You won’t find his name alongside Adam Smith or John Maynard Keynes among the world’s most famous and influential economists, although he was the inventor of the paper money system which we still use today – or at least did until the present crisis. And the reason he is purged is because his ideas ruined not just one, but two of the world’s great nations.

John Law wasn’t just a man of ideas, flawed as his principal one turned out to be in practice. He was also a gambler, a playboy, a killer and a flamboyant and utterly credible serial chancer.

He was born in 1671 into a wealthy family of bankers and goldsmiths. His father William had bought Lauriston Castle, an estate at Cramond on the Firth of Forth. Young Law studied at the High School of Edinburgh and at the age of 14 went into the family’s banking business.

When he was 18, Law Senior died and he inherited the family estate and wealth but instead of settling down to be Law of Lauriston, the family title, he upped for London where he managed to gamble away not just the family silver but the bricks and mortar, mortgaging the estate to pay his debts..

However, the losses at the tables, coupled with his quick and analytical mind, had introduced him to the science of probability, mentally calculating the odds of a card turning up based on what he had memorised in the previous hands.

In 1697, when he was 26, a flirtation with young Elizabeth Villiers, later to become Countess of Orkney, inflamed a rival for her hand, Edward "Beau" Wilson, who challenged him to a duel. Law killed Wilson with a single pass of his sword.

He was arrested, charged with murder, sentenced to death at the Old Bailey but managed to escape to Europe and, again, the gambling tables.

Just how he did it isn’t clear, but Law managed to make enemies of the sheriffs of Venice, Genoa and Paris, and was expelled from each of them. But before he was thrown out of the French capital he had made friends with a young royal, the Duke of Orleans, who would become the key to his future – and demise.

Law, obsessed with mathematics and monetary theory, had written a series of books and pamphlets, and in 1705 had returned to Scotland and published his book, Money And Trade Considered. His proposal for establishing a national bank was vetoed by the Scottish Parliament which, two years later, voted itself out of office with the Act of Union. Law, again at risk of arrest for his killing of Wilson, fled once more to Europe.

He spent the next decade in France and the Netherlands making himself rich with a series of dodgy financial schemes. In 1715, Louis XIV, the "Sun King", died leaving the country on the cusp of bankruptcy. The Duke of Orleans became regent and took over the reins of government, summoning his old friend Law to Paris to sort the economy.

Law convinced him that trading in coinage was restrictive and that a paper currency would stimulate trade and boost employment. The regent allowed him to mount a small-scale test. He and his brother established the Banque General, issuing bank notes, rather than coins. Law’s currency became sought after and was soon trading at 16% over face value. The bank opened branches across France and it, and the use of paper money boomed, trade and employment picked up, and the duke was convinced.

The young man’s influence was not to stop there and he proposed a far more ambitious scheme. France then owned the Mississippi River territories – the present-day states of Louisiana, Mississippi, Arkansas, Missouri, Illinois, Iowa, Wisconsin and Minnesota – and he convinced the regent to allow him to set up a company which had a monopoly on trade there. The Compagnie du Mississippi was born.

The duke also appointed him controller general of ginance, the second most powerful man in the country, and by 1720 he had merged all of the French trading companies – from tobacco farms, the mint, even the national debt – into the massive conglomerate which was the Mississippi company.

Law issued shares in the company which were over-subscribed. The share price flew, leading to one of the wildest speculative manias in history. Fortunes were made overnight, millions in a day. People from all classes rushed to the small street where Law lived, Rue Quincampoix, bidding for shares.

Law’s paper money scheme had, it seemed, overturned the normal economic rules.

In June, 300 years ago almost to the day, Sir Isaac Newton, who knew much about gravity, if not the rise and fall of stocks, returned to his Westminster townhouse and wrote in his diary about a meeting he had had that day at the Mint with two men who had persuaded him to invest in the South Sea Company. That company had been formed in 1711 by an act of parliament to conduct all of England’s trade with Spanish colonies in the West Indies and South America, although there was little trade and even less profit.

Newton had been an early investor but had sold out at a substantial profit. But now there was a far more adventurous scheme, one which would challenge the traditional enemies, the French and Law’s Mississippi Company, by privatising all £32 million of England’s debt into the South Sea Company, in return for which the government was to receive a £7.5m cash sum.

The company was involved in the slave trade with the Spanish colonies and in whaling but was, in fact, just an elaborate and early Ponzi scheme. In order to pay the £7.5m to the government the company needed to find the cash, which it did, issuing more and more new stock at higher and higher prices, meanwhile bribing friends and allies to buy shares, even providing them with loans to do so. The historian John Carswell likened the process to a financial pump, “each spurt of stock being accompanied by a draught of cash to suck it up again, leaving the level higher than before”. The price of stock went up from £100 to £1,000 in a year. There was a frenzy to invest.

In France, however, the idea which inspired the South Sea bubble, the Mississippi company, was in trouble. What Law hadn’t calculated was the effect that the issuing of millions of shares would have on the money supply and on inflation. Prices were rising by over 20% a month. The public was also twigging that the Mississippi delta wasn’t a Garden of Eden, rather a mosquito-plagued swamp.

There was a run on the shares, the banks and paper money. There were riots on the streets of Paris with people crushed to death in the rush to withdraw what coins there were from the banks.

In England the South Sea shares were also collapsing, triggering bankruptcies in companies and people who had bought on credit. Banks and goldsmiths went under as they could not collect loans made on the stock, and thousands of individuals were ruined, including many members of the aristocracy.

An inquiry was set up in England which reported in 1721, revealing widespread fraud in government. Among those implicated were the Chancellor of the Exchequer, John Aislabie, as well the Postmaster General and two lords, heads of ministries.

Aislabi was found guilty of the “most notorious, dangerous and infamous corruption”, and imprisoned.

The collapse left many people destitute. Hundreds of suicides were attributed to the financial collapse of the company and the Riot Act had to be read to prevent disturbances outside Parliament.

In Paris, Law’s bank and his company became bankrupt overnight and he was fortunate to flee with his life, and one diamond, having been one of the richest and most influential men in the country. Nine years later, the "man ‘o’ pairts" from Cramond died in penury in Venice.

Isaac Newton, who had suffered badly as a result of economic gravity, lost his holding but, apart from being the greatest mind of his generation (and many others), he was clearly a dab hand at business. When he died six years after the South Sea bubble burst his estate was valued at £30,000, around £60m today.