A Very English Deceit: The Secret History of the South Sea Bubble and the First Great Financial Scandal. Malcolm Balen
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СКАЧАТЬ land was, in Law’s view, a more stable instrument of economic prosperity. Land was, he opined, more valuable than silver because it produced everything, and silver was only a product.

      Law then moved on to the lessons he had learned first-hand in Amsterdam. Banks, he declared, offered the best method of improving trade and increasing the supply of money, because of the way they could facilitate credit. To move away from corrupted, debased coinage, he proposed the replacement of metal coins by banknotes: ‘The paper money proposed being always equal in quantity to the demand, the people will be employed, the country improved, manufacture advanced, trade domestic and foreign will be carried on, and wealth and power attained.’

      Initially, Law proposed a land bank, where paper money would be backed by the value of land. Notes were to be issued by the bank to the value of land that was sold. As he developed his argument, the colonial ambitions of the trading companies, whose financial aspirations became so entangled with the economies of European countries at that time, were implicitly blown away: their search for foreign booty was effectively deemed by Law to be absurd. France and Spain were ‘masters of the mines’, leaving other nations to buy their silver at high prices even though they had ‘a more valuable money’ of their own – paper, backed by land. Truly, declared Law, ‘the nature of money has not been rightly understood’.

      Inauspiciously, it was on Friday 13 July 1705 that the Scottish Parliament, riven by factional fighting, agreed to hear Law’s proposals for a land bank and paper money. But its main business that day, to Law’s misfortune, was to debate the possibilities of the union with England, and here Parliament’s hand was being forced both by the economic straits it found itself in and by the terms of the bill which had been placed before it. The proposed Alien Act was designed to allow the Queen to appoint commissioners to work for the union. But if the Parliament voted to reject the move, the Scots would be deemed to be aliens, and their exports to England banned. With the economy destroyed by the Darien venture, the bill was deliberately framed to concentrate minds. Law’s proposals would inevitably be seen, at best, as a radical alternative to union, and at worst as an irrelevant sideshow. Moreover, it was unlikely that any discussion in the Scottish Parliament could ever be straightforward.

      Passions ran high. Two members became so exercised by the issue of paper money that they challenged each other to a duel. Finally, Law’s proposals were rejected: the forcing of paper money upon the country was deemed to be ‘unfit for this nation’. Instead of striking out on a radical solution to its economic difficulties, which arguably might have delivered the financial stability the country needed and with it independence, the Scottish Parliament chose the path of least resistance, concentrating instead on joining the country to England in the Act of Union. Under its terms, one Parliament of Great Britain would replace the two of Scotland and England. Self-rule would be ceded by a piece of paper; it could, just perhaps, have been established by paper banknotes.

      For Law, this was a bitter blow. His theories remained academic and his future once more lay in exile. Without a royal pardon, he could not even return to Scotland if it was to be formally united to the English nation. Once more he appealed to the Queen; once more, on her government’s advice, she turned him down. Within weeks of the Scottish Parliament rejecting his scheme, it voted to appoint commissioners to arrange the union with England. Law was at heart a patriot who wanted to use his intellect to benefit his homeland. Thwarted, he could only turn his thoughts abroad, destined to circulate his economic theories among more accommodating heads of state who admired his genius and were content to ignore the youthful duel which had forced him into exile.

      Within a few years, Harley’s new government in England, faced with the burden of its ever-growing war debt, turned to a man with no intellectual convictions whatsoever, but a burning desire to make money for himself.

      CHAPTER III

      Blunt Advice

      George Soros became frustrated because his huge wealth seemed to give him no political influence in the West. He realized he needed to become a public personality. In the late summer of 1992, a time of great pressure on European institutions, he didso with a vengeance. He shorted, betting that the pound would not be able to hold its value against other currencies traded within the Exchange RateMechanism. On Sept. 16, with Soros and others selling pounds, the British government responded by raising interest rates 2 percentage points to attract buyers. By evening sterling had been forced from the ERM. Soros scooped up $1 billion from that escapade and became known all over the world as the Man Who Broke theBank of England. ‘I had no platform,’ he says today. ‘So I deliberately [did] the sterling thing to create a platform. Obviously people care about the man who made a lot of money.’Time.com, 1 September 1997

      John Blunt was not a handsome man. He was fat and pompous, and a very different character from John Law. Unlike with Law, there would be no madcap chase for the wilder things in life, nor any occasion when, through gambling, he would have to sell his family home or be bailed out by his mother. He had one aim in life, which was to better himself through business. His would be a focused search for wealth and power. Unlike Law, he had no intellectual backbone – he simply had a desire to get rich quick.

      But John Blunt did have one redeeming quality. Whilst he was loud and overbearing, he possessed great self-confidence, even charisma; he was on the make but charming – a man bursting with ideas and energy, who dominated any group. His gift was for making money, and he would prove himself to be an inspired promoter of companies. Within a decade he would become rich from backing a project to bring water into London, despite the rivalry of the New River Company, and another for the manufacture of linen. Within a decade, too, he would move closer to the political world, winning election in the City as a councillor in the Cornhill ward, which included Exchange Alley. Blunt was religious, a Baptist by faith, and as the years went by the three worlds of business, politics and religion would merge seamlessly to his advantage.

      Blunt was the son of a reasonably well-off shoemaker in Rochester; but he had come up, if not the hard way, then via a route that was tougher than Law’s relatively privileged upbringing in Scotland. He had started his working life as a humble member of the Worshipful Company of Scriveners, serving his apprenticeship in Holborn, London. Fittingly, for someone who wanted to aim high, his company’s coat of arms was an eagle, coloured gold, standing on a red book, its wings raised, poised to soar. Blunt’s choice of profession may have been a deliberate step in his planned path to power and influence. The scriveners were originally a kind of legal assistant, calligraphers with a monopoly on the paperwork for buying and selling houses. Gradually this gave them inside knowledge of the business affairs of merchants and landowners, and they became brokers who negotiated loans, an early type of merchant banker or land speculator. Such was the range of their financial activities that they seemed to occupy no firm place in society; one scrivener might tidy up the legal affairs of large estates, to the chagrin of the lawyers, while another might make his living by acting as a moneylender.

      It was, in all, a fitting profession for a man on the make. During his long apprenticeship to Daniel Richards in Birchin Lane, on the perimeter of Exchange Alley, where he wrote letters for a groat (or sixpence), Blunt built up a view of English society, steeping himself in the knowledge of who was rich and who was poor, and those who seemed well-to-do but were just keeping up appearances. But few scriveners became as rich as the goldsmith-bankers like John Law’s father, who could lend large sums on credit, and make much more in return. The motto of the scriveners through the years was Scribite scientes – ‘Write, learned men.’ For Blunt, this was just a means to an end. He wanted to be the exception to the rule that few scriveners rose to great wealth or eminence in the City. In 1689, at the age of twenty-five, he left his apprenticeship to seek out new opportunities. Within four months of leaving his apprenticeship, he was married, a first step on the ladder towards social respectability – the string of affairs which John Law had enjoyed was not for Blunt. His choice of bride was Elizabeth Court, who came from a solid Warwickshire СКАЧАТЬ