a currency crisis for the US because I can’t think of any possible way that the Fed can slow down, stop, or unwind from its $85 Billion per month bond buying program without sending interest rates on bonds up a few points, which would bankrupt our federal government from the interest payments alone.

    Orrin, do you see a way around this?

    • Orrin Woodward said

      Anyone who violates economic law pays the piper. I don’t see away around State bankruptcy, but I do see the “fever” breaking as a good sign. It humbles “the powers that be” and allows freedom a new rebirth with hopefully better understanding of the Five Laws of Decline this LeaderShift time! :) thanks, Orrin

  6. matt mielke said

    Thanks Orrin for another important history lesson.

  7. Kim Decker said

    Orrin,
    You are doing so much to tell the world and spread the news that to say “I honor you” would be an understatement. I will be so proud to see your name in history books as the greatest man of the new decade and will continue to spread the truth to who eve will listen.

  8. Yesterday Marc and I took the kids to see Iron Man 3. At the end of the movie a character makes a statement about the state of America and our Government. (I wish I could remember the words better to quote them here, but I can’t- sorry!) But the quote isn’t the point. The point that I’m trying to make is after the comment was made I turned to Marc and said there it is: “The Five Laws of Decline!” Marc said, yup! That is exactly it. I am so excited that through your continued teaching that I can “see” them everywhere! Keep up the excellent work! The Shift is happening!

  9. chris gornik said

    Orrin,

    This posting has taught me a lot about the history of Fiat money. Thank you for sharing!

  10. Chad Waters said

    Hi Orrin,

    Great article. Truley educating the public about what is going on is what we must do! In Canada most attitudes are to just beat the tax man! That’s how I grew up,how we were lead and why I was self employed.
    Now fully understanding what has happened it my passion/destiney and most of all my duty to help educate who ever I can! Now with the education and knowledge it be selfish and criminal to do anything but!

    Thanks for eduxating thousands upon thousands through your servant leadership!
    God Bless.

  11. Richard Kroll Jr. said

    Orrin, thank you for sharing yet another lesson from history our country seems bent on ignoring. Please keep them coming! Like you said, Unless we learn from history, we will continually repeat the same mistakes.

    Unfortunately, we, as a nation, are already suffering from the very same ills fiat money produces. We truly need a LeaderShift…NOW!!!

  12. Scott Staley said

    Truth is stranger than fiction. Great article. I hope that enough people wake up that the fever of SFN can be recognized and checked by the masses.

  13. What a great lesson from history. Where was that in my history book?! I can’t wait for the new Financial Fitness Pack to come out and talk about this topic and help people prepare for the inevitable.

  14. Tom DeWinter said

    Inflation caused by printing money is nothing more than a tax that the politicians didn’t even have to hold public hearings/discussions or to publically cast a vote to impose upon everyone.

    It is a tax imposed by a simply wink and a nod to the private bank known as the Federal Reserve, to crank up the presses. And suddenly the amount of goods you could by with say a $10 bill today is less than what you can purchase with that same $10 bill tomorrow.

    How is that different than the government directly taking your $10 bill and giving you back only $8? The only difference is in the former situation; everyone calls it “inflation” and seemingly expects and accepts it. While the later everyone dislikes it and knows that it is a tax. But a tax by any other name is still a tax!

    Due to conditioning not unlike Pavlov’s dogs, we now come expect and accept what they keep telling us is an artificially low and normal 2% tax increase each and every year, simply by calling it inflation. And this unseen and unvoted for tax is certainly going to worsen with the cintinued 24/7 running of the Federal Reserve’s printing press of fiat money!

    So inflation is simply another way to impose taxation without representation. The very ideal our nation’s founders fought and died in the Revolutionary war to be free of! And “We the people” should fight today for the very same cause. Going back to a gold standard would in part accomplish this. But it will take a Leadershift. Count me in!

  15. Elizabeth Sieracki said

    Orrin, thank you for the education. This was new historical information for me.

  16. J & P Harteis said

    May God have merrcy on us & give us time to sound the alarm, & recognize the harvest that’s out there! America has stopped being “good”, ansd so has stopped being “great”! We so desperately need a LeaderShift & a Great Awakening to heal our land!

  17. John Law, aka Ben Bernanke is back in business! Can you believe that Mr. Bernanke, after destroying our monetary credibility by more than quadrupling our currency in circulation in 5 years, is now declaring that he will step down as director of the Federal Reserve in 2014(or just before the predicted economic fall off the cliff). A coward would never want to stay around to face the results of his actions! Larry VB

  18. JeanetteP said

    Fantastic teaching Orrin! Keep it coming! Thanks for educating America:) God bless!

  19. Joe McGuire said

    Great post!

  20. Bob Rasmussen said

    Thx Orrin! This kind of education should be part of the existing educational system!!!

  21. nicholasnighbor said

    Thanks for posting this Orrin. Every time you teach about our history and the economic policies of the USA creates more of a sting each day to know what we need to do and start the dialogue of change!

  22. CJ Calvert said

    Orrin, thanks for another excellent article. This would have be more entertaining to read, if it weren’t so scary! I am still stunned that American politicians can’t see the parallels to historical examples such as what you’ve shared from Adam Hamilton. Is it that they are not well – read, and don’t know the historical examples, or that they naively feel that crashes only happen to other countries, not the infallible United States? I dont know which is more dangerous… Naivete or ignorance.

    • Orrin Woodward said

      CJ, Your comments remind me of the gentleman who was asked, “What do you think is worse – ignorance or apathy?” He answered, “I don’t know and I don’t care.” :) Most politicians don’t know and don’t care. But many citizens do and the LeaderShift results! thanks, Orrin

  23. MARIO VEGA said

    YOUR EDUCATION IS ALWAYS WELCOME BY ME. THANK YOU ORRIN FOR LEADERSHIFT AND ALL IT IS DOING IN OUR LIVES. LIBERATORS.

  24. Anthony Longlois said

    Orrin,

    Thank you for taking the time to study history and sharing the truth with all of us. It’s hard to deny the truth of history once you read it.

  25. Excellent Finances ‘F’ & Freedom ‘F’ post – highly illustrative, instructive, & insightful.

    For someone who had a very solid professional track education following up on a good enough conveyor belt education before that, I continue to see each of these posts, let alone the content of DeMille’s books, yours, Chris Brady’s, and Larry Van Buskirk’s audios as filling in all of the information that was missing from those 16 years of schooling.

    This post also tied in neatly with another fantastic audio that isn’t Larry’s — ‘Camel in the Tent’, which is one that I have listened to so many times, and am glad to share with so many to represent these two F’s and lead as many to economic and freedom truth as I can.

    Thank you!

  26. Orrin,

    Thank you for the enlightening message. I appreciate the way you make me think.

    JB

  27. Dale Burns Sr. said

    We need not only a “Leadershift” but also a power-shift. Wouldn’t it be great to have had more politicians that held Jobs, ran Businesses and balanced a few Budgets? After reading how Lakota Warriors like Crazy Horse were raised it contrasts our weak society with our compromises, loose morals and lack a spiritual direction. G_d help us Orrin as you are attempting to.

  28. J.J. said

    I think the best way that I heard this explained is in leadershift on how inflation steals from the poorest among us. Wonderful post

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