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The John Law Economic System

The John Law Economic System

The financial system in use today is a version of John Law’s system:

Each country in the developed world has a central bank that issues paper money, manages the supply of credit in the interest of commerce, uses fractional-reserve banking, and has joint-stock companies that pay dividends.

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MORE IDEAS FROM THE SAME ARTICLE

The instruments of trade and finance, like paper money, are groundbreaking inventions, put to use by collective acceptance using authority and seals of trust.

The idea of Facebook's Libra, an attempt to create a new currency made from the architecture that powers Bitcoin, is that the value of new money is not derived from state authority, but a combination of mathematics, global connectivity, and trust that resides in people using Facebook.

  • Real money is only gold, and all the other forms of currency in the system are merely different kinds of credit. 
  • Credit is an indispensable part of a functioning economy, so it continues to thrive even with historical setbacks.
  • Gold is the only real 'legal tender'.

The King Williams Administration used to borrow large sums of money used for wars and then levied taxes on ship cargo and spirits to pay back the interest. This gave rise to Banks like the Bank of England, and finally Bank Notes, the currency still used today.

The financial crisis of 2008 showed that the system can buckle anytime and money may not always be worth the same.

Paper Money was pushed as a 'fiat' currency due to an attractive quality: it was guaranteed to trade by the state authority for a specific weight of gold or silver, and couldn't be melted down or devalued.

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