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- Title
AN HISTORICAL STUDY OF LAW'S SYSTEM.
- Authors
Davis, Andrew McFarland
- Abstract
The article presents a discussion related to Scottish financier John Law's system related to the radical restructuring of French public finances. In the spring of 1719, Law introduced into the French market dealings in futures, or, as such transactions were termed by the speculators, bargains in primes. The authors of the article obtained exact information as to the character of these bargains through the language used in a subsequent decree. Law's first transaction of this sort was patterned after similar dealings, with which the brokers in London, England, had for many years been familiar. It was, however, made in so absurd a manner that its evident purpose was to attract attention. He purchased the right to call for two hundred shares of the stock at par six months after date. Instead of paying a moderate sum for the privilege, he is said to have paid 40,000 livres down, which was to be forfeited, if he did not take the stock at the given time. Law's confidence that he could by such means stimulate a speculative movement in the stock of his company at once met with a response. Before his contracts matured, the stock had reached a price of ten times its par value.
- Subjects
FRANCE; PUBLIC finance; LAW, John; STOCK prices; DEALS; INVESTORS
- Publication
Quarterly Journal of Economics, 1887, Vol 1, Issue 4, p420
- ISSN
0033-5533
- Publication type
Article
- DOI
10.2307/1879339