saved the king’s bacon, Law convinced the king to give him a monopoly on trade with the new world – in Louisiana. The combination of virtually limitless paper money and the hottest initial public offering (“IPO”) in history saw Law pay off the entire French government’s debt just by issuing another 300,000 shares of the Mississippi Company. The share price, which went public at 75 livres, eventually rose to 15,000 before the peak. It was this bubble... the forerunner to every modern financial bubble... that saw the creation of the word “millionaire.”
ABOUT FIVE YEARS AGO... Investors around the world began piling into Japanese stocks. It was a surprising move. Japanese stocks have been a virtual graveyard for capital since the last 1980s. That’s when Japan’s big real estate and investment bubble collapsed. The Japanese “Dow” – the Nikkei 225 – briefly soared from around 10,000 to more than 40,000... and then collapsed. Over the next 20 years, every rally in Japan was followed by still yet another, bigger decline. By 2009, the Japanese stock market was still down over 60% from its peak. (See chart to the right.) So what was it that spurred global investor interest a few years ago? Did Japan’s economy suddenly come back to life? No. Japan has consistently had the worst economy among the G20 group of major economies. Economic growth hasn’t been above 2% since 2012. Was there some breakthrough in solving
Japan’s big demographic problems? No. Japan’s population is declining. Japan is expected to lose more than 30% of its population by 2050. So... why were investors suddenly interested in Japan? JAPAN WENT ‘JOHN John Law was the Scottish rogue and murderer who convinced the French King Louis the XV to allow him to set up one of the world’s first central banks, the Banque Générale, in 1716. The bank brought paper money to France and allowed the king to finance his soaring debts. Having LAW’ WITH ITS CENTRAL BANK
American Consequences | 15
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