Free Millionaire: The Philanderer, Gambler, and Duelist Who Invented Modern Finance by Janet Gleeson Page B

within this settled domestic background, Law was able to work with new purpose.
    He decided to tender his knowledge to the queen in the traditional way, by writing a proposal. His first work, only recently identified by scholars, was entitled “Essay on a Land Bank.” In it he proposed a bank issuing paper money based on the value of land. This was a more stable basis for credit than silver, he contended, since history had shown that precious metals could fluctuate in value according to their scarcity, whereas land’s value was less volatile. The idea was not entirely original: since the mid-seventeenth century numerous writers had put forward similar schemes—even Defoe felt “land is the best bottom for banks.” The same idea still flourishes today in the form of savings-and-loan associations.
    Queen Anne was not impressed. Law’s arguments might be ingenious and succinctly expressed, but he could not erase his past. As a convicted felon and a notorious gambler, he was a far-from-obvious candidate to trust with the nation’s purse. After cursory consideration, the idea was therefore quickly rejected. The list of petitions and memorials to the queen in August 1704 recorded that Law, presently residing in Scotland, “by the intercession of friends” had managed to secure the Wilson family’s agreement to annul the appeal. It continues circumspectly, “yet your petitioner is debarred from serving your majesty (as he is most desirous) in the just war wherein your majesty is now engaged,” requesting royal pardon, “not only for the death of the said John [sic: it should be Edward] Wilson, but also for his breach of the said prison that he may be able to serve the queen for the rest of his life.” The application is marked with the single word “rejected.” In the eyes of the queen and her government, Law’s financial genius would never be acknowledged.
    Faced with this setback, Law did not waver in his determination. Certain that the scheme’s soundness was not in question, he decided to adapt it for Scotland. Here he was confident that his influential friends, including the Duke of Argyll, who was the queen’s commissioner in Scotland, would ensure a fair hearing.
    Scotland desperately needed someone to cure her economic ills. At the turn of the eighteenth century the country languished in an economic nadir, with currency in short supply, trade in the doldrums, unemployment and poverty widespread. The situation was exacerbated by a financial fiasco called the Darien scheme. The brainchild of William Paterson, founder of the Bank of England, the idea had been to found a colony in Panama, which would provide a base from which cargoes would be carried across the isthmus from the Pacific to the Atlantic and back, avoiding the long, treacherous route around Cape Horn. Touting the idea as a fail-safe investment that would yield fabulous rewards and make Scotland the richest country on earth, he raised £400,000—nearly half the capital of Scotland—from optimistic private investors all eager to participate. In 1698, after ejecting scores of desperate stowaways, five ships set sail from Leith with 2,000 passengers aboard, including Paterson, his wife, and his son. Three months later they dropped anchor at the settlement of New Caledonia.
    The expedition was a disaster. Malaria, dysentery, and other diseases were rife; the Spanish besieged the settlement; the English refused support because they were worried about competition with the East India Company, and, as a consequence, trade was blighted. Two years later, when the project was finally abandoned, the lives of 1,700 colonists, among them Paterson’s wife and son, had been lost, numerous investors had been ruined, and the Scottish economy was in such crisis that even the survival of the Bank of Scotland, set up a year after the Bank of England, was threatened.
    John Law was convinced he could rectify the situation. Within a year he had completed a 120-page