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diff --git a/.gitattributes b/.gitattributes new file mode 100644 index 0000000..6833f05 --- /dev/null +++ b/.gitattributes @@ -0,0 +1,3 @@ +* text=auto +*.txt text +*.md text diff --git a/6949-0.txt b/6949-0.txt new file mode 100644 index 0000000..54e09bb --- /dev/null +++ b/6949-0.txt @@ -0,0 +1,3056 @@ +Project Gutenberg's Fiat Money Inflation in France, by Andrew Dickson White + +This eBook is for the use of anyone anywhere at no cost and with +almost no restrictions whatsoever. You may copy it, give it away or +re-use it under the terms of the Project Gutenberg License included +with this eBook or online at www.gutenberg.org + + +Title: Fiat Money Inflation in France + How It Came, What It Brought, and How It Ended + +Author: Andrew Dickson White + +Release Date: November, 2004 [EBook #6949] +Posting Date: March 28, 2009 + +Language: English + +Character set encoding: UTF-8 + +*** START OF THIS PROJECT GUTENBERG EBOOK FIAT MONEY INFLATION IN FRANCE *** + + + + +Produced by Gordon Keener + + + + + + + + + +FIAT MONEY INFLATION IN FRANCE + +How It Came, What It Brought, and How It Ended + +by Andrew Dickson White, LL.D., Ph.D., D.C.L. + + +Late President and Professor of History at Cornell University; Sometime +United States Minister to Russia and Ambassador to Germany; Author of "A +History of the Warfare of Science with Theology," etc. + + + + +INTRODUCTION + +As far back as just before our Civil War I made, in France and +elsewhere, a large collection of documents which had appeared during the +French Revolution, including newspapers, reports, speeches, pamphlets, +illustrative material of every sort, and, especially, specimens of +nearly all the Revolutionary issues of paper money,--from notes of ten +thousand _livres_ to those of one _sou_. + +Upon this material, mainly, was based a course of lectures then given +to my students, first at the University of Michigan and later at Cornell +University, and among these lectures, one on "Paper Money Inflation in +France." + +This was given simply because it showed one important line of facts in +that great struggle; and I recall, as if it were yesterday, my feeling +of regret at being obliged to bestow so much care and labor upon a +subject to all appearance so utterly devoid of practical value. I +am sure that it never occurred, either to my Michigan students or to +myself, that it could ever have any bearing on our own country. It +certainly never entered into our minds that any such folly as that +exhibited in those French documents of the eighteenth century could ever +find supporters in the United States of the nineteenth. + +Some years later, when there began to be demands for large issues of +paper money in the United States, I wrought some of the facts thus +collected into a speech in the Senate of the State of New York, showing +the need of especial care in such dealings with financial necessities. + +In 1876, during the "greenback craze," General Garfield and Mr. S. B. +Crittenden, both members of the House of Representatives at that time, +asked me to read a paper on the same general subject before an audience +of Senators and Representatives of both parties in Washington. This I +did, and also gave it later before an assemblage of men of business at +the Union League Club in New York. + +Various editions of the paper were afterward published, among them, two +or three for campaign purposes, in the hope that they might be of use +in showing to what folly, cruelty, wrong and rain the passion for "fiat +money" may lead. + +Other editions were issued at a later period, in view of the principle +involved in the proposed unlimited coinage of silver in the United +States, which was, at bottom, the idea which led to that fearful wreck +of public and private prosperity in France. + +For these editions there was an added reason in the fact that the +utterances of sundry politicians at that time pointed clearly to issues +of paper money practically unlimited. These men were logical enough +to see that it would be inconsistent to stop at the unlimited issue +of silver dollars which cost really something when they could issue +unlimited paper dollars which virtually cost nothing. + +In thus exhibiting facts which Bishop Butler would have recognized as +confirming his theory of "The Possible Insanity of States," it is but +just to acknowledge that the French proposal was vastly more sane than +that made in our own country. Those French issues of paper rested not +merely "on the will of a free people," but on one-third of the entire +landed property of France; on the very choicest of real property in city +and country--the confiscated estates of the Church and of the fugitive +aristocracy--and on the power to use the paper thus issued in purchasing +this real property at very low prices. + +I have taken all pains to be exact, revising the whole paper in the +light of the most recent publications and giving my authority for every +important statement, and now leave the whole matter with my readers. + +At the request of a Canadian friend, who has expressed a strong wish +that this work be brought down to date, I have again restudied the +subject in the light of various works which have appeared since +my earlier research,--especially Levasseur's "Histoire des classes +ouvrières et de l'industrie en France,"--one of the really great books +of the twentieth century;--Dewarmin's superb "Cent Ans de numismatique +Française" and sundry special treatises. The result has been that +large additions have been made regarding some important topics, and +that various other parts of my earlier work have been made more clear by +better arrangement and supplementary information. + +ANDREW D. WHITE. Cornell University, September, 1912. + + + + +FOREWORD BY MR. JOHN MACKAY + +I am greatly indebted to the generosity of Mr. Andrew D. White, the +distinguished American scholar, author and diplomatist, for permission +to print and to circulate privately a small edition of his exceedingly +valuable account of the great currency-making experiment of the French +Revolutionary Government. The work has been revised and considerably +enlarged by Mr. White for the purpose of the present issue. + +The story of "Fiat Money Inflation in France" is one of great interest +to legislators, to economic students, and to all business and thinking +men. It records the most gigantic attempt ever made in the history of +the world by a government to create an inconvertible paper currency, and +to maintain its circulation at various levels of value. It also records +what is perhaps the greatest of all governmental efforts--with the +possible exception of Diocletian's--to enact and enforce a legal limit +of commodity prices. Every fetter that could hinder the will or thwart +the wisdom of democracy had been shattered, and in consequence every +device and expedient that untrammelled power and unrepressed optimism +could conceive were brought to bear. But the attempts failed. They left +behind them a legacy of moral and material desolation and woe, from +which one of the most intellectual and spirited races of Europe has +suffered for a century and a quarter, and will continue to suffer until +the end of time. There are limitations to the powers of governments and +of peoples that inhere in the constitution of things, and that neither +despotisms nor democracies can overcome. + +Legislatures are as powerless to abrogate moral and economic laws as +they are to abrogate physical laws. They cannot convert wrong into right +nor divorce effect from cause, either by parliamentary majorities, or +by unity of supporting public opinion. The penalties of such +legislative folly will always be exacted by inexorable time. While these +propositions may be regarded as mere commonplaces, and while they are +acknowledged in a general way, they are in effect denied by many of +the legislative experiments and the tendencies of public opinion of the +present day. The story, therefore, of the colossal folly of France in +the closing part Of the eighteenth century and its terrible fruits, is +full of instruction for all men who think upon the problems of our own +time. + +From among an almost infinite variety, there are four great and +fundamental facts that clearly emerge, namely,-- + +(1) Notwithstanding the fact that the paper currency issued was the +direct obligation of the State, that much of it was interest bearing, +and that all of it was secured upon the finest real estate in France, +and that penalties in the way of fines, imprisonments and death were +enacted from time to time to maintain its circulation at fixed values, +there was a steady depreciation in value until it reached zero point and +culminated in repudiation. The aggregate of the issues amounted to no +less than the enormous and unthinkable sum of $9,500,000,000, and in +the middle of 1797 when public repudiation took place, there was no +less than $4,200,000,000 in face value of _assignats_ and _mandats_ +outstanding; the loss, as always, falling mostly upon the poor and the +ignorant. + +(2) In the attempt to maintain fixed values for the paper currency the +Government became involved in an equally futile attempt to maintain a +tariff of legal prices for commodities. Here again penalties of fines, +of imprisonments and of death were powerless to accomplish the end in +view. + +(3) An wholesale demoralisation of society took place under which +thrift, integrity, humanity, and every principle of morality were thrown +into the welter of seething chaos and cruelty. + +(4) The real estate upon which the paper currency was secured +represented confiscations by the State of the lands of the Church and +of the Emigrant Noblemen. These lands were appraised, according to Mr. +White's narrative and other authorities, at $1,000,000,000. Here was +a straight addition to the State's resources of $1,000,000,000. It is +ominously significant that within one hundred years under the "Peace of +Frankfort" signed on the 10th May, 1871, the French nation agreed to pay +a war indemnity to victorious Germany of exactly the same sum, namely, +$1,000,000,000 in addition to the surrender of the province of Alsace +and a considerable part of Lorraine. The great addition to the national +wealth, therefore, effected by the immoral confiscation of the lands in +question disappeared with compound territorial interest added under the +visitation of relentless retribution. + +Public opinion in our own country is so far sound on the question +of currency, but signs are not lacking in some lay quarters of +an inclination to sanction dangerous experiments. The doctrine of +governmental regulation of prices, has, however, made its appearance in +embryo. Class dissatisfaction is also on the increase. The confiscation +of property rights under legal forms and processes is apt to be condoned +when directed against unpopular interests and when limited to amounts +that do not revolt the conscience. The wild and terrible expression +given to these insidious principles in the havoc of the Revolution +should be remembered by all. Nor should the fact be overlooked that, as +Mr. White points out on Page 6, the National Assembly of France which +originated and supported these measures contained in its membership the +ablest Frenchmen of the day. + +JOHN MACKAY. Toronto General Trusts Building, Toronto, 31st March, 1914. + + + + +FIAT MONEY INFLATION IN FRANCE + +How It Came, What It Brought, and How It Ended [1] + + + + +I. + +Early in the year 1789 the French nation found itself in deep financial +embarrassment: there was a heavy debt and a serious deficit. + +The vast reforms of that period, though a lasting blessing politically, +were a temporary evil financially. There was a general want of +confidence in business circles; capital had shown its proverbial +timidity by retiring out of sight as far as possible; throughout the +land was stagnation. + +Statesmanlike measures, careful watching and wise management would, +doubtless, have ere long led to a return of confidence, a reappearance +of money and a resumption of business; but these involved patience +and self-denial, and, thus far in human history, these are the rarest +products of political wisdom. Few nations have ever been able to +exercise these virtues; and France was not then one of these few. [2] + +There was a general search for some short road to prosperity: ere long +the idea was set afloat that the great want of the country was more of +the circulating medium; and this was speedily followed by calls for an +issue of paper money. The Minister of Finance at this period was Necker. +In financial ability he was acknowledged as among the great bankers of +Europe, but his was something more than financial ability: he had a +deep feeling of patriotism and a high sense of personal honor. The +difficulties in his way were great, but he steadily endeavored to +keep France faithful to those principles in monetary affairs which the +general experience of modern times had found the only path to national +safety. As difficulties arose the National Assembly drew away from him, +and soon came among the members renewed suggestions of paper money: +orators in public meetings, at the clubs and in the Assembly, proclaimed +it a panacea--a way of "securing resources without paying interest." +Journalists caught it up and displayed its beauties, among these men, +Marat, who, in his newspaper, "The Friend of the People," also joined +the cries against Necker, picturing him--a man of sterling honesty, who +gave up health and fortune for the sake of France--as a wretch seeking +only to enrich himself from the public purse. + +Against this tendency toward the issue of irredeemable paper Necker +contended as best he might. He knew well to what it always had led, +even when surrounded by the most skillful guarantees. Among those who +struggled to support ideas similar to his was Bergasse, a deputy from +Lyons, whose pamphlets, then and later, against such issues exerted a +wider influence, perhaps, than any others: parts of them seem fairly +inspired. Any one to-day reading his prophecies of the evils sure to +follow such a currency would certainly ascribe to him a miraculous +foresight, were it not so clear that his prophetic power was due simply +to a knowledge of natural laws revealed by history. But this current in +favor of paper money became so strong that an effort was made to breast +it by a compromise: and during the last months of 1789 and the first +months of 1790 came discussions in the National Assembly looking to +issues of notes based upon the landed property of the Church,--which was +to be confiscated for that purpose. But care was to be taken; the issue +was to be largely in the shape of notes of 1,000, 300 and 200 _livres_, +too large to be used as ordinary currency, but of convenient size to +be used in purchasing the Church lands; besides this, they were to bear +interest and this would tempt holders to hoard them. The Assembly thus +held back from issuing smaller obligations. + +Remembrances of the ruin which had come from the great issues of smaller +currency at an earlier day were still vivid. Yet the pressure toward +a popular currency for universal use grew stronger and stronger. The +finance committee of the Assembly reported that "the people demand a new +circulating medium"; that "the circulation of paper money is the best of +operations"; that "it is the most free because it reposes on the will +of the people"; that "it will bind the interest of the citizens to the +public good." + +The report appealed to the patriotism of the French people with the +following exhortation: "Let us show to Europe that we understand our +own resources; let us immediately take the broad road to our liberation +instead of dragging ourselves along the tortuous and obscure paths of +fragmentary loans." It concluded by recommending an issue of paper money +carefully guarded, to the full amount of four hundred million _livres_, +and the argument was pursued until the objection to smaller notes faded +from view. Typical in the debate on the whole subject, in its various +phases, were the declarations of M. Matrineau. He was loud and long for +paper money, his only fear being that the Committee had not authorized +enough of it; he declared that business was stagnant, and that the sole +cause was a want of more of the circulating medium; that paper money +ought to be made a legal tender; that the Assembly should rise above +prejudices which the failures of John Law's paper money had caused, +several decades before. Like every supporter of irredeemable paper money +then or since, he seemed to think that the laws of Nature had changed +since previous disastrous issues. He said: "Paper money under +a despotism is dangerous; it favors corruption; but in a nation +constitutionally governed, which itself takes care in the emission of +its notes, which determines their number and use, that danger no longer +exists." He insisted that John Law's notes at first restored prosperity, +but that the wretchedness and ruin they caused resulted from their +overissue, and that such an overissue is possible only under a +despotism. [3] + +M. de la Rochefoucauld gave his opinion that "the _assignats_ will draw +specie out of the coffers where it is now hoarded. [4] + +On the other hand Cazalès and Maury showed that the result could only +be disastrous. Never, perhaps, did a political prophecy meet with more +exact fulfillment in every line than the terrible picture drawn in one +of Cazalès' speeches in this debate. Still the current ran stronger and +stronger; Petion made a brilliant oration in favor of the report, and +Necker's influence and experience were gradually worn away. + +Mingled with the financial argument was a strong political plea. The +National Assembly had determined to confiscate the vast real property +of the French Church,--the pious accumulations of fifteen hundred +years. There were princely estates in the country, bishops' palaces and +conventual buildings in the towns; these formed between one-fourth and +one-third of the entire real property of France, and amounted in value +to at least two thousand million _livres_. By a few sweeping strokes +all this became the property of the nation. Never, apparently, did a +government secure a more solid basis for a great financial future. [5] + +There were two special reasons why French statesmen desired speedily to +sell these lands. First, a financial reason,--to obtain money to +relieve the government. Secondly, a political reason,--to get this land +distributed among the thrifty middle-classes, and so commit them to the +Revolution and to the government which gave their title. + +It was urged, then, that the issue of four hundred millions of paper, +(not in the shape of interest-bearing bonds, as had at first been +proposed, but in notes small as well as large), would give the treasury +something to pay out immediately, and relieve the national necessities; +that, having been put into circulation, this paper money would stimulate +business; that it would give to all capitalists, large or small, the +means for buying from the nation the ecclesiastical real estate, and +that from the proceeds of this real estate the nation would pay its +debts and also obtain new funds for new necessities: never was theory +more seductive both to financiers and statesmen. + +It would be a great mistake to suppose that the statesmen of France, or +the French people, were ignorant of the dangers in issuing irredeemable +paper money. No matter how skillfully the bright side of such a currency +was exhibited, all thoughtful men in France remembered its dark side. +They knew too well, from that ruinous experience, seventy years before, +in John Law's time, the difficulties and dangers of a currency not well +based and controlled. They had then learned how easy it is to issue it; +how difficult it is to check its overissue; how seductively it leads to +the absorption of the means of the workingmen and men of small fortunes; +how heavily it falls on all those living on fixed incomes, salaries or +wages; how securely it creates on the ruins of the prosperity of all +men of meagre means a class of debauched speculators, the most +injurious class that a nation can harbor,--more injurious, indeed, than +professional criminals whom the law recognizes and can throttle; how +it stimulates overproduction at first and leaves every industry flaccid +afterward; how it breaks down thrift and develops political and social +immorality. All this France had been thoroughly taught by experience. +Many then living had felt the result of such an experiment--the issues +of paper money under John Law, a man who to this day is acknowledged +one of the most ingenious financiers the world has ever known; and there +were then sitting in the National Assembly of France many who owed the +poverty of their families to those issues of paper. Hardly a man in the +country who had not heard those who issued it cursed as the authors of +the most frightful catastrophe France had then experienced. [6] + +It was no mere attempt at theatrical display, but a natural impulse, +which led a thoughtful statesman, during the debate, to hold up a piece +of that old paper money and to declare that it was stained with the +blood and tears of their fathers. + +And it would also be a mistake to suppose that the National Assembly, +which discussed this matter, was composed of mere wild revolutionists; +no inference could be more wide of the fact. Whatever may have been the +character of the men who legislated for France afterward, no thoughtful +student of history can deny, despite all the arguments and sneers +of reactionary statesmen and historians, that few more keen-sighted +legislative bodies have ever met than this first French Constitutional +Assembly. In it were such men as Sieyès, Bailly, Necker, Mirabeau, +Talleyrand, DuPont de Nemours and a multitude of others who, in various +sciences and in the political world, had already shown and were destined +afterward to show themselves among the strongest and shrewdest men that +Europe has yet seen. + +But the current toward paper money had become irresistible. It was +constantly urged, and with a great show of force, that if any nation +could safely issue it, France was now that nation; that she was fully +warned by her severe experience under John Law; that she was now a +constitutional government, controlled by an enlightened, patriotic +people,--not, as in the days of the former issues of paper money, an +absolute monarchy controlled by politicians and adventurers; that +she was able to secure every _livre_ of her paper money by a virtual +mortgage on a landed domain vastly greater in value than the entire +issue; that, with men like Bailly, Mirabeau and Necker at her head, she +could not commit the financial mistakes and crimes from which France had +suffered under John Law, the Regent Duke of Orleans and Cardinal Dubois. + +Oratory prevailed over science and experience. In April, 1790, came the +final decree to issue four hundred millions of _livres_ in paper money, +based upon confiscated property of the Church for its security. The +deliberations on this first decree and on the bill carrying it into +effect were most interesting; prominent in the debate being Necker, Du +Pont de Nemours, Maury, Cazalès, Petion, Bailly and many others hardly +inferior. The discussions were certainly very able; no person can read +them at length in the "Moniteur," nor even in the summaries of the +parliamentary history, without feeling that various modern historians +have done wretched injustice to those men who were then endeavoring to +stand between France and ruin. + +This sum--four hundred millions, so vast in those days, was issued in +_assignats_, which were notes secured by a pledge of productive +real estate and bearing interest to the holder at three per cent. No +irredeemable currency has ever claimed a more scientific and practical +guarantee for its goodness and for its proper action on public finances. +On the one hand, it had what the world recognized as a most practical +security,--a mortgage an productive real estate of vastly greater value +than the issue. On the other hand, as the notes bore interest, there +seemed cogent reason for their being withdrawn from circulation whenever +they became redundant. [7] + +As speedily as possible the notes were put into circulation. Unlike +those issued in John Law's time, they were engraved in the best style +of the art. To stimulate loyalty, the portrait of the king was placed +in the center; to arouse public spirit, patriotic legends and emblems +surrounded it; to stimulate public cupidity, the amount of interest +which the note would yield each day to the holder was printed in the +margin; and the whole was duly garnished with stamps and signatures to +show that it was carefully registered and controlled. [8] + +To crown its work the National Assembly, to explain the advantages +of this new currency, issued an address to the French people. In this +address it spoke of the nation as "delivered by this grand means from +all uncertainty and from all ruinous results of the credit system." It +foretold that this issue "would bring back into the public treasury, +into commerce and into all branches of industry strength, abundance and +prosperity." [9] + +Some of the arguments in this address are worth recalling, and, among +them, the following:--"Paper money is without inherent value unless +it represents some special property. Without representing some special +property it is inadmissible in trade to compete with a metallic +currency, which has a value real and independent of the public action; +therefore it is that the paper money which has only the public authority +as its basis has always caused ruin where it has been established; that +is the reason why the bank notes of 1720, issued by John Law, after +having caused terrible evils, have left only frightful memories. +Therefore it is that the National Assembly has not wished to expose +you to this danger, but has given this new paper money not only a value +derived from the national authority but a value real and immutable, a +value which permits it to sustain advantageously a competition with the +precious metals themselves." [10] + +But the final declaration was, perhaps, the most interesting. It was as +follows:-- + +"These _assignats_, bearing interest as they do, will soon be considered +better than the coin now hoarded, and will bring it out again into +circulation." The king was also induced to issue a proclamation +recommending that his people receive this new money without objection. + +All this caused great joy. Among the various utterances of this feeling +was the letter of M. Sarot, directed to the editor of the Journal of the +National Assembly, and scattered through France. M. Sarot is hardly able +to contain himself as he anticipates the prosperity and glory that this +issue of paper is to bring to his country. One thing only vexes him, and +that is the pamphlet of M. Bergasse against the _assignats_; therefore +it is after a long series of arguments and protestations, in order to +give a final proof of his confidence in the paper money and his entire +skepticism as to the evils predicted by Bergasse and others, M. Sarot +solemnly lays his house, garden and furniture upon the altar of his +country and offers to sell them for paper money alone. + +There were, indeed, some gainsayers. These especially appeared among the +clergy, who, naturally, abhorred the confiscation of Church property. +Various ecclesiastics made speeches, some of them full of pithy and +weighty arguments, against the proposed issue of paper, and there is +preserved a sermon from one priest threatening all persons handling the +new money with eternal damnation. But the great majority of the French +people, who had suffered ecclesiastical oppression so long, regarded +these utterances as the wriggling of a fish on the hook, and enjoyed the +sport all the better. [11] + +The first result of this issue was apparently all that the most sanguine +could desire: the treasury was at once greatly relieved; a portion of +the public debt was paid; creditors were encouraged; credit revived; +ordinary expenses were met, and, a considerable part of this paper +money having thus been passed from the government into the hands of +the people, trade increased and all difficulties seemed to vanish. The +anxieties of Necker, the prophecies of Maury and Cazalès seemed proven +utterly futile. And, indeed, it is quite possible that, if the national +authorities had stopped with this issue, few of the financial evils +which afterwards arose would have been severely felt; the four hundred +millions of paper money then issued would have simply discharged the +function of a similar amount of specie. But soon there came another +result: times grew less easy; by the end of September, within five +months after the issue of the four hundred millions in _assignats_, the +government had spent them and was again in distress. [12] + +The old remedy immediately and naturally recurred to the minds of +men. Throughout the country began a cry for another issue of paper; +thoughtful men then began to recall what their fathers had told them +about the seductive path of paper-money issues in John Law's time, and +to remember the prophecies that they themselves had heard in the debate +on the first issue of _assignats_ less than six months before. + +At that time the opponents of paper had prophesied that, once on the +downward path of inflation, the nation could not be restrained and that +more issues would follow. The supporters of the first issue had asserted +that this was a calumny; that the people were now in control and that +they could and would check these issues whenever they desired. + +The condition of opinion in the Assembly was, therefore, chaotic: a few +schemers and dreamers were loud and outspoken for paper money; many +of the more shallow and easy-going were inclined to yield; the more +thoughtful endeavored to breast the current. + +One man there was who could have withstood the pressure: Mirabeau. He +was the popular idol,--the great orator of the Assembly and much more +than a great orator,--he had carried the nation through some of its +worst dangers by a boldness almost godlike; in the various conflicts he +had shown not only oratorical boldness, but amazing foresight. As to his +real opinion on an irredeemable currency there can be no doubt. It was +the opinion which all true statesmen have held, before his time and +since,--in his own country, in England, in America, in every modern +civilized nation. In his letter to Cerutti, written in January, 1789, +hardly six months before, he had spoken of paper money as "A nursery of +tyranny, corruption and delusion; a veritable debauch of authority in +delirium." In one of his early speeches in the National Assembly he had +called such money, when Anson covertly suggested its issue, "a loan +to an armed robber," and said of it: "that infamous word, paper money, +ought to be banished from our language." In his private letters written +at this very time, which were revealed at a later period, he showed that +he was fully aware of the dangers of inflation. But he yielded to the +pressure: partly because he thought it important to sell the government +lands rapidly to the people, and so develop speedily a large class of +small landholders pledged to stand by the government which gave them +their titles; partly, doubtless, from a love of immediate rather than +of remote applause; and, generally, in a vague hope that the severe, +inexorable laws of finance which had brought heavy punishments upon +governments emitting an irredeemable currency in other lands, at other +times, might in some way at this time, be warded off from France. [13] + +The question was brought up by Montesquieu's report on the 27th +of August, 1790. This report favored, with evident reluctance, an +additional issue of paper. It went on to declare that the original issue +of four hundred millions, though opposed at the beginning, had proved +successful; that _assignats_ were economical, though they had dangers; +and, as a climax, came the declaration: "We must save the country." [14] + +Upon this report Mirabeau then made one of his most powerful speeches. +He confessed that he had at first feared the issue of _assignats_, but +that he now dared urge it; that experience had shown the issue of +paper money most serviceable; that the report proved the first issue +of _assignats_ a success; that public affairs had come out of distress; +that ruin had been averted and credit established. He then argued that +there was a difference between paper money of the recent issue and +that from which the nation had suffered so much in John Law's time; he +declared that the French nation had now become enlightened and he added, +"Deceptive subtleties can no longer mislead patriots and men of sense in +this matter." He then went on to say: "We must accomplish that which +we have begun," and declared that there must be one more large issue +of paper, guaranteed by the national lands and by the good faith of the +French nation. To show how practical the system was he insisted that +just as soon as paper money should become too abundant it would be +absorbed in rapid purchases of national lands; and he made a very +striking comparison between this self-adjusting, self-converting system +and the rains descending in showers upon the earth, then in swelling +rivers discharged into the sea, then drawn up in vapor and finally +scattered over the earth again in rapidly fertilizing showers. He +predicted that the members would be surprised at the astonishing success +of this paper money and that there would be none too much of it. + +His theory grew by what it fed upon,--as the paper-money theory has +generally done. Toward the close, in a burst of eloquence, he suggested +that _assignats_ be created to an amount sufficient to cover the +national debt, and that all the national lands be exposed for sale +immediately, predicting that thus prosperity would return to the nation +and that an classes would find this additional issue of paper money a +blessing. [15] + +This speech was frequently interrupted by applause; a unanimous vote +ordered it printed, and copies were spread throughout France. The +impulse given by it permeated all subsequent discussion; Gouy arose +and proposed to liquidate the national debt of twenty-four hundred +millions,--to use his own words--"by one single operation, grand, +simple, magnificent." [16] This "operation" was to be the emission of +twenty-four hundred millions in legal tender notes, and a law that +specie should not be accepted in purchasing national lands. His demagogy +bloomed forth magnificently. He advocated an appeal to the people, who, +to use his flattering expression, "ought alone to give the law in a +matter so interesting." The newspapers of the period, in reporting his +speech, noted it with the very significant remark, "This discourse was +loudly applauded." + +To him replied Brillat-Savarin. He called attention to the depreciation +of _assignats_ already felt. He tried to make the Assembly see that +natural laws work as inexorably in France as elsewhere; he predicted +that if this new issue were made there would come a depreciation of +thirty per cent. Singular, that the man who so fearlessly stood against +this tide of unreason has left to the world simply a reputation as +the most brilliant cook that ever existed! He was followed by the Abbe +Goutes, who declared,--what seems grotesque to those who have read +the history of an irredeemable paper currency in any country--that +new issues of paper money "will supply a circulating medium which will +protect public morals from corruption." [17] + +Into this debate was brought a report by Necker. He was not, indeed, +the great statesman whom France especially needed at this time, of all +times. He did not recognize the fact that the nation was entering a +great revolution, but he could and did see that, come what might, +there were simple principles of finance which must be adhered to. Most +earnestly, therefore, he endeavored to dissuade the Assembly from +the proposed issue; suggesting that other means could be found for +accomplishing the result, and he predicted terrible evils. But the +current was running too fast. The only result was that Necker was +spurned as a man of the past; he sent in his resignation and left +France forever. [18] The paper-money demagogues shouted for joy at his +departure; their chorus rang through the journalism of the time. No +words could express their contempt for a man who was unable to see the +advantages of filling the treasury with the issues of a printing press. +Marat, Hébert, Camille Desmoulins and the whole mass of demagogues so +soon to follow them to the guillotine were especially jubilant. [19] + +Continuing the debate, Rewbell attacked Necker, saying that the +_assignats_ were not at par because there were not yet enough of them; +he insisted that payments for public lands be received in _assignats_ +alone; and suggested that the church bells of the kingdom be melted down +into small money. Le Brun attacked the whole scheme in the Assembly, as +he had done in the Committee, declaring that the proposal, instead +of relieving the nation, would wreck it. The papers of the time very +significantly say that at this there arose many murmurs. Chabroud came +to the rescue. He said that the issue of _assignats_ would relieve the +distress of the people and he presented very neatly the new theory of +paper money and its basis in the following words: "The earth is the +source of value; you cannot distribute the earth in a circulating value, +but this paper becomes representative of that value and it is evident +that the creditors of the nation will not be injured by taking it." On +the other hand, appeared in the leading paper, the "Moniteur," a very +thoughtful article against paper money, which sums up all by saying, +"It is, then, evident that all paper which cannot, at the will of the +bearer, be converted into specie cannot discharge the functions of +money." This article goes on to cite Mirabeau's former opinion in his +letter to Cerutti, published in 1789,--the famous opinion of paper money +as "a nursery of tyranny, corruption and delusion; a veritable debauch +of authority in delirium." Lablache, in the Assembly, quoted a saying +that "paper money is the emetic of great states." [20] + +Boutidoux, resorting to phrasemaking, called the _assignats_ _"un papier +terre,"_ or "land converted into paper." Boislandry answered vigorously +and foretold evil results. Pamphlets continued to be issued,--among +them, one so pungent that it was brought into the Assembly and read +there,--the truth which it presented with great clearness being simply +that doubling the quantity of money or substitutes for money in a nation +simply increases prices, disturbs values, alarms capital, diminishes +legitimate enterprise, and so decreases the demand both for products +and for labor; that the only persons to be helped by it are the rich +who have large debts to pay. This pamphlet was signed "A Friend of the +People," and was received with great applause by the thoughtful minority +in the Assembly. Du Pont de Nemours, who had stood by Necker in the +debate on the first issue of _assignats_, arose, avowed the pamphlet to +be his, and said sturdily that he had always voted against the emission +of irredeemable paper and always would. [21] + +Far more important than any other argument against inflation was the +speech of Talleyrand. He had been among the boldest and most radical +French statesmen. He it was,--a former bishop,--who, more than any +other, had carried the extreme measure of taking into the possession of +the nation the great landed estates of the Church, and he had supported +the first issue of four hundred millions. But he now adopted a judicial +tone--attempted to show to the Assembly the very simple truth that the +effect of a second issue of _assignats_ may be different from that of +the first; that the first was evidently needed; that the second may be +as injurious as the first was useful. He exhibited various weak points +in the inflation fallacies and presented forcibly the trite truth that +no laws and no decrees can keep large issues of irredeemable paper at +par with specie. + +In his speech occur these words: "You can, indeed, arrange it so that +the people shall be forced to take a thousand _livres_ in paper for a +thousand _livres_ in specie; but you can never arrange it so that a man +shall be obliged to give a thousand _livres_ in specie for a thousand +_livres_ in paper,--in that fact is embedded the entire question; and on +account of that fact the whole system fails." [22] + +The nation at large now began to take part in the debate; thoughtful +men saw that here was the turning Point between good and evil, that the +nation stood at the parting of the ways. Most of the great commercial +cities bestirred themselves and sent up remonstrances against the new +emission,--twenty-five being opposed and seven in favor of it. + +But eloquent theorists arose to glorify paper and among these, Royer, +who on September 14, 1790, put forth a pamphlet entitled "Reflections of +a patriotic Citizen on the issue of _Assignats_," in which he gave many +specious reasons of the why the _assignats_ could not be depressed, and +spoke of the argument against them as "vile clamors of people bribed +to affect public opinion." He said to the National Assembly, "If it +is necessary to create five thousand millions, and more, of the paper, +decree such a creation gladly." He, too, predicted, as many others had +done, a time when gold was to lose all its value, since all exchanges +would be made with this admirable, guaranteed paper, and therefore that +coin would come out from the places where it was hoarded. He foretold +prosperous times to France in case these great issues of paper were +continued and declared these "the only means to insure happiness, glory +and liberty to the French nation." Speeches like this gave courage to +a new swarm of theorists,--it began to be especially noted that men who +had never shown any ability to make or increase fortunes for themselves +abounded in brilliant plans for creating and increasing wealth for the +country at large. + +Greatest force of all, on September 27, 1790, came Mirabeau's final +speech. The most sober and conservative of his modern opponents speaks +of its eloquence as "prodigious." In this the great orator dwelt first +on the political necessity involved, declaring that the most pressing +need was to get the government lands into the hands of the people, and +so to commit to the nation and against the old privileged classes the +class of landholders thus created. + +Through the whole course of his arguments there is one leading point +enforced with all his eloquence and ingenuity--the excellence of the +proposed currency, its stability and its security. He declares that, +being based on the pledge of public lands and convertible into them, the +notes are better secured than if redeemable in specie; that the precious +metals are only employed in the secondary arts, while the French paper +money represents the first and most real of all property, the source of +all production, the land; that while other nations have been obliged to +emit paper money, none have ever been so fortunate as the French nation, +for the reason that none had ever before been able to give this landed +security; that whoever takes French paper money has practically a +mortgage to secure it,--and on landed property which can easily be sold +to satisfy his claims, while other nations have been able only to give a +vague claim on the entire nation. "And," he ones, "I would rather have a +mortgage on a garden than on a kingdom!" + +Other arguments of his are more demagogical. He declares that the only +interests affected will be those of bankers and capitalists, but +that manufacturers will see prosperity restored to them. Some of his +arguments seem almost puerile, as when he says, "If gold has been +hoarded through timidity or malignity, the issue of paper will show that +gold is not necessary, and it will then come forth." But, as a whole, +the speech was brilliant; it was often interrupted by applause; it +settled the question. People did not stop to consider that it was the +dashing speech of an orator and not the matured judgment of a financial +expert; they did not see that calling Mirabeau or Talleyrand to advise +upon a monetary policy, because they had shown boldness in danger and +strength in conflict, was like summoning a prize-fighter to mend a +watch. + +In vain did Maury show that, while the first issues of John Law's paper +had brought prosperity, those that followed brought misery; in vain did +he quote from a book published in John Law's time, showing that Law was +at first considered a patriot and friend of humanity; in vain did he +hold up to the Assembly one of Law's bills and appeal to their memories +of the wretchedness brought upon France by them; in vain did Du Pont +present a simple and really wise plan of substituting notes in the +payment of the floating debt which should not form a part of the +ordinary circulating medium; nothing could resist the eloquence of +Mirabeau. Barnave, following, insisted that "Law's paper was based +upon the phantoms of the Mississippi; ours, upon the solid basis of +ecclesiastical lands," and he proved that the _assignats_ could not +depreciate further. Prudhomme's newspaper poured contempt over gold as +security for the currency, extolled real estate as the only true basis +and was fervent in praise of the convertibility and self-adjusting +features of the proposed scheme. In spite of all this plausibility and +eloquence, a large minority stood firm to their earlier principles; but +on the 29th of September, 1790, by a vote of 508 to 423, the deed was +done; a bill was passed authorizing the issue of eight hundred millions +of new _assignats_, but solemnly declaring that in no case should the +entire amount put in circulation exceed twelve hundred millions. To make +assurance doubly sure, it also provided that as fast as the _assignats_ +were paid into the treasury for land they should be burned, and thus a +healthful contraction be constantly maintained. Unlike the first issue, +these new notes were to bear no interest. [23] + +Great were the plaudits of the nation at this relief. Among the +multitudes of pamphlets expressing this joy which have come down to us +the "Friend of the Revolution" is the most interesting. It begins as +follows: "Citizens, the deed is done. The _assignats_ are the keystone +of the arch. It has just been happily put in position. Now I can +announce to you that the Revolution is finished and there only remain +one or two important questions. All the rest is but a matter of detail +which cannot deprive us any longer of the pleasure of admiring this +important work in its entirety. The provinces and the commercial cities +which were at first alarmed at the proposal to issue so much paper money +now send expressions of their thanks; specie is coming out to be joined +with paper money. Foreigners come to us from all parts of Europe to seek +their happiness under laws which they admire; and soon France, enriched +by her new property and by the national industry which is preparing for +fruitfulness, will demand still another creation of paper money." + +France was now fully committed to a policy of inflation; and, if there +had been any question of this before, all doubts were removed now by +various acts very significant as showing the exceeding difficulty of +stopping a nation once in the full tide of a depreciating currency. The +National Assembly had from the first shown an amazing liberality to all +sorts of enterprises, wise or foolish, which were urged "for the good of +the people." As a result of these and other largesses the old cry of the +"lack of a circulating medium" broke forth again; and especially loud +were the clamors for more small bills. The cheaper currency had largely +driven out the dearer; paper had caused small silver and copper money +mainly to disappear; all sorts of notes of hand, circulating under the +name of "confidence bills," flooded France--sixty-three kinds in Paris +alone. This unguaranteed currency caused endless confusion and fraud. +Different districts of France began to issue their own _assignats_ in +small denominations, and this action stirred the National Assembly to +evade the solemn pledge that the circulation should not go above twelve +hundred millions and that all _assignats_ returned to the treasury for +lands should immediately be burned. [24] Within a short time there had +been received into the treasury for lands one hundred and sixty million +_livres_ in paper. By the terms of the previous acts this amount of +paper ought to have been retired. Instead of this, under the plea of +necessity, the greater part of it was reissued in the form of small +notes. + +There was, indeed, much excuse for new issues of small notes, for, under +the theory that an issue of smaller notes would drive silver out of +circulation, the smallest authorized _assignat_ was for fifty _livres_. +To supply silver and copper and hold it in circulation everything was +tried. Citizens had been spurred on by law to send their silverware and +jewels to the mint. Even the king sent his silver and gold plate, and +the churches and convents were required by law to send to the government +melting pot all silver and gold vessels not absolutely necessary for +public worship. For copper money the church bells were melted down. But +silver and even copper continued to become more and more scarce. In the +midst of all this, various juggleries were tried, and in November, 1790, +the Assembly decreed a single standard of coinage, the chosen metal +being silver, and the ratio between the two precious metals was +changed from 15 1/2 to 1, to 14 1/2 to 1--but all in vain. It was found +necessary to issue the dreaded small paper, and a beginning was made by +issuing one hundred millions in notes of five _francs_, and, ere long, +obedient to the universal clamor, there were issued parchment notes for +various small amounts down to a single _sou_. [25] + +Yet each of these issues, great or small, was but as a drop of cold +water to a parched throat. Although there was already a rise in prices +which showed that the amount needed for circulation had been exceeded, +the cry for "more circulating medium" was continued. The pressure for +new issues became stronger and stronger. The Parisian populace and the +Jacobin Club were especially loud in their demands for them; and, a few +months later, on June 19, 1791, with few speeches, in a silence very +ominous, a new issue was made of six hundred millions more;--less than +nine months after the former great issue, with its solemn pledges +to keep down the amount in circulation. With the exception of a few +thoughtful men, the whole nation again sang paeans. [26] + +In this comparative ease of new issues is seen the action of a law +in finance as certain as the working of a similar law in natural +philosophy. If a material body fall from a height its velocity is +accelerated, by a well-known law, in a constantly increasing ratio: so +in issues of irredeemable currency, in obedience to the theories of a +legislative body or of the people at large, there is a natural law of +rapidly increasing emission and depreciation. The first inflation bills +were passed with great difficulty, after very sturdy resistance and by +a majority of a few score out of nearly a thousand votes; but we observe +now that new inflation measures were passed more and more easily and +we shall have occasion to see the working of this same law in a more +striking degree as this history develops itself. + +During the various stages of this debate there cropped up a doctrine +old and ominous. It was the same which appeared toward the end of the +nineteenth century in the United States during what became known as the +"greenback craze" and the free "silver craze." In France it had +been refuted, a generation before the Revolution, by Turgot, just as +brilliantly as it was met a hundred years later in the United States +by James A. Garfield and his compeers. This was the doctrine that all +currency, whether gold, paper, leather or any other material, derives +its efficiency from the official stamp it bears, and that, this being +the case, a government may relieve itself of its debts and make itself +rich and prosperous simply by means of a printing press:--fundamentally +the theory which underlay the later American doctrine of "fiat money." + +There came mutterings and finally speeches in the Jacobin Club, in the +Assembly and in newspaper articles and pamphlets throughout the country, +taking this doctrine for granted. These could hardly affect thinking +men who bore in mind the calamities brought upon the whole people, +and especially upon the poorer classes, by this same theory as put in +practice by John Law, or as refuted by Turgot, but it served to swell +the popular chorus in favor of the issue of more _assignats_ and plenty +of them. [27] + +The great majority of Frenchmen now became desperate optimists, +declaring that inflation is prosperity. Throughout France there came +temporary good feeling. The nation was becoming inebriated with paper +money. The good feeling was that of a drunkard just after his draught; +and it is to be noted as a simple historical fact, corresponding to a +physiological fact, that, as draughts of paper money came faster the +successive periods of good feeling grew shorter. + +Various bad signs began to appear. Immediately after each new issue came +a marked depreciation; curious it is to note the general reluctance to +assign the right reason. The decline in the purchasing power of paper +money was in obedience to the simplest laws in economics, but France had +now gone beyond her thoughtful statesmen and taken refuge in unwavering +optimism, giving any explanation of the new difficulties rather than the +right one. A leading member of the Assembly insisted, in an elaborate +speech, that the cause of depreciation was simply the want of knowledge +and of confidence among the rural population and he suggested means of +enlightening them. La Rochefoucauld proposed to issue an address to +the people showing the goodness of the currency and the absurdity of +preferring coin. The address was unanimously voted. As well might they +have attempted to show that a beverage made by mixing a quart of wine +and two quarts of water would possess all the exhilarating quality of +the original, undiluted liquid. + +Attention was aroused by another menacing fact;--specie disappeared +more and more. The explanations of this fact also displayed wonderful +ingenuity in finding false reasons and in evading the true one. A +very common explanation was indicated in Prudhomme's newspaper, "Les +Révolutions de Paris," of January 17, 1791, which declared that coin +"will keep rising until the people shall have hanged a broker." Another +popular theory was that the Bourbon family were, in some mysterious way, +drawing off all solid money to the chief centers of their intrigues in +Germany. Comic and, at the same time, pathetic, were evidences of the +wide-spread idea that if only a goodly number of people engaged in trade +were hanged, the par value of the _assignats_ would be restored. + +Still another favorite idea was that British emissaries were in the +midst of the people, instilling notions hostile to paper. Great efforts +were made to find these emissaries and more than one innocent person +experienced the popular wrath under the supposition that he was engaged +in raising gold and depressing paper. Even Talleyrand, shrewd as he was, +insisted that the cause was simply that the imports were too great and +the exports too little. [28] As well might he explain that fact that, +when oil is mingled with water, water sinks to the bottom, by saying +that this is because the oil rises to the top. This disappearance of +specie was the result of a natural law as simple and as sure in its +action as gravitation; the superior currency had been withdrawn because +an inferior currency could be used. [29] Some efforts were made to remedy +this. In the municipality of Quilleboeuf a considerable amount in specie +having been found in the possession of a citizen, the money was seized +and sent to the Assembly. The people of that town treated this hoarded +gold as the result of unpatriotic wickedness or madness, instead of +seeing that it was but the sure result of a law working in every land +and time, when certain causes are present. Marat followed out this +theory by asserting that death was the proper penalty for persons who +thus hid their money. + +Still another troublesome fact began now to appear. Though paper money +had increased in amount, prosperity had steadily diminished. In spite of +all the paper issues, commercial activity grew more and more spasmodic. +Enterprise was chilled and business became more and more stagnant. +Mirabeau, in his speech which decided the second great issue of paper, +had insisted that, though bankers might suffer, this issue would be of +great service to manufacturers and restore prosperity to them and their +workmen. The latter were for a time deluded, but were at last rudely +awakened from this delusion. The plenty of currency had at first +stimulated production and created a great activity in manufactures, but +soon the markets were glutted and the demand was diminished. In spite of +the wretched financial policy of years gone by, and especially in spite +of the Revocation of the Edict of Nantes, by which religious bigotry +had driven out of the kingdom thousands of its most skillful Protestant +workmen, the manufactures of France had before the Revolution come into +full bloom. In the finer woolen goods, in silk and satin fabrics of all +sorts, in choice pottery and porcelain, in manufactures of iron, steel, +and copper, they had again taken their old leading place upon the +Continent. All the previous changes had, at the worst, done no more +than to inflict a momentary check on this highly developed system of +manufactures. But what the bigotry of Louis XIV and the shiftlessness +of Louis XV could not do in nearly a century, was accomplished by this +tampering with the currency in a few months. One manufactory after +another stopped. At one town, Lodève, five thousand workmen were +discharged from the cloth manufactories. Every cause except the right +one was assigned for this. Heavy duties were put upon foreign goods; +everything that tariffs and custom-houses could do was done. Still the +great manufactories of Normandy were closed, those of the rest of the +kingdom speedily followed, and vast numbers of workmen in all parts of +the country were thrown out of employment. [30] Nor was this the case +with the home demand alone. The foreign demand, which at first had been +stimulated, soon fell off. In no way can this be better stated than by +one of the most thoughtful historians of modern times, who says, "It is +true that at first the _assignats_ gave the same impulse to business +in the city as in the country, but the apparent improvement had no firm +foundation, even in the towns. Whenever a great quantity of paper money +is suddenly issued we invariably see a rapid increase of trade. The +great quantity of the circulating medium sets in motion all the energies +of commerce and manufactures; capital for investment is more easily +found than usual and trade perpetually receives fresh nutriment. If this +paper represents real credit, founded upon order and legal security, +from which it can derive a firm and lasting value, such a movement may +be the starting point of a great and widely-extended prosperity, as, for +instance, a splendid improvement in English agriculture was undoubtedly +owing to the emancipation of the country bankers. If on the contrary, +the new paper is of precarious value, as was clearly seen to be the case +with the French _assignats_ as early as February, 1791, it can confer no +lasting benefits. For the moment, perhaps, business receives an impulse, +all the more violent because every one endeavors to invest his doubtful +paper in buildings, machines and goods, which, under all circumstances, +retain some intrinsic value. Such a movement was witnessed in France +in 1791, and from every quarter there came satisfactory reports of the +activity of manufactures." + +"But, for the moment, the French manufacturers derived great advantage +from this state of things. As their products could be so cheaply paid +for, orders poured in from foreign countries to such a degree that it +was often difficult for the manufacturers to satisfy their customers. +It is easy to see that prosperity of this kind must very soon find +its limit.... When a further fall in the _assignats_ took place this +prosperity would necessarily collapse, and be succeeded by a crisis +all the more destructive the more deeply men had engaged in speculation +under the influence of the first favorable prospects." [31] + +Thus came a collapse in manufacturing and commerce, just as it had come +previously in France: just as it came at various periods in Austria, +Russia, America, and in all countries where men have tried to build up +prosperity on irredeemable paper. [32] + +All this breaking down of the manufactures and commerce of the nation +made fearful inroads on the greater fortunes; but upon the lesser, and +upon the little properties of the masses of the nation who relied upon +their labor, it pressed with intense severity. The capitalist could put +his surplus paper money into the government lands and await results; but +the men who needed their money from day to day suffered the worst of +the misery. Still another difficulty appeared. There had come a complete +uncertainty as to the future. Long before the close of 1791 no one knew +whether a piece of paper money representing a hundred _livres_ would, +a month later, have a purchasing power of ninety or eighty or sixty +_livres_. The result was that capitalists feared to embark their means +in business. Enterprise received a mortal blow. Demand for labor was +still further diminished; and here came a new cause of calamity: for +this uncertainty withered all far-reaching undertakings. The business +of France dwindled into a mere living from hand to mouth. This state of +things, too, while it bore heavily upon the moneyed classes, was +still more ruinous to those in moderate and, most of all, to those in +straitened circumstances. With the masses of the people, the purchase of +every article of supply became a speculation--a speculation in which +the professional speculator had an immense advantage over the ordinary +buyer. Says the most brilliant of apologists for French revolutionary +statesmanship, "Commerce was dead; betting took its place." [33] + +Nor was there any compensating advantage to the mercantile classes. The +merchant was forced to add to his ordinary profit a sum sufficient to +cover probable or possible fluctuations in value, and while prices of +products thus went higher, the wages of labor, owing to the number of +workmen who were thrown out of employment, went lower. + +But these evils, though great, were small compared to those far more +deep-seated signs of disease which now showed themselves throughout the +country. One of these was the _obliteration of thrift_ from the minds +of the French people. The French are naturally thrifty; but, with such +masses of money and with such uncertainty as to its future value, the +ordinary motives for saving and care diminished, And a loose luxury +spread throughout the country. A still worse outgrowth was the increase +of speculation and gambling. With the plethora of paper currency in +1791 appeared the first evidences of that cancerous disease which +always follows large issues of irredeemable currency,--a disease more +permanently injurious to a nation than war, pestilence or famine. For +at the great metropolitan centers grew a luxurious, speculative, +stock-gambling body, which, like a malignant tumor, absorbed into itself +the strength of the nation and sent out its cancerous fibres to the +remotest hamlets. At these city centers abundant wealth seemed to be +piled up: in the country at, large there grew a dislike of steady labor +and a contempt for moderate gains and simple living. In a pamphlet +published in May, 1791, we see how, in regard to this also, public +opinion was blinded. The author calls attention to the increase of +gambling in values of all sorts in these words: "What shall I say of the +stock-jobbing, as frightful as it is scandalous, which goes on in Paris +under the very eyes of our legislators,--a most terrible evil, yet, +under the present circumstances,--necessary?" The author also speaks +of these stock-gamblers as using the most insidious means to influence +public opinion in favor of their measures; and then proposes, seriously, +a change in various matters of detail, thinking that this would prove a +sufficient remedy for an evil which had its roots far down in the whole +system of irredeemable currency. As well might a physician prescribe a +pimple wash for a diseased liver. [34] + +Now began to be seen more plainly some of the many ways in which an +inflation policy robs the working class. As these knots of plotting +schemers at the city centers were becoming bloated with sudden wealth, +the producing classes of the country, though having in their possession +more and more currency, grew lean. In the schemes and speculations put +forth by stock-jobbers and stimulated by the printing of more currency, +multitudes of small fortunes were absorbed and lost while a few swollen +fortunes were rapidly aggregated in the larger cities. This crippled a +large class in the country districts, which had employed a great number +of workmen. + +In the leading French cities now arose a luxury and license which was +a greater evil even than the plundering which ministered to it. In +the country the gambling spirit spread more and more. Says the same +thoughtful historian whom I have already quoted: "What a prospect for +a country when its rural population was changed into a great band of +gamblers!" [35] + +Nor was this reckless and corrupt spirit confined to business men; it +began to break out in official circles, and public men who, a few +years before, had been thought above all possibility of taint, became +luxurious, reckless, cynical and finally corrupt. Mirabeau, himself, +who, not many months previous, had risked imprisonment and even death +to establish constitutional government, was now--at this very +time--secretly receiving heavy bribes. When, at the downfall of the +monarchy a few years later, the famous iron chest of the Tuileries was +opened, there were found evidences that, in this carnival of inflation +and corruption, he had been a regularly paid servant of the Royal +court. [36] The artful plundering of the people at large was bad enough, +but worse still was this growing corruption in official and legislative +circles. Out of the speculating and gambling of the inflation period +grew luxury, and, out of this, corruption. It grew as naturally as a +fungus on a muck heap. It was first felt in business operations, +but soon began to be seen in the legislative body and in journalism. +Mirabeau was, by no means, the only example. Such members of the +legislative body as Jullien of Toulouse, Delaunay of Angers, Fabre +d'Eglantine and their disciples, were among the most noxious of those +conspiring by legislative action to raise and depress securities for +stock-jobbing purposes. Bribery of legislators followed as a matter of +course, Delaunay, Jullien and Chabot accepted a bribe of five hundred +thousand _livres_ for aiding legislation calculated to promote the +purposes of certain stock-jobbers. It is some comfort to know that +nearly all concerned were guillotined for it. [37] + +It is true that the number of these corrupt legislators was small, far +less than alarmists led the nation to suppose, but there were enough to +cause wide-spread distrust, cynicism and want of faith in any patriotism +or any virtue. + + + + +II. + +Even worse than this was the breaking down of the morals of the country +at large, resulting from the sudden building up of ostentatious wealth +in a few large cities, and from the gambling, speculative spirit +spreading from these to the small towns and rural districts. From this +was developed an even more disgraceful result,--the decay of a true +sense of national good faith. The patriotism which the fear of the +absolute monarchy, the machinations of the court party, the menaces of +the army and the threats of all monarchical Europe had been unable +to shake was gradually disintegrated by this same speculative, +stock-jobbing habit fostered by the superabundant currency. At the +outset, in the discussions preliminary to the first issue of paper +money, Mirabeau and others who had favored it had insisted that +patriotism as well as an enlightened self-interest, would lead the +people to keep up the value of paper money. The very opposite of this +was now revealed, for there appeared, as another outgrowth of this +disease, what has always been seen under similar circumstances. It is +a result of previous, and a cause of future evils. This outgrowth was a +vast debtor class in the nation, directly interested in the depreciation +of the currency in which they were to pay their debts. The nucleus of +this class was formed by those who had purchased the church lands from +the government. Only small payments down had been required and the +remainder was to be paid in deferred installments: an indebtedness of a +multitude of people had thus been created to the amount of hundreds of +millions. This body of debtors soon saw, of course, that their interest +was to depreciate the currency in which their debts were to be paid; +and these were speedily joined by a far more influential class;--by that +class whose speculative tendencies had been stimulated by the abundance +of paper money, and who had gone largely into debt, looking for a rise +in nominal values. Soon demagogues of the viler sort in the political +clubs began to pander to it; a little later important persons in this +debtor class were to be found intriguing in the Assembly--first in its +seats and later in more conspicuous places of public trust. Before long, +the debtor class became a powerful body extending through all ranks of +society. From the stock-gambler who sat in the Assembly to the small +land speculator in the rural districts; from the sleek inventor of +_canards_ on the Paris Exchange to the lying stock-jobber in the +market town, all pressed vigorously for new issues of paper; all were +apparently able to demonstrate to the people that in new issues of paper +lay the only chance for national prosperity. + +This great debtor class, relying on the multitude who could be +approached by superficial arguments, soon gained control. Strange as it +might seem to those who have not watched the same causes at work at a +previous period in France and at various times in other countries, while +every issue of paper money really made matters worse, a superstition +gained ground among the people at large that, if only _enough_ paper +money were issued and were more cunningly handled the poor would be made +rich. Henceforth, all opposition was futile. In December, 1791, a report +was made in the Legislative Assembly in favor of yet another great issue +of three hundred millions more of paper money. In regard to this report +Cambon said that more money was needed but asked, "Will you, in a moment +when stock-jobbing is carried on with such fury, give it new power by +adding so much more to the circulation?" But such high considerations +were now little regarded. Dorisy declared, "There is not enough money +yet in circulation; if there were more the sales of national lands would +be more rapid." And the official report of his speech states that these +words were applauded. + +Dorisy then went on to insist that the government lands were worth at +least thirty-five hundred million _livres_ and said: "Why should members +ascend the tribunal and disquiet France? Fear nothing; your currency +reposes upon a sound mortgage." Then followed a glorification of the +patriotism of the French people, which, he asserted, would carry the +nation through all its difficulties. + +Becquet, speaking next, declared that "The circulation is becoming more +rare every day." + +On December 17, 1791, a new issue was ordered, making in all twenty-one +hundred millions authorized. Coupled with this was the declaration that +the total amount in actual circulation should never reach more than +sixteen hundred millions. Before this issue the value of the 100 +_livres_ note had fallen at Paris to about 80 _livres_; [38] immediately +afterward it fell to about 68 _livres_. What limitations of the currency +were worth may be judged from the fact that not only had the declaration +made hardly a year before, limiting the amount in circulation to twelve +hundred millions, been violated, but the declaration, made hardly a +month previous, in which the Assembly had as solemnly limited the amount +of circulation to fourteen hundred millions, had also been repudiated. + +The evils which we have already seen arising from the earlier issues +were now aggravated; but the most curious thing evolved out of all this +chaos was a _new system of political economy_. In speeches, newspapers +and pamphlets about this time, we begin to find it declared that, after +all, a depreciated currency is a blessing; that gold and silver form an +unsatisfactory standard for measuring values: that it is a good thing to +have a currency that will not go out of the kingdom and which separates +France from other nations: that thus shall manufacturers be encouraged; +that commerce with other nations may be a curse, and hindrance thereto +may be a blessing; that the laws of political economy however applicable +in other times, are not applicable to this particular period, and, +however operative in other nations, are not now so in France; that the +ordinary rules of political economy are perhaps suited to the minions of +despotism but not to the free and enlightened inhabitants of France at +the close of the eighteenth century; that the whole state of present +things, so far from being an evil is a blessing. All these ideas, and +others quite as striking, were brought to the surface in the debates on +the various new issues. [39] + +Within four months came another report to the Assembly as ingenious as +those preceding. It declared: "Your committee are thoroughly persuaded +that the amount of the circulating medium before the Revolution was +greater than that of the _assignats_ today: but at that time the money +circulated slowly and now it passes rapidly so that one thousand million +_assignats_ do the work of two thousand millions of specie." The report +foretells further increase in prices, but by some curious jugglery +reaches a conclusion favorable to further inflation. Despite these +encouragements the _assignats_ nominally worth 100 _livres_ had fallen, +at the beginning of February, 1792, to about 60 _livres_, and during +that month fell to 53 _livres_. [40] + +In March, Clavière became minister of finance. He was especially proud +of his share in the invention and advocacy of the _assignats_, and now +pressed their creation more vigorously than ever, and on April 30th, of +the same year, came the fifth great issue of paper money, amounting to +three hundred millions: at about the same time Cambon sneered ominously +at public creditors as "rich people, old financiers and bankers." +Soon payment was suspended on dues to public creditors for all amounts +exceeding ten thousand _francs_. + +This was hailed by many as a measure in the interests of the poorer +classes of people, but the result was that it injured them most of all. +Henceforward, until the end of this history, capital was quietly taken +from labor and locked up in all the ways that financial ingenuity could +devise. All that saved thousands of laborers in France from starvation +was that they were drafted off into the army and sent to be killed on +foreign battlefields. + +On the last day of July, 1792, came another brilliant report from +Fouquet, showing that the total amount of currency already issued was +about twenty-four hundred millions, but claiming that the national lands +were worth a little more than this sum. A decree was now passed issuing +three hundred millions more. By this the prices of everything were again +enhanced save one thing, and that one thing was labor. Strange as it may +at first appear, while the depreciation of the currency had raised all +products enormously in price, the stoppage of so many manufactories and +the withdrawal of capital caused wages in the summer of 1792, after all +the inflation, to be as small as they had been four years before--viz., +fifteen _sous_ per day. No more striking example can be seen of the +truth uttered by Daniel Webster, that "of all the contrivances for +cheating the laboring classes of mankind, none has been more effective +than that which deludes them with paper-money." [41] + +Issue after issue followed at intervals of a few months, until, on +December 14, 1792, we have an official statement to the effect that +thirty-five hundred millions had been put forth, of which six hundred +millions had been burned, leaving in circulation twenty-eight hundred +millions. + +When it is remembered that there was little business to do and that +the purchasing power of the _livre_ or franc, when judged by the staple +products of the country, was equal to about half the present purchasing +power of our own dollar, it will be seen into what evils France had +drifted. As the mania for paper money ran its course, even the _sous_, +obtained by melting down the church bells, were more and more driven out +of circulation and more and more parchment notes from twenty _four_ to +five were issued, and at last pieces of one _sou_, of half a _sou_ and +even of one-quarter of a _sou_ were put in circulation. [42] + +But now another source of wealth was opened to the nation. There came a +confiscation of the large estates of landed proprietors who had fled +the country. An estimate in 1793 made the value of these estates three +billions of _francs_. As a consequence, the issues of paper money +were continued in increased amounts, on the old theory that they were +guaranteed by the solemn pledge of these lands belonging to the state. +Under the Legislative Assembly through the year 1792 new issues were +made virtually every month, so that at the end of January, 1793, it +was more and more realized that the paper money actually in circulation +amounted close upon three thousand millions of _francs_. All this had +been issued publicly, in open sessions of the National and Legislative +Assemblies; but now under the National Convention, the two Committees +of Public Safety and of Finance began to decree new issues privately, in +secret session. + +As a result, the issues became larger still, and four hundred workmen +were added to those previously engaged in furnishing this paper money, +and these were so pressed with work from six o'clock in the morning +until eight in the evening that they struck for higher wages and were +successful. [43] + +The consequences of these overissues now began to be more painfully +evident to the people at large. Articles of common consumption became +enormously dear and prices were constantly rising. Orators in the +Legislative Assembly, clubs, local meetings and elsewhere now endeavored +to enlighten people by assigning every reason for this depreciation save +the true one. They declaimed against the corruption of the ministry, the +want of patriotism among the Moderates, the intrigues of the emigrant +nobles, the hard-heartedness of the rich, the monopolizing spirit of the +merchants, the perversity of the shopkeepers,---each and all of these as +causes of the difficulty. [44] + +This decline in the government paper was at first somewhat masked by +fluctuations. For at various times the value of the currency _rose_. The +victory of Jemappes and the general success of the French army against +the invaders, with the additional security offered by new confiscations +of land, caused, in November, 1792, an appreciation in the value of the +currency; the franc had stood at 57 and it rose to about 69; but +the downward tendency was soon resumed and in September, 1793, +the _assignats_ had sunk below 30. Then sundry new victories and +coruscations of oratory gave momentary confidence so that in December, +1793, they rose above 50. But despite these fluctuations the downward +tendency soon became more rapid than ever. [45] + +The washerwomen of Paris, finding soap so dear that they could hardly +purchase it, insisted that all the merchants who were endeavoring to +save something of their little property by refusing to sell their goods +for the wretched currency with which France was flooded, should be +punished with death; the women of the markets and the hangers-on of the +Jacobin Club called loudly for a law "to equalize the value of paper +money and silver coin." It was also demanded that a tax be laid +especially on the rich, to the amount of four hundred million _francs_, +to buy bread. Marat declared loudly that the people, by hanging +shopkeepers and plundering stores, could easily remove the trouble. The +result was that on the 28th of February, 1793, at eight o'clock in the +evening, a mob of men and women in disguise began plundering the +stores and shops of Paris. At first they demanded only bread; soon they +insisted on coffee and rice and sugar; at last they seized everything +on which they could lay their hands--cloth, clothing, groceries and +luxuries of every kind. Two hundred such places were plundered. This was +endured for six hours and finally order was restored only by a grant of +seven million _francs_ to buy off the mob. The new political economy was +beginning to bear, its fruits luxuriantly. A gaudy growth of it appeared +at the City Hall of Paris when, in response to the complaints of the +plundered merchants, Roux declared, in the midst of great applause, that +"shopkeepers were only giving back to the people what they had hitherto +robbed them of." + +The mob having thus been bought off by concessions and appeased by +oratory, the government gained time to think, and now came a series of +amazing expedients,--and yet all perfectly logical. + +Three of these have gained in French history an evil pre-eminence, and +first of the three was the Forced Loan. + +In view of the fact that the well-to-do citizens were thought to be +lukewarm in their support of the politicians controlling the country, +various demagogues in the National Convention, which had now succeeded +the National, Constituent and Legislative Assemblies, found ample matter +for denunciations long and loud. The result outside the Convention +was increased activity of the guillotine; the results inside were new +measures against all who had money, and on June 22, 1793, the +Convention determined that there should be a Forced Loan, secured on the +confiscated lands of the emigrants and levied upon all married men +with incomes of ten thousand _francs_, and upon all unmarried men with +incomes of six thousand _francs_. It was calculated that these +would bring into the treasury a thousand millions of _francs_. But a +difficulty was found. So many of the rich had lied or had concealed +their wealth that only a fifth of the sum required could be raised, and +therefore a law was soon passed which levied forced loans upon incomes +as low as one thousand, _francs_,--or, say, two hundred dollars +of American money. This tax was made progressive. On the smaller +proprietors it was fixed at one-tenth and on the larger, that is, on all +incomes above nine thousand _francs_, it was made one-half of the entire +income. Little if any provision was made for the repayment of this loan +but the certificates might be used for purchasing the confiscated real +estate of the church and of the nobility. [46] + +But if this first expedient shows how naturally a "fiat" money system +runs into despotism, the next is no less instructive in showing how +easily it becomes repudiation and dishonor. + +As we have seen, the first issue of the _assignats_,--made by the +National Assembly, bore a portrait of the king; but on the various +issues after the establishment of a republic this emblem had been +discarded. This change led to a difference in value between the earlier +and the later paper money. The wild follies of fanatics and demagogues +had led to an increasing belief that the existing state of things could +not last; that the Bourbons must ere long return; that in such case, +while a new monarch would repudiate all the vast mass of the later paper +issued by the Republic, he would recognize that first issue bearing the +face and therefore the guarantee of the king. So it was that this first +issue came to bear a higher value than those of later date. To meet this +condition of things it was now proposed to repudiate an that earlier +issue. In vain did sundry more thoughtful members of the Convention +plead that this paper money, amounting to five hundred and fifty-eight +millions of _francs_, bore the solemn guarantee of the nation, as well +as of the king; the current was irresistible. All that Cambon, the great +leader of finance at that time, could secure was a clause claiming to +protect the poor, to the effect that this demonetization should not +extend to notes below a hundred _francs_ in value; and it was also +agreed that any of the notes, large or small, might be received in +payment of taxes and for the confiscated property of the clergy and +nobility. To all the arguments advanced against this breach of the +national faith Danton, then at the height of his power, simply declared +that only aristocrats could favor notes bearing the royal portrait, and +gave forth his famous utterance: "Imitate Nature, which watches over the +preservation of the race but has no regard for individuals." The decree +was passed on the 31st of July, 1793, yet its futility was apparent in +less than two months, when the Convention decreed that there should be +issued two thousand millions of _francs_ more in _assignats_ between the +values of ten _sous_ and four hundred _francs_, and when, before the end +of the year, five hundred millions more were authorized. [47] + +The third outgrowth of the vast issue of fiat money was the _Maximum_. +As far back as November, 1792, the Terrorist associate of Robespierre, +St. Just, in view of the steady rise in prices of the necessaries of +life, had proposed a scheme by which these prices should be established +by law, at a rate proportionate to the wages of the working classes. +This plan lingered in men's minds, taking shape in various resolutions +and decrees until the whole culminated on September 29, 1793, in the Law +of the _Maximum_. + +While all this legislation was high-handed, it was not careless. Even +statesmen of the greatest strength, having once been drawn into this +flood, were borne on into excesses which, a little earlier, would have +appalled them. Committees of experts were appointed to study the whole +subject of prices, and at last there were adopted the great "four rules" +which seemed to statesmen of that time a masterly solution of the whole +difficulty. [48] + +_First_, the price of each article of necessity was to be fixed at one +and one-third its price in 1790. _Secondly_, all transportation was to +be added at a fixed rate per league. _Thirdly_, five per cent was to be +added for the profit of the wholesaler. _Fourthly_, ten per cent was +to be added for the profit of the retailer. Nothing could look more +reasonable. Great was the jubilation. The report was presented and +supported by Barrère,--"the tiger monkey,"--then in all the glory +of his great orations: now best known from his portrait by Macaulay. +Nothing could withstand Barrère's eloquence. He insisted that France +had been suffering from a "_Monarchical_ commerce which only sought +wealth," while what she needed and what she was now to receive was a +"_Republican_ commerce--a commerce of moderate profits and virtuous." He +exulted in the fact that "France alone enjoys such a commerce,--that it +exists in no other nation." He poured contempt over political economy as +"that science which quacks have corrupted, which pedants have obscured +and which academicians have depreciated." France, he said, has something +better, and he declared in conclusion, "The needs of the people will +no longer be spied upon in order that the commercial classes may +arbitrarily take advantage." [49] + +The first result of the _Maximum_ was that every means was taken to +evade the fixed price imposed, and the farmers brought in as little +produce as they possibly could. This increased the scarcity, and the +people of the large cities were put on an allowance. Tickets were issued +authorizing the bearer to obtain at the official prices a certain +amount of bread or sugar or soap or wood or coal to cover immediate +necessities. [50] + +But it was found that the _Maximum_, with its divinely revealed four +rules, could not be made to work well--even by the shrewdest devices. In +the greater part of France it could not be enforced. As to merchandise +of foreign origin or merchandise into which any foreign product entered, +the war had raised it far above the price allowed under the first rule, +namely, the price of 1790, with an addition of one-third. Shopkeepers +therefore could not sell such goods without ruin. The result was that +very many went out of business and the remainder forced buyers to pay +enormous charges under the very natural excuse that the seller risked +his life in trading at all. That this excuse was valid is easily seen +by the daily lists of those condemned to the guillotine, in which +not infrequently figure the names of men charged with violating the +_Maximum_ laws. Manufactures were very generally crippled and frequently +destroyed, and agriculture was fearfully depressed. To detect goods +concealed by farmers and shopkeepers, a spy system was established +with a reward to the informer of one-third of the value of the goods +discovered. To spread terror, the Criminal Tribunal at Strassburg was +ordered to destroy the dwelling of any one found guilty of selling goods +above the price set by law. The farmer often found that he could not +raise his products at anything like the price required by the new law, +and when he tried to hold back his crops or cattle, alleging that he +could not afford to sell them at the prices fixed by law, they were +frequently taken from him by force and he was fortunate if paid even +in the depreciated fiat money--fortunate, indeed, if he finally escaped +with his life. [51] + +Involved in all these perplexities, the Convention tried to cut the +Gordian knot. It decreed that any person selling gold or silver coin, +or making any difference in any transaction between paper and specie, +should be imprisoned in irons for six years:--that any one who refused +to accept a payment in _assignats_, or accepted _assignats_ at a +discount, should pay a fine of three thousand _francs_; and that any one +committing this crime a second time should pay a fine of six thousand +_francs_ and suffer imprisonment twenty years in irons. Later, on the +8th of September, 1793, the penalty for such offences was made death, +with confiscation of the criminal's property, and so reward was offered +to any person informing the authorities regarding any such criminal +transaction. To reach the climax of ferocity, the Convention decreed, +in May, 1794, that the death penalty should be inflicted on any person +convicted of "having asked, before a bargain was concluded, in what +money payment was to be made." Nor was this all. The great finance +minister, Cambon, soon saw that the worst enemies of his policy were +gold and silver. Therefore it was that, under his lead, the Convention +closed the Exchange and finally, on November 13, 1793, under terrifying +penalties, suppressed all commerce in the precious metals. About a year +later came the abolition of the Maximum itself. [52] + +It is easily seen that these _Maximum_ laws were perfectly logical. +Whenever any nation intrusts to its legislators the issue of a currency +not based on the idea of redemption in standard coin recognized in the +commerce of civilized nations, it intrusts to them the power to raise or +depress the value of every article in the possession of every citizen. +Louis XIV had claimed that all property in Prance was his own, and that +what private persons held was as much his as if it were in his coffers. +But even this assumption is exceeded by the confiscating power exercised +in a country, where, instead of leaving values to be measured by a +standard common to the whole world, they are left to be depressed or +raised at the whim, caprice or interest of a body of legislators. When +this power is given, the power of prices is inevitably included in +it. [53] + +It may be said that these measures were made necessary by the war then +going on. Nothing could be more baseless than such an objection. In this +war the French soon became generally successful. It was quickly pushed +mainly upon foreign soil. Numerous contributions were levied upon the +subjugated countries to support the French armies. The war was one of +those in which the loss, falling apparently on future generations, first +stimulates, in a sad way, trade and production. The main cause of these +evils was tampering with the circulating medium of an entire nation; +keeping all values in fluctuation; discouraging enterprise; paralyzing +energy; undermining sobriety; obliterating thrift; promoting +extravagance and exciting riot by the issue of an irredeemable currency. +The true business way of meeting the enormous demands on France during +the first years of the Revolution had been stated by a true statesman +and sound financier, Du Pont de Nemours, at the very beginning. He had +shown that using the same paper as a circulating medium and as a means +for selling the national real estate was like using the same implement +for an oyster knife and a razor. [54] + +It has been argued that the _assignats_ sank in value because they were +not well secured,--that securing them on government real estate was as +futile as if the United States had, in the financial troubles of its +early days, secured notes on its real estate. This objection is utterly +fallacious. The government lands of our country were remote from the +centers of capital and difficult to examine; the French national real +estate was near these centers--even _in_ them--and easy to examine. +Our national real estate was unimproved and unproductive; theirs +was improved and productive--its average productiveness in market in +ordinary times being from four to five per cent. [55] + +It has also been objected that the attempt to secure the _assignats_ on +government real estate failed because of the general want of confidence +in the title derived by the purchasers from the new government. Every +thorough student of that period must know that this is a misleading +statement. Everything shows that the vast majority of the French people +had a fanatical confidence in the stability of the new government during +the greater part of the Revolution. There were disbelievers in the +security of the _assignats_ just as there were disbelievers in the +paper money of the United States throughout our Civil War; but they were +usually a small minority. Even granting that there was a doubt as to +investment in French lands, the French people certainly had as much +confidence in the secure possession of government lands as any people +can ever have in large issues of government bonds: indeed, it is certain +that they had far more confidence in their lands as a security than +modern nations can usually have in large issues of bonds obtained by +payments of irredeemable paper. One simple fact, as stated by John +Stuart Mill, which made _assignats_ difficult to convert into real +estate was that the vast majority of people could not afford to make +investments outside their business; and this fact is no less fatal +to any attempt to contract large issues of irredeemable paper--save, +perhaps, a bold, statesmanlike attempt, which seizes the best time and +presses every advantage, eschewing all juggling devices and sacrificing +everything to maintain a sound currency based on standards common to the +entire financial world. + +And now was seen, taking possession of the nation, that idea which +developed so easily out of the fiat money system;--the idea that the +ordinary needs of government may be legitimately met wholly by the means +of paper currency;--that taxes may be dispensed with. As a result, it +was found that the _assignat_ printing press was the one resource left +to the government, and the increase in the volume of paper money became +every day more appalling. + +It will doubtless surprise many to learn that, in spite of these evident +results of too much currency, the old cry of a "scarcity of circulating +medium" was not stilled; it appeared not long after each issue, no +matter how large. + +But every thoughtful student of financial history knows that this cry +always comes after such issues--nay, that it _must_ come,--because +in obedience to a natural law, the former scarcity, or rather +_insufficiency_ of currency recurs just as soon as prices become +adjusted to the new volume, and there comes some little revival of +business with the usual increase of credit. [56] + +In August, 1793, appeared a new report by Cambon. No one can read it +without being struck by its mingled ability and folly. His final plan +of dealing with the public debt has outlasted all revolutions since, +but his disposition of the inflated currency came to a wretched failure. +Against Du Pont, who showed conclusively that the wild increase of paper +money was leading straight to, ruin, Cambon carried the majority in +the great assemblies and clubs by sheer audacity--the audacity of +desperation. Zeal in supporting the _assignats_ became his religion. The +National Convention which succeeded the Legislative Assembly, issued in +1793 over three thousand millions of _assignats_, and, of these, over +twelve hundred millions were poured into the circulation. And yet Cambon +steadily insisted that the security for the _assignat_ currency was +perfect. The climax of his zeal was reached when he counted as assets +in the national treasury the indemnities which, he declared, France +was sure to receive after future victories over the allied nations +with which she was then waging a desperate war. As patriotism, it was +sublime; as finance it was deadly. [57] + +Everything was tried. Very elaborately he devised a funding scheme +which, taken in connection with his system of issues, was in effect +what in these days would be called an "_interconvertibility scheme_" By +various degrees of persuasion or force,--the guillotine looming up in +the background,--holders of _assignats_ were urged to convert them into +evidence of national debt, bearing interest at five per cent, with the +understanding that if more paper were afterward needed more would be +issued. All in vain. The official tables of depreciation show that the +_assignats_ continued to fall. A forced loan, calling in a billion +of these, checked this fall, but only for a moment. The +"_interconvertibility scheme_" between currency and bonds failed as +dismally as the "_interconvertibility scheme_" between currency and land +had failed. [58] + +A more effective expedient was a law confiscating the property of all +Frenchmen who left France after July 14, 1789, and who had not returned. +This gave new land to be mortgaged for the security of paper money. + +All this vast chapter in financial folly is sometimes referred to as if +it resulted from the direct action of men utterly unskilled in finance. +This is a grave error. That wild schemers and dreamers took a leading +part in setting the fiat money system going is true; that speculation +and interested financiers made it worse is also true: but the men who +had charge of French finance during the Reign of Terror and who made +these experiments, which seem to us so monstrous, in order to rescue +themselves and their country from the flood which was sweeping +everything to financial ruin were universally recognized as among the +most skillful and honest financiers in Europe. Cambon, especially, +ranked then and ranks now as among the most expert in any period. The +disastrous results of all his courage and ability in the attempt to +stand against the deluge of paper money show how powerless are the most +skillful masters of finance to stem the tide of fiat money calamity +when once it is fairly under headway; and how useless are all enactments +which they can devise against the underlying laws of nature. + +Month after month, year after year new issues went on. Meanwhile +everything possible was done to keep up the value of paper. The city +authorities of Metz took a solemn oath that the _assignats_ should bear +the same price whether in paper or specie,--and whether in buying +or selling, and various other official bodies throughout the nation +followed this example. In obedience to those who believed with the +market women of Paris, as stated in their famous petition, that "laws +should be passed making paper money as good as gold," Couthon, in +August, 1793, had proposed and carried a law punishing any person +who should sell _assignats_ at less than their nominal value with +imprisonment for twenty years in chains, and later carried a law making +investments in foreign countries by Frenchmen punishable with death. [59] + +But to the surprise of the great majority of the French people, the +value of the _assignats_ was found, after the momentary spasm of fear +had passed, not to have been permanently increased by these measures: on +the contrary, this "fiat" paper persisted in obeying the natural laws of +finance and, as new issues increased, their value decreased. Nor did the +most lavish aid of nature avail. The paper money of the nation seemed to +possess a magic power to transmute prosperity into adversity and plenty +into famine. The year 1794 was exceptionally fruitful: and yet with the +autumn came scarcity of provisions and with the winter came distress. +The reason is perfectly simple. The sequences in that whole history are +absolutely logical. First, the Assembly had inflated the currency and +raised prices enormously. Next, it had been forced to establish an +arbitrary maximum price for produce. But this price, large as it +seemed, soon fell below the real value of produce; many of the farmers, +therefore, raised less produce or refrained from bringing what they had +to market. [60] But, as is usual in such cases, the trouble was ascribed +to everything rather than the real cause, and the most severe measures +were established in all parts of the country to force farmers to bring +produce to market, millers to grind and shopkeepers to sell it. [61] The +issues of paper money continued. Toward the end of 1794 seven thousand +millions in _assignats_ were in circulation. [62] By the end of May, +1795, the circulation was increased to ten thousand millions, at the +end of July, to fourteen thousand millions; and the value of one hundred +_francs_ in paper fell steadily, first to four _francs_ in gold, then to +three, then to two and one-half. [63] But, curiously enough, while this +depreciation was rapidly going on, as at various other periods when +depreciation was rapid, there came an apparent revival of business. The +hopes of many were revived by the fact that in spite of the decline of +paper there was an exceedingly brisk trade in all kinds of permanent +property. Whatever articles of permanent value certain needy people were +willing to sell certain cunning people were willing to buy and to pay +good prices for in _assignats_. At this, hope revived for a time in +certain quarters. But ere long it was discovered that this was one of +the most distressing results of a natural law which is sure to come into +play under such circumstances. It was simply a feverish activity caused +by the intense desire of a large number of the shrewder class to convert +their paper money into anything and everything which they could hold and +hoard until the collapse which they foresaw should take place. This very +activity in business simply indicated the disease. It was simply legal +robbery of the more enthusiastic and trusting by the more cold-hearted +and keen. It was, the "unloading" of the _assignats_ upon the mass of +the people. [64] + +Interesting is it to note in the midst of all this the steady action +of another simple law in finance. Prisons, guillotines, enactments +inflicting twenty years' imprisonment in chains upon persons twice +convicted of buying or selling paper money at less than its nominal +value, and death upon investors in foreign securities, were powerless. +The National Convention, fighting a world in arms and with an armed +revolt on its own soil, showed titanic power, but in its struggle to +circumvent one simple law of nature its weakness was pitiable. The +_louis d'or_ stood in the market as a monitor, noting each day, with +unerring fidelity, the decline in value of the _assignat_; a monitor not +to be bribed, not to be scared. As well might the National Convention +try to bribe or scare away the polarity of the mariner's compass. On +August 1, 1795, this gold _louis_ of 25 _francs_ was worth in paper, +920 _francs_; on September 1st, 1,200 _francs_; on November 1st, 2,600 +_francs_; on December 1st, 3,050 _francs_. In February, 1796, it was +worth 7,200 _francs_ or one franc in gold was worth 288 _francs_ in +paper. Prices of all commodities went up nearly in proportion. [65] +The writings of this period give curious details. Thibaudeau, in his +Memoirs, speaks of sugar as 500 _francs_ a pound, soap, 230 _francs_, +candles, 140 _francs_. Mercier, in his lifelike pictures of the French +metropolis at that period, mentions 600 _francs_ as carriage hire for a +single drive, and 6,000 for an entire day. Examples from other sources +are such as the following:--a measure of flour advanced from two +_francs_ in 1790, to 225 _francs_ in 1795; a pair of shoes, from +five _francs_ to 200; a hat, from 14 _francs_ to 500; butter, to, +560 _francs_ a pound; a turkey, to 900 _francs_. [66] Everything +was enormously inflated in price _except the wages of labor_. As +manufacturers had closed, wages had fallen, until all that kept them up +seemed to be the fact that so many laborers were drafted off into the +army. From this state of things came grievous wrong and gross fraud. +Men who had foreseen these results and had gone into debt were of course +jubilant. He who in 1790 had borrowed 10,000 _francs_ could pay his +debts in 1796 for about 35 _francs_. Laws were made to meet these +abuses. As far back as 1794 a plan was devised for publishing official +"tables of depreciation" to be used in making equitable settlements of +debts, but all such machinery proved futile. On the 18th of May, 1796, a +young man complained to the National Convention that his elder brother, +who had been acting as administrator of his deceased father's estate, +had paid the heirs in _assignats_, and that he had received scarcely one +three-hundredth part of the real value of his share. [67] To meet cases +like this, a law was passed establishing a "scale of proportion." Taking +as a standard the value of the _assignat_ when there were two billions +in circulation, this law declared that, in payment of debts, one-quarter +should be added to the amount originally borrowed for every five hundred +millions added to the circulation. In obedience to this law a man +who borrowed two thousand _francs_ when there were two billions in +circulation would have to pay his creditors twenty-five hundred +_francs_ when half a billion more were added to the currency, and over +thirty-five thousand _francs_ before the emissions of paper reached +their final amount. This brought new evils, worse, if possible, than the +old. [68] + +The question will naturally be asked, _On whom did this vast +depreciation mainly fall at last_? When this currency had sunk to +about one three-hundredth part of its nominal value and, after that, +to nothing, in whose hands was the bulk of it? The answer is simple. I +shall give it in the exact words of that thoughtful historian from whom +I have already quoted: "Before the end of the year 1795 the paper money +was almost exclusively in the hands of the working classes, employees +and men of small means, whose property was not large enough to invest in +stores of goods or national lands. [69] Financiers and men of large means +were shrewd enough to put as much of their property as possible into +objects of permanent value. The working classes had no such foresight +or skill or means. On them finally came the great crushing weight of the +loss. After the first collapse came up the cries of the starving. Roads +and bridges were neglected; many manufactures were given up in utter +helplessness." To continue, in the words of the historian already cited: +"None felt any confidence in the future in any respect; few dared to +make a business investment for any length of time and it was accounted a +folly to curtail the pleasures of the moment, to accumulate or save for +so uncertain a future." [70] + +This system in finance was accompanied by a system in politics no less +startling, and each system tended to aggravate the other. The wild +radicals, having sent to the guillotine first all the Royalists and +next all the leading Republicans they could entrap, the various +factions began sending each other to the same destination:--Hébertists, +Dantonists, with various other factions and groups, and, finally, the +Robespierrists, followed each other in rapid succession. After these +declaimers and phrase-mongers had thus disappeared there came to power, +in October, 1795, a new government,--mainly a survival of the more +scoundrelly,--the Directory. It found the country utterly impoverished +and its only resource at first was to print more paper and to issue even +while wet from the press. These new issues were made at last by the two +great committees, with or without warrant of law, and in greater sums +than ever. Complaints were made that the array of engravers and printers +at the mint could not meet the demand for _assignats_--that they +could produce only from sixty to seventy millions per day and that +the government was spending daily from eighty to ninety millions. Four +thousand millions of _francs_ were issued during one month, a little +later three thousand millions, a little later four thousand millions, +until there had been put forth over thirty-five thousand millions. The +purchasing power of this paper having now become almost nothing, it was +decreed, on the 22nd of December, 1795, that the whole amount issued +should be limited to forty thousand millions, including all that had +previously been put forth and that when this had been done the copper +plates should be broken. Even in spite of this, additional issues +were made amounting to about ten thousand millions. But on the 18th of +February, 1796, at nine o'clock in the morning, in the presence of a +great crowd, the machinery, plates and paper for printing _assignats_ +were brought to the Place Vendome and there, on the spot where the +Napoleon Column now stands, these were solemnly broken and burned. + +Shortly afterward a report by Camus was made to the Assembly that +the entire amount of paper money issued in less than six years by the +Revolutionary Government of France had been over forty-five thousand +millions of _francs_--that over six thousand millions had been annulled +and burned and that at the final catastrophe there were in circulation +close upon forty thousand millions. It will be readily seen that it +was fully time to put an end to the system, for the gold "_louis_" of +twenty-five _francs_ in specie had, in February, 1796, as we have seen, +become worth 7,200 _francs_, and, at the latest quotation of all, no +less than 15,000 _francs_ in paper money--that is, one franc in gold was +nominally worth 600 _francs_ in paper. + +Such were the results of allowing dreamers, schemers, phrase-mongers, +declaimers and strong men subservient to these to control a +government. [71] + + + + +III. + +The first new expedient of the Directory was to secure a forced loan of +six hundred million _francs_ from the wealthier classes; but this was +found fruitless. Ominous it was when persons compelled to take this +loan found for an _assignat_ of one hundred _francs_ only one franc was +allowed. Next a National Bank was proposed; but capitalists were loath +to embark in banking while the howls of the mob against all who had +anything especially to do with money resounded in every city. At last +the Directory bethought themselves of another expedient. This was by no +means new. It had been fully tried on our continent twice before that +time: and once, since--first, in our colonial period; next, during +our Confederation; lastly, by the "Southern Confederacy" and here, +as elsewhere, always in vain. But experience yielded to theory--plain +business sense to financial metaphysics. It was determined to issue a +new paper which should be "fully secured" and "as good as gold." + +Pursuant to this decision it was decreed that a new paper money "fully +secured and as good as gold" be issued under the name of "_mandats_." In +order that these new notes should be "fully secured," choice public real +estate was set apart to an amount fully equal to the nominal value of +the issue, and any one offering any amount of the _mandats_ could at +once take possession of government lands; the price of the lands to be +determined by two experts, one named by the government and one by the +buyer, and without the formalities and delays previously established in +regard to the purchase of lands with _assignats_. + +Perhaps the most whimsical thing in the whole situation was the +fact that the government, pressed as it was by demands of all sorts, +continued to issue the old _assignats_ at the same time that it was +discrediting them by issuing the new _mandats_. And yet in order to make +the _mandats_ "as good as gold" it was planned by forced loans and other +means to reduce the quantity of _assignats_ in circulation, so that the +value of each _assignat_ should be raised to one-thirtieth of the value +of gold, then to make _mandats_ legal tender and to substitute them for +_assignats_ at the rate of one for thirty. Never were great expectations +more cruelly disappointed. Even before the _mandats_ could be issued +from the press they fell to thirty-five per cent of their nominal value; +from this they speedily fell to fifteen, and soon after to five per +cent, and finally, in August, 1796, six months from their first issue, +to three per cent. This plan failed--just as it failed in New England in +1737; just as it failed under our own Confederation in 1781; just as it +failed under the Southern Confederacy during our Civil War. [72] + +To sustain this new currency the government resorted to every method +that ingenuity could devise. Pamphlets suited to people of every +capacity were published explaining its advantages. Never was there more +skillful puffing. A pamphlet signed "Marchant" and dedicated to "People +of Good Faith" was widely circulated, in which Marchant took pains +to show the great advantage of the _mandats_ as compared with +_assignats_,--how land could be more easily acquired with them; how +their security was better than with _assignats_; how they could not, by +any possibility, sink in values as the _assignats_ had done. But even +before the pamphlet was dry from the press the depreciation of the +_mandats_ had refuted his entire argument. [73] + +The old plan of penal measures was again pressed. Monot led off by +proposing penalties against those who shall speak publicly against +the _mandats_; Talot thought the penalties ought to be made especially +severe; and finally it was enacted that any persons "who by their +discourse or writing shall decry the _mandats_ shall be condemned to a +fine of not less than one thousand _francs_ or more than ten thousand; +and in case of a repetition of the offence, to four years in irons." It +was also decreed that those who refused to receive the _mandats_ should +be fined,--the first time, the exact sum which they refuse; the second +time, ten times as much; and the third time, punished with two years in +prison. But here, too, came in the action of those natural laws which +are alike inexorable in all countries. This attempt proved futile in +France just as it had proved futile less than twenty years before in +America. No enactments could stop the downward tendency of this new +paper "fully secured," "as good as gold"; the laws that finally govern +finance are not made in conventions or congresses. [74] + +From time to time various new financial juggles were tried, some of them +ingenious, most of them drastic. It was decreed that all _assignats_ +above the value of one hundred _francs_ should cease to circulate after +the beginning of June, 1796. But this only served to destroy the +last vestige of, confidence in government notes of any kind. Another +expedient was seen in the decree that paper money should be made to +accord with a natural and immutable standard of value and that one franc +in paper should thenceforth be worth ten pounds of wheat. This also +failed. On July 16th another decree seemed to show that the authorities +despaired of regulating the existing currency and it was decreed that +all paper, whether _mandats_ or _assignats_, should be taken at its +real value, and that bargains might be made in whatever currency people +chose. The real value of the _mandats_ speedily sank to about two per +cent of their nominal value and the only effect of this legislation +seemed to be that both _assignats_ and _mandats_ went still lower. Then +from February 4 to February 14, 1797, came decrees and orders that the +engraving apparatus for the _mandats_ should be destroyed as that for +the _assignats_ had been, that neither _assignats_ nor _mandats_ should +longer be a legal tender and that old debts to the state might be paid +for a time with government paper at the rate of one per cent of their +face value. [75] Then, less than three months later, it was decreed that +the twenty-one billions of _assignats_ still in circulation should be +annulled. Finally, on September 30, 1797, as the culmination of these +and various other experiments and expedients, came an order of the +Directory that the national debts should be paid two-thirds in bonds +which might be used in purchasing confiscated real estate, and the +remaining "Consolidated Third," as it was called, was to be placed on +the "Great Book" of the national debt to be paid thenceforth as the +government should think best. + +As to the bonds which the creditors of the nation were thus forced to +take, they sank rapidly, as the _assignats_ and _mandats_ had done, even +to three per cent of their value. As to the "Consolidated Third," that +was largely paid, until the coming of Bonaparte, in paper money which +sank gradually to about six per cent of its face value. Since May, 1797, +both _assignats_ and _mandats_ had been virtually worth nothing. + +So ended the reign of paper money in France. The twenty-five hundred +millions of _mandats_ went into the common heap of refuse with the +previous forty-five thousand millions of _assignats_: the nation in +general, rich and poor alike, was plunged into financial ruin from one +end to the other. + +On the prices charged for articles of ordinary use light is thrown by +extracts from a table published in 1795, reduced to American coinage. + + + 1790 1795 + For a bushel of flour 40 cents 45 dollars + For a bushel of oats 18 cents 10 dollars + For a cartload of wood 4 dollars 500 dollars + For a bushel of coal 7 cents 2 dollars + For a pound of sugar 18 cents 12 1/2 dollars + For a pound of soap 18 cents 8 dollars + For a pound of candles 18 cents 8 dollars + For one cabbage 8 cents 5 1/2 dollars + For a pair of shoes 1 dollar 40 dollars + For twenty-five eggs 24 cents 5 dollars + + +But these prices about the middle of 1795 were moderate compared with +those which were reached before the close of that year and during the +year following. Perfectly authentic examples were such as the following: + + A pound of bread 9 dollars + A bushel of potatoes 40 dollars + A pound of candles 40 dollars + A cartload of wood 250 dollars + +So much for the poorer people. Typical of those esteemed wealthy may be +mentioned a manufacturer of hardware who, having retired from business +in 1790 with 321,000 _livres_, found his property in 1796 worth 14,000 +_francs_. [76] + +For this general distress arising from the development and collapse of +"fiat" money in France, there was, indeed, one exception. In Paris and +a few of the other great cities, men like Tallien, of the heartless, +debauched, luxurious, speculator, contractor and stock-gambler class, +had risen above the ruins of the multitudes of smaller fortunes. +Tallien, one of the worst demagogue "reformers," and a certain number +of men like him, had been skillful enough to become millionaires, while +their dupes, who had clamored for issues of paper money, had become +paupers. + +The luxury and extravagance of the currency gamblers and their families +form one of the most significant features in any picture of the social +condition of that period. [77] + +A few years before this the leading women in French society showed a +nobility of character and a simplicity in dress worthy of Roman matrons. +Of these were Madame Boland and Madame Desmoulins; but now all was +changed. At the head of society stood Madame Tallien and others like +her, wild in extravagance, daily seeking new refinements in luxury, and +demanding of their husbands and lovers vast sums to array them and to +feed their whims. If such sums could not be obtained honestly they must +be had dishonestly. The more closely one examines that period, the more +clearly he sees that the pictures, given by Thibaudeau and Challamel and +De Goncourt are not at all exaggerated. [78] + +The contrast between these gay creatures of the Directory period and the +people at large was striking. Indeed much as the vast majority of the +wealthy classes suffered from impoverishment, the laboring classes, +salaried employees of all sorts, and people of fixed income and of small +means, especially in the cities, underwent yet greater distress. These +were found, as a rule, to subsist mainly on daily government rations of +bread at the rate of one pound per person. This was frequently unfit +for food and was distributed to long lines of people, men, women and +children, who were at times obliged to wait their turn even from dawn +to dusk. The very rich could, by various means, especially by bribery, +obtain better bread, but only at enormous cost. In May, 1796, the market +price of good bread was, in paper, 80 _francs_ (16 dollars) per pound +and a little later provisions could not be bought for paper money at any +price. [79] + +And here it may be worth mentioning that there was another financial +trouble especially vexatious. While, as we have seen, such enormous +sums, rising from twenty to forty thousand millions of _francs_ in +paper, were put in circulation by the successive governments of the +Revolution, enormous sums had been set afloat in counterfeits by +criminals and by the enemies of France. These came not only from +various parts of the French Republic but from nearly all the surrounding +nations, the main source being London. Thence it was that Count Joseph +de Puisaye sent off cargoes of false paper, excellently engraved and +printed, through ports in Brittany and other disaffected parts of +France. One seizure by General Hoche was declared by him to exceed in +nominal value ten thousand millions of _francs_. With the exception of +a few of these issues, detection was exceedingly difficult, even for +experts; for the vast majority of the people it was impossible. + +Nor was this all. At various times the insurgent royalists in La Vendee +and elsewhere put _their_ presses also in operation, issuing notes +bearing the Bourbon arms,--the _fleur-de-lis_, the portrait of the +Dauphin (as Louis XVII) with the magic legend "_De Par le Roi_," and +large bodies of the population in the insurgent districts were _forced_ +to take these. Even as late as 1799 these notes continued to appear. [80] + +The financial agony was prolonged somewhat by attempts to secure funds +by still another "forced loan," and other discredited measures, but +when all was over with paper money, specie began to reappear--first in +sufficient sums to do the small amount of business which remained after +the collapse. Then as the business demand increased, the amount of +specie flowed in from the world at large to meet it and the nation +gradually recovered from that long paper-money debauch. + +Thibaudeau, a very thoughtful observer, tells us in his Memoirs that +great fears were felt as to a want of circulating medium between the +time when paper should go out and coin should come in; but that no +such want was severely felt--that coin came in gradually as it was +wanted. [81] + +Nothing could better exemplify the saying of one of the most shrewd of +modern statesmen that "There will always be money." [82] + +But though there soon came a degree of prosperity--as compared with the +distress during the paper-money orgy, convalescence was slow. The acute +suffering from the wreck and rain brought by _assignats_, _mandats_ and +other paper currency in process of repudiation lasted nearly ten years, +but the period of recovery lasted longer than the generation which +followed. It required fully forty years to bring capital, industry, +commerce and credit up to their condition when the Revolution began, and +demanded a "man on horseback," who established monarchy on the ruins of +the Republic and thew away millions of lives for the Empire, to be added +to the millions which had been sacrificed by the Revolution. [83] + +Such, briefly sketched in its leading features, is the history of the +most skillful, vigorous and persistent attempt ever made to substitute +for natural laws in finance the ability of legislative bodies, and, for +a standard of value recognized throughout the world, a national standard +devised by theorists and manipulated by schemers. Every other attempt +of the same kind in human history, under whatever circumstances, has +reached similar results in kind if not in degree; all of them show the +existence of financial laws as real in their operation as those which +hold the planets in their courses. [84] + +I have now presented this history in its chronological order--the order +of events: let me, in conclusion, sum it up, briefly, in its _logical_ +order,--the order of cause and effect. + +And, first, in the economic department. From the early reluctant and +careful issues of paper we saw, as an immediate result, improvement and +activity in business. Then arose the clamor for more paper money. At +first, new issues were made with great difficulty; but, the dyke once +broken, the current of irredeemable currency poured through; and, the +breach thus enlarging, this currency was soon swollen beyond control. +It was urged on by speculators for a rise in values; by demagogues who +persuaded the mob that a nation, by its simple fiat, could stamp real +value to any amount upon valueless objects. As a natural consequence a +great debtor class grew rapidly, and this class gave its influence to +depreciate more and more the currency in which its debts were to be +paid. [85] + +The government now began, and continued by spasms to grind out still +more paper; commerce was at first stimulated by the difference in +exchange; but this cause soon ceased to operate, and commerce, having +been stimulated unhealthfully, wasted away. + +Manufactures at first received a great impulse; but, ere long, this +overproduction and overstimulus proved as fatal to them as to commerce. +From time to time there was a revival of hope caused by an apparent +revival of business; but this revival of business was at last seen to +be caused more and more by the desire of far-seeing and cunning men of +affairs to exchange paper money for objects of permanent value. As +to the people at large, the classes living on fixed incomes and small +salaries felt the pressure first, as soon as the purchasing power of +their fixed incomes was reduced. Soon the great class living on wages +felt it even more sadly. + +Prices of the necessities of life increased: merchants were obliged to +increase them, not only to cover depreciation of their merchandise, but +also to cover their risk of loss from fluctuation; and, while the prices +of products thus rose, wages, which had at first gone up, under +the general stimulus, lagged behind. Under the universal doubt and +discouragement, commerce and manufactures were checked or destroyed. +As a consequence the demand for labor was diminished; laboring men were +thrown out of employment, and, under the operation of the simplest +law of supply and demand, the price of labor--the daily wages of the +laboring class--went down until, at a time when prices of food, clothing +and various articles of consumption were enormous, wages were nearly as +low as at the time preceding the first issue of irredeemable currency. + +The mercantile classes at first thought themselves exempt from the +general misfortune. They were delighted at the apparent advance in the +value of the goods upon their shelves. But they soon found that, as they +increased prices to cover the inflation of currency and the risk +from fluctuation and uncertainty, purchases became less in amount +and payments less sure; a feeling of insecurity spread throughout the +country; enterprise was deadened and stagnation followed. + +New issues of paper were then clamored for as more drams are demanded by +a drunkard. New issues only increased the evil; capitalists were all the +more reluctant to embark their money on such a sea of doubt. Workmen of +all sorts were more and more thrown out of employment. Issue after issue +of currency came; but no relief resulted save a momentary stimulus, +which aggravated the disease. The most ingenious evasions of natural +laws in finance which the most subtle theorists could contrive were +tried--all in vain; the most brilliant substitutes for those laws were +tried; "self-regulating" schemes, "interconverting" schemes--all +equally vain. [86] All thoughtful men had lost confidence. All men were +_waiting_; stagnation became worse and worse. At last came the collapse +and then a return, by a fearful shock, to a state of things which +presented something like certainty of remuneration to capital and labor. +Then, and not till then, came the beginning of a new era of prosperity. + +Just as dependent on the law of cause and effect was the _moral_ +development. Out of the inflation of prices grew a speculating class; +and, in the complete uncertainty as to the future, all business became +a game of chance, and all business men, gamblers. In city centers came a +quick growth of stock-jobbers and speculators; and these set a debasing +fashion in business which spread to the remotest parts of the country. +Instead of satisfaction with legitimate profits, came a passion for +inordinate gains. Then, too, as values became more and more uncertain, +there was no longer any motive for care or economy, but every motive for +immediate expenditure and present enjoyment. So came upon the nation +the _obliteration of thrift_. In this mania for yielding to present +enjoyment rather than providing for future comfort were the seeds of +new growths of wretchedness: luxury, senseless and extravagant, set in: +this, too, spread as a fashion. To feed it, there came cheatery in +the nation at large and corruption among officials and persons holding +trusts. While men set such fashions in private and official business, +women set fashions of extravagance in dress and living that added to the +incentives to corruption. Faith in moral considerations, or even in +good impulses, yielded to general distrust. National honor was thought +a fiction cherished only by hypocrites. Patriotism was eaten out by +cynicism. + +Thus was the history of France logically developed in obedience to +natural laws; such has, to a greater or less degree, always been the +result of irredeemable paper, created according to the whim or interest +of legislative assemblies rather than based upon standards of value +permanent in their nature and agreed upon throughout the entire world. +Such, we may fairly expect, will always be the result of them until +the fiat of the Almighty shall evolve laws in the universe radically +different from those which at present obtain. [87] + +And, finally, as to the general development of the theory and practice +which all this history records: my subject has been Fiat Money in +France; How it came; What it brought; and How it ended. + +It came by seeking a remedy for a comparatively small evil in an evil +infinitely more dangerous. To cure a disease temporary in its character, +a corrosive poison was administered, which ate out the vitals of French +prosperity. + +It progressed according to a law in social physics which we may call +the "_law of accelerating issue and depreciation._" It was comparatively +easy to refrain from the first issue; it was exceedingly difficult to +refrain from the second; to refrain from the third and those following +was practically impossible. + +It brought, as we have seen, commerce and manufactures, the mercantile +interest, the agricultural interest, to ruin. It brought on these the +same destruction which would come to a Hollander opening the dykes of +the sea to irrigate his garden in a dry summer. + +It ended in the complete financial, moral and political prostration of +France-a prostration from which only a Napoleon could raise it. + +But this history would be incomplete without a brief sequel, showing how +that great genius profited by all his experience. When Bonaparte took +the consulship the condition of fiscal affairs was appalling. The +government was bankrupt; an immense debt was unpaid. The further +collection of taxes seemed impossible; the assessments were in hopeless +confusion. War was going on in the East, on the Rhine, and in Italy, and +civil war, in La Vendée. All the armies had long been unpaid, and the +largest loan that could for the moment be effected was for a sum hardly +meeting the expenses of the government for a single day. At the first +cabinet council Bonaparte was asked what he intended to do. He replied, +"I will pay cash or pay nothing." From this time he conducted all his +operations on this basis. He arranged the assessments, funded the debt, +and made payments in cash; and from this time--during all the campaigns +of Marengo, Austerlitz, Jena, Eylau, Friedland, down to the Peace of +Tilsit in 1807--there was but one suspension of specie payment, and this +only for a few days. When the first great European coalition was formed +against the Empire, Napoleon was hard pressed financially, and it was +proposed to resort to paper money; but he wrote to his minister, "While +I live I will never resort to irredeemable paper." He never did, and +France, under this determination, commanded all the gold she needed. +When Waterloo came, with the invasion of the Allies, with war on her +own soil, with a change of dynasty, and with heavy expenses for war and +indemnities, France, on a specie basis, experienced no severe financial +distress. + +If we glance at the financial history of France during the +Franco-Prussian War and the Communist struggle, in which a far more +serious pressure was brought upon French finances than our own recent +Civil War put upon American finance, and yet with no national stagnation +or distress, but with a steady progress in prosperity, we shall see +still more clearly the advantage of meeting a financial crisis in an +honest and straightforward way, and by methods sanctioned by the world's +most costly experience, rather than by yielding to dreamers, theorists, +phrase-mongers, declaimers, schemers, speculators or to that sort of, +"Reform" which is "the last refuge of a scoundrel." [88] + +There is a lesson in all this which it behooves every thinking man to +ponder. + + + + +NOTES + + +Note: The White Collection at the Cornell University library mentioned +in many of the following notes is described here: + +http://rmc.library.cornell.edu/collections/subjects/frrev.html + + + +THE BANK OF NEW YORK, established in 1784, was the only Bank in +existence in the city of New York at the time of the French experiment +with fiat money. + +THE BANK OF NEW YORK AND TRUST COMPANY, which celebrates its one-hundred +and fiftieth anniversary in March, 1934, considers it a privilege to +be able to distribute some copies of this scholarly article of the late +Andrew D. White. The article emphasizes the fact that the use of fiat +money in France was in its beginning a sincere effort on the part of +intelligent members of the National Assembly to stem the tide of misery +and wretchedness which had brought about the Revolution in 1789. But the +article also shows clearly that once started on a small scale, it became +utterly impossible to control the currency inflation and that after some +slight indications of improvement in conditions, the situation went from +bad to worse. In the long run, those most injured were the people whom +it was most desired to help--the laborer, the wage earner and those +whose incomes from previous savings were smallest. + +ANDREW D. WHITE had a long and distinguished career as educator, +historian, economist and diplomat; his description of the events +in France that followed the experiment with fiat money is intensely +interesting and well Worth the attention of every thinking person in the +United States of 1933. + + + + +FOOTNOTES: + + +[Footnote 1: A paper read before a meeting of Senators and Members of +the House of Representatives of both political parties, at Washington, +April 12th, and before the Union League Club, at New York, April 13th, +1876, and now (1914) revised and extended.] + +[Footnote 2: For proof that the financial situation of France at that +time was by no means hopeless, see Storch, "Economie Politique," vol. +iv, p. 159.] + +[Footnote 3: See Moniteur, sitting of April 10, 1790.] + +[Footnote 4: Ibid., sitting of April 15, 1790.] + +[Footnote 5: For details of this struggle, see Buchez and Roux, +"Histoire Parlementaire de la Révolution Française," vol. iii, pp. +364, 365, 404. For the wild utterances of Marat throughout this whole +history, see the full set of his "L'ami du peuple" in the President +White Collection of the Cornell University. For Bergasse's pamphlet and +a mass of similar publications, see the same collection. For the effect +produced by them, see Challamel, "Les Français sous la Révolution"; +also De Goncourt, "La Société Française pendant la Révolution," &c.] + +For the Report referred to, see Levasseur, "Histoire des classes +ouvriès et de l'industrie en France de 1789 à 1870," Paris, 1903, vol. +i., chap. 6. Levasseur (vol. 1, p. 120), a very strong conservative in +such estimates, sets the total value of church property at two thousand +millions; other authorities put it as high as twice that sum. See +especially Taine, liv. ii, ch. I., who gives the valuation as "about +four milliards." Sybel, "Gesch. der Revolutionszeit," gives it as two +milliards and Briand, "La séparation" &c., agrees with him. See also De +Nerve, "Finances Françaises," vol. ii, pp. 236-240; also Alison, +"History of Europe," vol. i.] + +[Footnote 6: For striking pictures of this feeling among the younger +generation of Frenchmen, see Challamel, "Sur la Révolution," p. 305. +For general history of John Law's paper money, see Henri Martin, +"Histoire de France"; also Blanqui, "Histoire de l'économie politique," +vol. ii, pp. 65-87; also Senior on "Paper Money," sec. iii, Pt. I, also +Thiers, "Histoire de Law"; also Levasseur, op. cit. Liv. i., chap. VI. +Several specimens of John Law's paper currency are to be found in the +White Collection in the Library of Cornell University,--some, numbered +with enormous figures.] + +[Footnote 7: See Buchez and Roux, "Histoire Parlementaire," vol. v, p. +321, et seq. For an argument to prove that the _assignats_ were, after +all, not so well secured as John Law's money, see Storch, "Economie +Politique," vol. iv, p. 160.] + +[Footnote 8: For specimens of this first issue and of nearly every other +issue during the French Revolution, see the extensive collection of +originals in the Cornell University Library. For a virtually complete +collection of photographic copies, see Dewamin, "Cent ans de +numismatique française," vol. i, passim.] + +[Footnote 9: See "Addresse de l'Assemblée nationals sur lea emissions +_d'assignats_ monnaies," p. 5.] + +[Footnote 10: Ibid., p. 10.] + +[Footnote 11: For Sarot, see "Lettre de M. Sarot," Paris, April 19, +1790. As to the sermon referred to see Levasseur as above, vol. i, p. +136.] + +[Footnote 12: Von Sybel, "History of the French Revolution," vol. i, p. +252; also Levasseur, as above, pp. 137 and following.] + +[Footnote 13: For Mirabeau's real opinion on irredeemable paper, see his +letter to Cerutti, in a leading article of the "Moniteur"; also +"Mèmoires do Mirabeau," vol. vii, pp. 23, 24 and elsewhere. For his +pungent remarks above quoted, see Levasseur, ibid., vol. i, p. 118.] + +[Footnote 14: See "Moniteur," August 27, 1790.] + +[Footnote 15: "Moniteur," August 28, 1790; also Levasseur, as above, pp. +139 _et seq_.] + +[Footnote 16: "Par une seule opération, grande, simple, magnifique." +See "Moniteur." The whole sounds curiously like the proposals of the +"Greenbackers," regarding the American debt, some years since.] + +[Footnote 17: "Moniteur," August 29, 1790.] + +[Footnote 18: See Lacretelle, "18me Siécle," vol. viii, pp. 84-87; also +Thiers and Mignet.] + +[Footnote 19: See Hatin, Histoire de la Presse en France, vols. v and +vi.] + +[Footnote 20: See "Moniteur," Sept. 5, 6 and 20, 1790.] + +[Footnote 21: See Levasseur, vol. i, p. 142.] + +[Footnote 22: See speech in "Moniteur"; also in Appendix to Thiers' +"History of the French Revolution."] + +[Footnote 23: See Levassear, "Classes ouvrières," etc., vol. i, p. +149.] + +[Footnote 24: See Levasseur, pp. 151 et seq. Various examples of these +"confidence bills" are to be seen in the Library of Cornell University.] + +[Footnote 25: See Levasseur, vol. i, pp. 155-156.] + +[Footnote 26: See Von Sybel, "History of the Revolution," vol. i, p. +265; also Levasseur, as above, vol. i, pp. 152-160.] + +[Footnote 27: For Turgot's argument against "fiat money" theory, see A. +D. White, "Seven Great Statesmen in the Warfare of Humanity with +Unreason," article on Turgot, pp. 169, et seq.] + +[Footnote 28: See De Goncourt, "Société française," for other +explanations; "Les Révolutions de Paris," vol. ii, p. 216; Challamel, +"Les Français sous la Révolution"; Senior, "On Some Effects of Paper +Money," p. 82; Buchez and Roux, "Histoire Parlementaire," etc., vol. x, +p. 216; Aulard, "Paris pendant la Révolution thermidorienne," _passim_, +and especially "Rapport du bureau de surveillance," vol. ii, pp. 562, et +seq. (Dec. 4-24, 1795.)] + +[Footnote 29: For statements and illustration of the general action of +this law, see Sumner, "History of American Currency," pp. 157, 158; also +Jevons, on "Money," p. 80.] + +[Footnote 30: See De Goncourt, "Société Française," p. 214.] + +[Footnote 31: See Von Sybel, History of the French Revolution, vol. 1, +pp. 281, 283.] + +[Footnote 32: For proofs that issues of irredeemable paper at first +stimulated manufactures and commerce in Austria and afterward ruined +them, see Storch's "Economie politique," vol. iv, p. 223, note; and for +the same effect produced by the same causes in Russia, see ibid., end of +vol. iv. For the same effects in America, see Sumner's "History of +American Currency." For general statement of effect of inconvertible +issues on foreign exchanges see McLeod on "Banking," p. 186.] + +[Footnote 33: See Louis Blanc, "Histoire de la Révolution," tome xii, +p. 113.] + +[Footnote 34: See "Extrait du registre des délibérations de la section +de la bibliothèque," May 3, 1791, pp. 4, 5.] + +[Footnote 35: Von Sybel, vol. i, p. 273.] + +[Footnote 36: For general account, see Thiers' "Révolution," chap. xiv; +also Lacretelle, vol. viii, p. 109; also "Memoirs of Mallet du Pan." For +a good account of the intrigues between the court and Mirabeau and of +the prices paid him, see Reeve, "Democracy and Monarchy in France," vol. +i, pp. 213-220. For a very striking caricature published after the iron +chest in the Tuileries was opened and the evidences of bribery of +Mirabeau fully revealed, see Challamel, "Musée," etc. Vol. i, p. 341, +is represented as a skeleton sitting on a pile of letters, holding the +French crown in one hand and a purse of gold in the other.] + +[Footnote 37: Thiers, chap. ix.] + +[Footnote 38: For this and other evidences of steady decline in the +purchasing power of the _assignats_, see Caron, "Tableaux de +Dépréciation du papier-monnaie," Paris, 1909, p. 386.] + +[Footnote 39: See especially "Discours de Fabre d'Eglantine," in +"Moniteur" for August 11, 1793; also debate in "Moniteur" of September +15, 1793; also Prudhomme's "Révolutions de Paris." For arguments of +much the same tenor, see vast numbers of pamphlets, newspaper articles +and speeches during the "Greenback Craze,"--and the craze for unlimited +coinage of silver,--in the United States.] + +[Footnote 40: See Caron, "Tableaux de Dépréciation," as above, p. +386.] + +[Footnote 41: Von Sybel, vol. i, pp. 509, 510, 515; also Villeneuve +Bargemont, "Histoire de l'Economie Politique," vol. ii, p. 213.] + +[Footnote 42: As to the purchasing power of money at that time, see +Arthur Young, "Travels in France during the Years 1787, 1788 and 1789." +For notices of the small currency with examples of satirical verses +written regarding it, see Challamel, "Les français sous la +Révolution," pp. 307, 308. See also Mercier, "Le Nouveau Paris," +edition of 1800, chapter ccv., entitled "Parchemin Monnaie." A series of +these petty notes will be found in the White collection of the Cornell +University Library. They are very dirty and much worn, but being printed +on parchment, remain perfectly legible. For issue of quarter-"_sou_" +pieces see Levasseur, p. 180.] + +[Footnote 43: See Levasseur, vol. i, p. 176.] + +[Footnote 44: For Chaumette's brilliant display of fictitious reasons +for the decline see Thiers, Shoberl's translation, published by Bentley, +vol. iii, p. 248.] + +[Footnote 45: For these fluctuations, see Caron, as above, p. 387.] + +[Footnote 46: One of the Forced Loan certificates will be found in the +White Collection in the Library of Cornell University.] + +[Footnote 47: For details of these transactions, see Levasseur, as +above, vol. i, chap. 6, pp. 181, et seq. Original specimens of these +notes, bearing the portrait of Louis XVI will be found in the Cornell +University Library (White Collection) and for the whole series perfectly +photographed in the same collection, Dewarmin, "Cent ans de numismatique +française," vol. i, pp. 143-165.] + +[Footnote 48: For statements showing the distress and disorder that +forced the Convention to establish the "_Maximum_" see Levasseur, vol. +i, pp. 188-193.] + +[Footnote 49: See Levasseur, as above, vol. i, pp. 195-225.] + +[Footnote 50: See specimens of these tickets in the White Collection in +the Cornell Library.] + +[Footnote 51: For these condemnations to the guillotine see the +officially published trials and also the lists of the condemned, in the +White Collection, also the lists given daily in the "Moniteur." For the +spy system, see Levasseur, vol. i, p. 194.] + +[Footnote 52: See Levasseur, as above, vol. i, p. 186. For an argument +to show that the Convention was led into this Draconian legislation, not +by necessity, but by its despotic tendencies, see Von Sybel's "History +of the French Revolution," vol. iii, pp. 11, 12. For general statements +of theories underlying the "_Maximum_," see Thiers; for a very +interesting picture, by an eye-witness, of the absurdities and miseries +it caused, see Mercier, "Nouveau Paris," edition of 1800, chapter XLIV.] + +[Footnote 53: For a summary of the report of the Committee, with list of +articles embraced under it, and for various interesting details, see +Villeneuve Bargemont, "Histoire de l'Economie Politique," vol. ii, pp. +213-239; also Levasseur, as above. For curious examples of severe +penalties for very slight infringements on the law on the subject, see +Louis Blanc, "Histoire de la Révolution française," tome x, p. 144. +For Louis XIVth's claim see "Memoirs of Louis XIV for the Instruction of +the Dauphin."] + +For a simple exposition of the way in which the exercise of this power +became simply confiscation of all private property in France, see Mallet +Du Pan's "Memoirs," London, 1852, vol. ii, p. 14.] + +[Footnote 54: See Du Pont's arguments, as given by Levasseur.] + +[Footnote 55: Louis Blanc calls attention to this very fact in showing +the superiority of the French _assignats_ to the old American +Continental currency, See his "Histoire de la Révolution française," +tome xii, p. 98.] + +[Footnote 56: See Sumner, as above, p. 220.] + +[Footnote 57: See Levasseur, as above, vol. i, p. 178.] + +[Footnote 58: See Cambon's "Report," Aug. 15, 1793, pp. 49-60; also, +"Decree of Aug. 24, 1793," sec. 31, chapters XCVI-CIII. Also, "Tableaux +de la dépréciation de papier monnaie dans le department de la Seine."] + +[Footnote 59: For the example of Metz and other authorities, see +Levasseur, as above, vol. i, p. 180.] + +[Footnote 60: See Von Sybel, vol. iii, p. 173.] + +[Footnote 61: See Thiers; also, for curious details of measures taken to +compel farmers and merchants, see Senior, Lectures on "Results of Paper +Money," pp. 86, 87.] + +[Footnote 62: See Von Sybel, vol. iv, p. 231.] + +[Footnote 63: See Von Sybel, vol. iv, p. 330; also tables of +depreciation in "Moniteur"; also official reports in the White +Collection; also Caron's "Tables," etc.] + +[Footnote 64: For a lifelike sketch of the way in which these exchanges +of _assignats_ for valuable property went on at periods of the rapid +depreciation of paper, see Challamel, "Les français sous la +Révolution," p. 309; also Say, "Economic Politique."] + +[Footnote 65: For a very complete table of the depreciation from day to +day, see "Supplement to the Moniteur" of October 2, 1797; also Caron, as +above. For the market prices of the _louis d'or_ at the first of every +month, as the collapse approached, see Montgaillard. See also "Official +Lists" in the White Collection. For a table showing the steady rise of +the franc in gold during a single week, from 251 to 280 _francs_, see +Dewarmin, as above, vol. i, p. 136.] + +[Footnote 66: See "Mèmoires de Thibaudeau," vol. ii, p. 26, also +Mercier, "Lo Nouveau Paris," vol. ii, p. 90; for curious example of the +scales of depreciation see the White Collection. See also extended table +of comparative values in 1790 and 1795. See Levasseur, as above, vol. i, +pp. 223-4.] + +[Footnote 67: For a striking similar case in our own country, see +Sumner, "History of American Currency," p. 47.] + +[Footnote 68: See Villeneuve Bargemont, "Histoire de l'économie +politique," vol. ii, p. 229.] + +[Footnote 69: See Von Sybel, vol. iv, pp. 337, 338. See also for +confirmation Challamel, "Histoire Musée," vol. ii, p. 179. For a +thoughtful statement of the reasons why such paper was not invested in +lands by men of moderate means, and workingmen, see Mill, "Political +Economy," vol. ii, pp. 81, 82.] + +[Footnote 70: See Von Sybel, vol. iv, p. 222.] + +[Footnote 71: See especially Levasseur, "Histoire des classes +ouvrières," etc. vol. i, pp. 219, 230 and elsewhere; also De Nervo, +"Finance française," p. 280; also Stourm, as already cited. The exact +amount of _assignats_ in circulation at the final suppression is given +by Dowarmin, (vol. i, p. 189), as 39,999,945,428 _livres_ or _francs_.] + +[Footnote 72: For details of the mandat system very thoroughly given, +see Thiers' "History of the French Revolution," Bentley's edition, vol. +iv, pp. 410-412. For the issue of _assignats_ and _mandats_ at the same +time, see Dewarmin, vol. i, p. 136; also Levasseur, vol. i, pp. 230-257. +For an account of "new tenor bills" in America and their failure in +1737, see Summer, pp. 27-31; for their failure in 1781, see Morse, "Life +of Alexander Hamilton," vol. i, pp. 86, 87. For similar failure in +Austria, see Summer, p. 314.] + +[Footnote 73: See Marchant, "Lettre aux gens de bonne foi."] + +[Footnote 74: See Summer, p. 44; also De Nervo, "Finances françaises," +p. 282.] + +[Footnote 75: See De Nervo, "Finances françaises," p. 282; also +Levasseur, vol. i, p. 236 et seq.] + +[Footnote 76: See Table from "Gazette de France" and extracts from other +sources in Levasseur, vol. i, pp. 223-4.] + +[Footnote 77: Among the many striking accounts of the debasing effects +of "inflation" upon France under the Directory perhaps the best is that +of Lacretelle, vol. xiii, pp. 32-36. For similar effect, produced by the +same cause in our own country in 1819, see statement from Niles' +"Register," in Sumner, p. 80. For the jumble of families reduced to +beggary with families lifted into sudden wealth and for the mass of +folly and misery thus mingled, see Levassour, vol. i, p. 237.] + +[Footnote 78: For Madame Tallien and luxury of the stock-gambler +classes, see Challamel, "Les français sous la Révolution," pp. 30, 33; +also De Goncourt, "Les français sous le Directoire." Regarding the +outburst of vice in Paris and the demoralization of the police, see +Levasseur, as above.] + +[Footnote 79: See Levasseur, Vol. i, p. 237, et seq.] + +[Footnote 80: For specimens of counterfeit _assignats_, see the White +Collection in the Cornell University Library, but for the great series +of various issues of them in fac-simile, also for detective warnings and +attempted descriptions of many varieties of them, and for the history of +their Issue, see especially Dewarmin, vol. i, pp. 152-161. For +photographic copies of Royalist _assignats_, etc., see also Dewarmin, +ibid., pp. 192-197, etc. For a photograph of probably the last of the +Royalist notes ever issued, bearing the words "Pro Deo, pro Rege, pro +Patria" and "Armée Catholique et Royale" with the date 1799, and for +the sum of 100 _livres_, see Dewarmin, vol. i, p. 204.] + +[Footnote 81: For similar expectation of a "shock," which did not occur, +at the resumption of specie payments in Massachusetts, see Sumner, +"History of American Currency," p. 34.] + +[Footnote 82: See Thiers.] + +[Footnote 83: See Levasseur, vol. i, p. 246.] + +[Footnote 84: For examples of similar effects in Russia, Austria and +Denmark, see Storch, "Economie Politique," vol. iv; for similar effects +in the United States, see Gouge, "Paper Money and Banking in the United +States," also Summer, "History of American Currency." For working out of +the same principles in England, depicted in a masterly way, see +Macaulay, "History of England," chap. xxi; and for curious exhibition of +the same causes producing same results in ancient Greece, see a curious +quotation by Macaulay in same chapter.] + +[Footnote 85: For parallel cases in the early history of our own +country, see Sumner, p. 21, and elsewhere.] + +[Footnote 86: For a review of some of these attempts, with eloquent +statement of their evil results, see "Mémoires de Durand de Maillane," +pp. 166-169.] + +[Footnote 87: For similar effect of inflated currency in enervating and +undermining trade, husbandry, manufactures and morals in our own +country, see Daniel Webster, cited in Sumner, pp. 45-50. For similar +effects in other countries, see Senior, Storch, Macaulay and others +already cited.] + +[Footnote 88: For facts regarding French finance under Napoleon I am +indebted to Hon. David A. Wells. For more recent triumphs of financial +commonsense in France, see Bonnet's articles, translated by the late +George Walker, Esq. For general subject, see Levasseur.] + + + + + + + +End of the Project Gutenberg EBook of Fiat Money Inflation in France, by +Andrew Dickson White + +*** END OF THIS PROJECT GUTENBERG EBOOK FIAT MONEY INFLATION IN FRANCE *** + +***** This file should be named 6949-0.txt or 6949-0.zip ***** +This and all associated files of various formats will be found in: + http://www.gutenberg.org/6/9/4/6949/ + +Produced by Gordon Keener + +Updated editions will replace the previous one--the old editions +will be renamed. + +Creating the works from public domain print editions means that no +one owns a United States copyright in these works, so the Foundation +(and you!) can copy and distribute it in the United States without +permission and without paying copyright royalties. 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Thus, we do not necessarily +keep eBooks in compliance with any particular paper edition. + + +Most people start at our Web site which has the main PG search facility: + + http://www.gutenberg.org + +This Web site includes information about Project Gutenberg-tm, +including how to make donations to the Project Gutenberg Literary +Archive Foundation, how to help produce our new eBooks, and how to +subscribe to our email newsletter to hear about new eBooks. diff --git a/6949-0.zip b/6949-0.zip Binary files differnew file mode 100644 index 0000000..523a1f6 --- /dev/null +++ b/6949-0.zip diff --git a/6949-8.txt b/6949-8.txt new file mode 100644 index 0000000..03d6832 --- /dev/null +++ b/6949-8.txt @@ -0,0 +1,3056 @@ +Project Gutenberg's Fiat Money Inflation in France, by Andrew Dickson White + +This eBook is for the use of anyone anywhere at no cost and with +almost no restrictions whatsoever. You may copy it, give it away or +re-use it under the terms of the Project Gutenberg License included +with this eBook or online at www.gutenberg.org + + +Title: Fiat Money Inflation in France + How It Came, What It Brought, and How It Ended + +Author: Andrew Dickson White + +Release Date: November, 2004 [EBook #6949] +Posting Date: March 28, 2009 + +Language: English + +Character set encoding: ISO-8859-1 + +*** START OF THIS PROJECT GUTENBERG EBOOK FIAT MONEY INFLATION IN FRANCE *** + + + + +Produced by Gordon Keener + + + + + + + + + +FIAT MONEY INFLATION IN FRANCE + +How It Came, What It Brought, and How It Ended + +by Andrew Dickson White, LL.D., Ph.D., D.C.L. + + +Late President and Professor of History at Cornell University; Sometime +United States Minister to Russia and Ambassador to Germany; Author of "A +History of the Warfare of Science with Theology," etc. + + + + +INTRODUCTION + +As far back as just before our Civil War I made, in France and +elsewhere, a large collection of documents which had appeared during the +French Revolution, including newspapers, reports, speeches, pamphlets, +illustrative material of every sort, and, especially, specimens of +nearly all the Revolutionary issues of paper money,--from notes of ten +thousand _livres_ to those of one _sou_. + +Upon this material, mainly, was based a course of lectures then given +to my students, first at the University of Michigan and later at Cornell +University, and among these lectures, one on "Paper Money Inflation in +France." + +This was given simply because it showed one important line of facts in +that great struggle; and I recall, as if it were yesterday, my feeling +of regret at being obliged to bestow so much care and labor upon a +subject to all appearance so utterly devoid of practical value. I +am sure that it never occurred, either to my Michigan students or to +myself, that it could ever have any bearing on our own country. It +certainly never entered into our minds that any such folly as that +exhibited in those French documents of the eighteenth century could ever +find supporters in the United States of the nineteenth. + +Some years later, when there began to be demands for large issues of +paper money in the United States, I wrought some of the facts thus +collected into a speech in the Senate of the State of New York, showing +the need of especial care in such dealings with financial necessities. + +In 1876, during the "greenback craze," General Garfield and Mr. S. B. +Crittenden, both members of the House of Representatives at that time, +asked me to read a paper on the same general subject before an audience +of Senators and Representatives of both parties in Washington. This I +did, and also gave it later before an assemblage of men of business at +the Union League Club in New York. + +Various editions of the paper were afterward published, among them, two +or three for campaign purposes, in the hope that they might be of use +in showing to what folly, cruelty, wrong and rain the passion for "fiat +money" may lead. + +Other editions were issued at a later period, in view of the principle +involved in the proposed unlimited coinage of silver in the United +States, which was, at bottom, the idea which led to that fearful wreck +of public and private prosperity in France. + +For these editions there was an added reason in the fact that the +utterances of sundry politicians at that time pointed clearly to issues +of paper money practically unlimited. These men were logical enough +to see that it would be inconsistent to stop at the unlimited issue +of silver dollars which cost really something when they could issue +unlimited paper dollars which virtually cost nothing. + +In thus exhibiting facts which Bishop Butler would have recognized as +confirming his theory of "The Possible Insanity of States," it is but +just to acknowledge that the French proposal was vastly more sane than +that made in our own country. Those French issues of paper rested not +merely "on the will of a free people," but on one-third of the entire +landed property of France; on the very choicest of real property in city +and country--the confiscated estates of the Church and of the fugitive +aristocracy--and on the power to use the paper thus issued in purchasing +this real property at very low prices. + +I have taken all pains to be exact, revising the whole paper in the +light of the most recent publications and giving my authority for every +important statement, and now leave the whole matter with my readers. + +At the request of a Canadian friend, who has expressed a strong wish +that this work be brought down to date, I have again restudied the +subject in the light of various works which have appeared since +my earlier research,--especially Levasseur's "Histoire des classes +ouvrières et de l'industrie en France,"--one of the really great books +of the twentieth century;--Dewarmin's superb "Cent Ans de numismatique +Française" and sundry special treatises. The result has been that +large additions have been made regarding some important topics, and +that various other parts of my earlier work have been made more clear by +better arrangement and supplementary information. + +ANDREW D. WHITE. Cornell University, September, 1912. + + + + +FOREWORD BY MR. JOHN MACKAY + +I am greatly indebted to the generosity of Mr. Andrew D. White, the +distinguished American scholar, author and diplomatist, for permission +to print and to circulate privately a small edition of his exceedingly +valuable account of the great currency-making experiment of the French +Revolutionary Government. The work has been revised and considerably +enlarged by Mr. White for the purpose of the present issue. + +The story of "Fiat Money Inflation in France" is one of great interest +to legislators, to economic students, and to all business and thinking +men. It records the most gigantic attempt ever made in the history of +the world by a government to create an inconvertible paper currency, and +to maintain its circulation at various levels of value. It also records +what is perhaps the greatest of all governmental efforts--with the +possible exception of Diocletian's--to enact and enforce a legal limit +of commodity prices. Every fetter that could hinder the will or thwart +the wisdom of democracy had been shattered, and in consequence every +device and expedient that untrammelled power and unrepressed optimism +could conceive were brought to bear. But the attempts failed. They left +behind them a legacy of moral and material desolation and woe, from +which one of the most intellectual and spirited races of Europe has +suffered for a century and a quarter, and will continue to suffer until +the end of time. There are limitations to the powers of governments and +of peoples that inhere in the constitution of things, and that neither +despotisms nor democracies can overcome. + +Legislatures are as powerless to abrogate moral and economic laws as +they are to abrogate physical laws. They cannot convert wrong into right +nor divorce effect from cause, either by parliamentary majorities, or +by unity of supporting public opinion. The penalties of such +legislative folly will always be exacted by inexorable time. While these +propositions may be regarded as mere commonplaces, and while they are +acknowledged in a general way, they are in effect denied by many of +the legislative experiments and the tendencies of public opinion of the +present day. The story, therefore, of the colossal folly of France in +the closing part Of the eighteenth century and its terrible fruits, is +full of instruction for all men who think upon the problems of our own +time. + +From among an almost infinite variety, there are four great and +fundamental facts that clearly emerge, namely,-- + +(1) Notwithstanding the fact that the paper currency issued was the +direct obligation of the State, that much of it was interest bearing, +and that all of it was secured upon the finest real estate in France, +and that penalties in the way of fines, imprisonments and death were +enacted from time to time to maintain its circulation at fixed values, +there was a steady depreciation in value until it reached zero point and +culminated in repudiation. The aggregate of the issues amounted to no +less than the enormous and unthinkable sum of $9,500,000,000, and in +the middle of 1797 when public repudiation took place, there was no +less than $4,200,000,000 in face value of _assignats_ and _mandats_ +outstanding; the loss, as always, falling mostly upon the poor and the +ignorant. + +(2) In the attempt to maintain fixed values for the paper currency the +Government became involved in an equally futile attempt to maintain a +tariff of legal prices for commodities. Here again penalties of fines, +of imprisonments and of death were powerless to accomplish the end in +view. + +(3) An wholesale demoralisation of society took place under which +thrift, integrity, humanity, and every principle of morality were thrown +into the welter of seething chaos and cruelty. + +(4) The real estate upon which the paper currency was secured +represented confiscations by the State of the lands of the Church and +of the Emigrant Noblemen. These lands were appraised, according to Mr. +White's narrative and other authorities, at $1,000,000,000. Here was +a straight addition to the State's resources of $1,000,000,000. It is +ominously significant that within one hundred years under the "Peace of +Frankfort" signed on the 10th May, 1871, the French nation agreed to pay +a war indemnity to victorious Germany of exactly the same sum, namely, +$1,000,000,000 in addition to the surrender of the province of Alsace +and a considerable part of Lorraine. The great addition to the national +wealth, therefore, effected by the immoral confiscation of the lands in +question disappeared with compound territorial interest added under the +visitation of relentless retribution. + +Public opinion in our own country is so far sound on the question +of currency, but signs are not lacking in some lay quarters of +an inclination to sanction dangerous experiments. The doctrine of +governmental regulation of prices, has, however, made its appearance in +embryo. Class dissatisfaction is also on the increase. The confiscation +of property rights under legal forms and processes is apt to be condoned +when directed against unpopular interests and when limited to amounts +that do not revolt the conscience. The wild and terrible expression +given to these insidious principles in the havoc of the Revolution +should be remembered by all. Nor should the fact be overlooked that, as +Mr. White points out on Page 6, the National Assembly of France which +originated and supported these measures contained in its membership the +ablest Frenchmen of the day. + +JOHN MACKAY. Toronto General Trusts Building, Toronto, 31st March, 1914. + + + + +FIAT MONEY INFLATION IN FRANCE + +How It Came, What It Brought, and How It Ended [1] + + + + +I. + +Early in the year 1789 the French nation found itself in deep financial +embarrassment: there was a heavy debt and a serious deficit. + +The vast reforms of that period, though a lasting blessing politically, +were a temporary evil financially. There was a general want of +confidence in business circles; capital had shown its proverbial +timidity by retiring out of sight as far as possible; throughout the +land was stagnation. + +Statesmanlike measures, careful watching and wise management would, +doubtless, have ere long led to a return of confidence, a reappearance +of money and a resumption of business; but these involved patience +and self-denial, and, thus far in human history, these are the rarest +products of political wisdom. Few nations have ever been able to +exercise these virtues; and France was not then one of these few. [2] + +There was a general search for some short road to prosperity: ere long +the idea was set afloat that the great want of the country was more of +the circulating medium; and this was speedily followed by calls for an +issue of paper money. The Minister of Finance at this period was Necker. +In financial ability he was acknowledged as among the great bankers of +Europe, but his was something more than financial ability: he had a +deep feeling of patriotism and a high sense of personal honor. The +difficulties in his way were great, but he steadily endeavored to +keep France faithful to those principles in monetary affairs which the +general experience of modern times had found the only path to national +safety. As difficulties arose the National Assembly drew away from him, +and soon came among the members renewed suggestions of paper money: +orators in public meetings, at the clubs and in the Assembly, proclaimed +it a panacea--a way of "securing resources without paying interest." +Journalists caught it up and displayed its beauties, among these men, +Marat, who, in his newspaper, "The Friend of the People," also joined +the cries against Necker, picturing him--a man of sterling honesty, who +gave up health and fortune for the sake of France--as a wretch seeking +only to enrich himself from the public purse. + +Against this tendency toward the issue of irredeemable paper Necker +contended as best he might. He knew well to what it always had led, +even when surrounded by the most skillful guarantees. Among those who +struggled to support ideas similar to his was Bergasse, a deputy from +Lyons, whose pamphlets, then and later, against such issues exerted a +wider influence, perhaps, than any others: parts of them seem fairly +inspired. Any one to-day reading his prophecies of the evils sure to +follow such a currency would certainly ascribe to him a miraculous +foresight, were it not so clear that his prophetic power was due simply +to a knowledge of natural laws revealed by history. But this current in +favor of paper money became so strong that an effort was made to breast +it by a compromise: and during the last months of 1789 and the first +months of 1790 came discussions in the National Assembly looking to +issues of notes based upon the landed property of the Church,--which was +to be confiscated for that purpose. But care was to be taken; the issue +was to be largely in the shape of notes of 1,000, 300 and 200 _livres_, +too large to be used as ordinary currency, but of convenient size to +be used in purchasing the Church lands; besides this, they were to bear +interest and this would tempt holders to hoard them. The Assembly thus +held back from issuing smaller obligations. + +Remembrances of the ruin which had come from the great issues of smaller +currency at an earlier day were still vivid. Yet the pressure toward +a popular currency for universal use grew stronger and stronger. The +finance committee of the Assembly reported that "the people demand a new +circulating medium"; that "the circulation of paper money is the best of +operations"; that "it is the most free because it reposes on the will +of the people"; that "it will bind the interest of the citizens to the +public good." + +The report appealed to the patriotism of the French people with the +following exhortation: "Let us show to Europe that we understand our +own resources; let us immediately take the broad road to our liberation +instead of dragging ourselves along the tortuous and obscure paths of +fragmentary loans." It concluded by recommending an issue of paper money +carefully guarded, to the full amount of four hundred million _livres_, +and the argument was pursued until the objection to smaller notes faded +from view. Typical in the debate on the whole subject, in its various +phases, were the declarations of M. Matrineau. He was loud and long for +paper money, his only fear being that the Committee had not authorized +enough of it; he declared that business was stagnant, and that the sole +cause was a want of more of the circulating medium; that paper money +ought to be made a legal tender; that the Assembly should rise above +prejudices which the failures of John Law's paper money had caused, +several decades before. Like every supporter of irredeemable paper money +then or since, he seemed to think that the laws of Nature had changed +since previous disastrous issues. He said: "Paper money under +a despotism is dangerous; it favors corruption; but in a nation +constitutionally governed, which itself takes care in the emission of +its notes, which determines their number and use, that danger no longer +exists." He insisted that John Law's notes at first restored prosperity, +but that the wretchedness and ruin they caused resulted from their +overissue, and that such an overissue is possible only under a +despotism. [3] + +M. de la Rochefoucauld gave his opinion that "the _assignats_ will draw +specie out of the coffers where it is now hoarded. [4] + +On the other hand Cazalès and Maury showed that the result could only +be disastrous. Never, perhaps, did a political prophecy meet with more +exact fulfillment in every line than the terrible picture drawn in one +of Cazalès' speeches in this debate. Still the current ran stronger and +stronger; Petion made a brilliant oration in favor of the report, and +Necker's influence and experience were gradually worn away. + +Mingled with the financial argument was a strong political plea. The +National Assembly had determined to confiscate the vast real property +of the French Church,--the pious accumulations of fifteen hundred +years. There were princely estates in the country, bishops' palaces and +conventual buildings in the towns; these formed between one-fourth and +one-third of the entire real property of France, and amounted in value +to at least two thousand million _livres_. By a few sweeping strokes +all this became the property of the nation. Never, apparently, did a +government secure a more solid basis for a great financial future. [5] + +There were two special reasons why French statesmen desired speedily to +sell these lands. First, a financial reason,--to obtain money to +relieve the government. Secondly, a political reason,--to get this land +distributed among the thrifty middle-classes, and so commit them to the +Revolution and to the government which gave their title. + +It was urged, then, that the issue of four hundred millions of paper, +(not in the shape of interest-bearing bonds, as had at first been +proposed, but in notes small as well as large), would give the treasury +something to pay out immediately, and relieve the national necessities; +that, having been put into circulation, this paper money would stimulate +business; that it would give to all capitalists, large or small, the +means for buying from the nation the ecclesiastical real estate, and +that from the proceeds of this real estate the nation would pay its +debts and also obtain new funds for new necessities: never was theory +more seductive both to financiers and statesmen. + +It would be a great mistake to suppose that the statesmen of France, or +the French people, were ignorant of the dangers in issuing irredeemable +paper money. No matter how skillfully the bright side of such a currency +was exhibited, all thoughtful men in France remembered its dark side. +They knew too well, from that ruinous experience, seventy years before, +in John Law's time, the difficulties and dangers of a currency not well +based and controlled. They had then learned how easy it is to issue it; +how difficult it is to check its overissue; how seductively it leads to +the absorption of the means of the workingmen and men of small fortunes; +how heavily it falls on all those living on fixed incomes, salaries or +wages; how securely it creates on the ruins of the prosperity of all +men of meagre means a class of debauched speculators, the most +injurious class that a nation can harbor,--more injurious, indeed, than +professional criminals whom the law recognizes and can throttle; how +it stimulates overproduction at first and leaves every industry flaccid +afterward; how it breaks down thrift and develops political and social +immorality. All this France had been thoroughly taught by experience. +Many then living had felt the result of such an experiment--the issues +of paper money under John Law, a man who to this day is acknowledged +one of the most ingenious financiers the world has ever known; and there +were then sitting in the National Assembly of France many who owed the +poverty of their families to those issues of paper. Hardly a man in the +country who had not heard those who issued it cursed as the authors of +the most frightful catastrophe France had then experienced. [6] + +It was no mere attempt at theatrical display, but a natural impulse, +which led a thoughtful statesman, during the debate, to hold up a piece +of that old paper money and to declare that it was stained with the +blood and tears of their fathers. + +And it would also be a mistake to suppose that the National Assembly, +which discussed this matter, was composed of mere wild revolutionists; +no inference could be more wide of the fact. Whatever may have been the +character of the men who legislated for France afterward, no thoughtful +student of history can deny, despite all the arguments and sneers +of reactionary statesmen and historians, that few more keen-sighted +legislative bodies have ever met than this first French Constitutional +Assembly. In it were such men as Sieyès, Bailly, Necker, Mirabeau, +Talleyrand, DuPont de Nemours and a multitude of others who, in various +sciences and in the political world, had already shown and were destined +afterward to show themselves among the strongest and shrewdest men that +Europe has yet seen. + +But the current toward paper money had become irresistible. It was +constantly urged, and with a great show of force, that if any nation +could safely issue it, France was now that nation; that she was fully +warned by her severe experience under John Law; that she was now a +constitutional government, controlled by an enlightened, patriotic +people,--not, as in the days of the former issues of paper money, an +absolute monarchy controlled by politicians and adventurers; that +she was able to secure every _livre_ of her paper money by a virtual +mortgage on a landed domain vastly greater in value than the entire +issue; that, with men like Bailly, Mirabeau and Necker at her head, she +could not commit the financial mistakes and crimes from which France had +suffered under John Law, the Regent Duke of Orleans and Cardinal Dubois. + +Oratory prevailed over science and experience. In April, 1790, came the +final decree to issue four hundred millions of _livres_ in paper money, +based upon confiscated property of the Church for its security. The +deliberations on this first decree and on the bill carrying it into +effect were most interesting; prominent in the debate being Necker, Du +Pont de Nemours, Maury, Cazalès, Petion, Bailly and many others hardly +inferior. The discussions were certainly very able; no person can read +them at length in the "Moniteur," nor even in the summaries of the +parliamentary history, without feeling that various modern historians +have done wretched injustice to those men who were then endeavoring to +stand between France and ruin. + +This sum--four hundred millions, so vast in those days, was issued in +_assignats_, which were notes secured by a pledge of productive +real estate and bearing interest to the holder at three per cent. No +irredeemable currency has ever claimed a more scientific and practical +guarantee for its goodness and for its proper action on public finances. +On the one hand, it had what the world recognized as a most practical +security,--a mortgage an productive real estate of vastly greater value +than the issue. On the other hand, as the notes bore interest, there +seemed cogent reason for their being withdrawn from circulation whenever +they became redundant. [7] + +As speedily as possible the notes were put into circulation. Unlike +those issued in John Law's time, they were engraved in the best style +of the art. To stimulate loyalty, the portrait of the king was placed +in the center; to arouse public spirit, patriotic legends and emblems +surrounded it; to stimulate public cupidity, the amount of interest +which the note would yield each day to the holder was printed in the +margin; and the whole was duly garnished with stamps and signatures to +show that it was carefully registered and controlled. [8] + +To crown its work the National Assembly, to explain the advantages +of this new currency, issued an address to the French people. In this +address it spoke of the nation as "delivered by this grand means from +all uncertainty and from all ruinous results of the credit system." It +foretold that this issue "would bring back into the public treasury, +into commerce and into all branches of industry strength, abundance and +prosperity." [9] + +Some of the arguments in this address are worth recalling, and, among +them, the following:--"Paper money is without inherent value unless +it represents some special property. Without representing some special +property it is inadmissible in trade to compete with a metallic +currency, which has a value real and independent of the public action; +therefore it is that the paper money which has only the public authority +as its basis has always caused ruin where it has been established; that +is the reason why the bank notes of 1720, issued by John Law, after +having caused terrible evils, have left only frightful memories. +Therefore it is that the National Assembly has not wished to expose +you to this danger, but has given this new paper money not only a value +derived from the national authority but a value real and immutable, a +value which permits it to sustain advantageously a competition with the +precious metals themselves." [10] + +But the final declaration was, perhaps, the most interesting. It was as +follows:-- + +"These _assignats_, bearing interest as they do, will soon be considered +better than the coin now hoarded, and will bring it out again into +circulation." The king was also induced to issue a proclamation +recommending that his people receive this new money without objection. + +All this caused great joy. Among the various utterances of this feeling +was the letter of M. Sarot, directed to the editor of the Journal of the +National Assembly, and scattered through France. M. Sarot is hardly able +to contain himself as he anticipates the prosperity and glory that this +issue of paper is to bring to his country. One thing only vexes him, and +that is the pamphlet of M. Bergasse against the _assignats_; therefore +it is after a long series of arguments and protestations, in order to +give a final proof of his confidence in the paper money and his entire +skepticism as to the evils predicted by Bergasse and others, M. Sarot +solemnly lays his house, garden and furniture upon the altar of his +country and offers to sell them for paper money alone. + +There were, indeed, some gainsayers. These especially appeared among the +clergy, who, naturally, abhorred the confiscation of Church property. +Various ecclesiastics made speeches, some of them full of pithy and +weighty arguments, against the proposed issue of paper, and there is +preserved a sermon from one priest threatening all persons handling the +new money with eternal damnation. But the great majority of the French +people, who had suffered ecclesiastical oppression so long, regarded +these utterances as the wriggling of a fish on the hook, and enjoyed the +sport all the better. [11] + +The first result of this issue was apparently all that the most sanguine +could desire: the treasury was at once greatly relieved; a portion of +the public debt was paid; creditors were encouraged; credit revived; +ordinary expenses were met, and, a considerable part of this paper +money having thus been passed from the government into the hands of +the people, trade increased and all difficulties seemed to vanish. The +anxieties of Necker, the prophecies of Maury and Cazalès seemed proven +utterly futile. And, indeed, it is quite possible that, if the national +authorities had stopped with this issue, few of the financial evils +which afterwards arose would have been severely felt; the four hundred +millions of paper money then issued would have simply discharged the +function of a similar amount of specie. But soon there came another +result: times grew less easy; by the end of September, within five +months after the issue of the four hundred millions in _assignats_, the +government had spent them and was again in distress. [12] + +The old remedy immediately and naturally recurred to the minds of +men. Throughout the country began a cry for another issue of paper; +thoughtful men then began to recall what their fathers had told them +about the seductive path of paper-money issues in John Law's time, and +to remember the prophecies that they themselves had heard in the debate +on the first issue of _assignats_ less than six months before. + +At that time the opponents of paper had prophesied that, once on the +downward path of inflation, the nation could not be restrained and that +more issues would follow. The supporters of the first issue had asserted +that this was a calumny; that the people were now in control and that +they could and would check these issues whenever they desired. + +The condition of opinion in the Assembly was, therefore, chaotic: a few +schemers and dreamers were loud and outspoken for paper money; many +of the more shallow and easy-going were inclined to yield; the more +thoughtful endeavored to breast the current. + +One man there was who could have withstood the pressure: Mirabeau. He +was the popular idol,--the great orator of the Assembly and much more +than a great orator,--he had carried the nation through some of its +worst dangers by a boldness almost godlike; in the various conflicts he +had shown not only oratorical boldness, but amazing foresight. As to his +real opinion on an irredeemable currency there can be no doubt. It was +the opinion which all true statesmen have held, before his time and +since,--in his own country, in England, in America, in every modern +civilized nation. In his letter to Cerutti, written in January, 1789, +hardly six months before, he had spoken of paper money as "A nursery of +tyranny, corruption and delusion; a veritable debauch of authority in +delirium." In one of his early speeches in the National Assembly he had +called such money, when Anson covertly suggested its issue, "a loan +to an armed robber," and said of it: "that infamous word, paper money, +ought to be banished from our language." In his private letters written +at this very time, which were revealed at a later period, he showed that +he was fully aware of the dangers of inflation. But he yielded to the +pressure: partly because he thought it important to sell the government +lands rapidly to the people, and so develop speedily a large class of +small landholders pledged to stand by the government which gave them +their titles; partly, doubtless, from a love of immediate rather than +of remote applause; and, generally, in a vague hope that the severe, +inexorable laws of finance which had brought heavy punishments upon +governments emitting an irredeemable currency in other lands, at other +times, might in some way at this time, be warded off from France. [13] + +The question was brought up by Montesquieu's report on the 27th +of August, 1790. This report favored, with evident reluctance, an +additional issue of paper. It went on to declare that the original issue +of four hundred millions, though opposed at the beginning, had proved +successful; that _assignats_ were economical, though they had dangers; +and, as a climax, came the declaration: "We must save the country." [14] + +Upon this report Mirabeau then made one of his most powerful speeches. +He confessed that he had at first feared the issue of _assignats_, but +that he now dared urge it; that experience had shown the issue of +paper money most serviceable; that the report proved the first issue +of _assignats_ a success; that public affairs had come out of distress; +that ruin had been averted and credit established. He then argued that +there was a difference between paper money of the recent issue and +that from which the nation had suffered so much in John Law's time; he +declared that the French nation had now become enlightened and he added, +"Deceptive subtleties can no longer mislead patriots and men of sense in +this matter." He then went on to say: "We must accomplish that which +we have begun," and declared that there must be one more large issue +of paper, guaranteed by the national lands and by the good faith of the +French nation. To show how practical the system was he insisted that +just as soon as paper money should become too abundant it would be +absorbed in rapid purchases of national lands; and he made a very +striking comparison between this self-adjusting, self-converting system +and the rains descending in showers upon the earth, then in swelling +rivers discharged into the sea, then drawn up in vapor and finally +scattered over the earth again in rapidly fertilizing showers. He +predicted that the members would be surprised at the astonishing success +of this paper money and that there would be none too much of it. + +His theory grew by what it fed upon,--as the paper-money theory has +generally done. Toward the close, in a burst of eloquence, he suggested +that _assignats_ be created to an amount sufficient to cover the +national debt, and that all the national lands be exposed for sale +immediately, predicting that thus prosperity would return to the nation +and that an classes would find this additional issue of paper money a +blessing. [15] + +This speech was frequently interrupted by applause; a unanimous vote +ordered it printed, and copies were spread throughout France. The +impulse given by it permeated all subsequent discussion; Gouy arose +and proposed to liquidate the national debt of twenty-four hundred +millions,--to use his own words--"by one single operation, grand, +simple, magnificent." [16] This "operation" was to be the emission of +twenty-four hundred millions in legal tender notes, and a law that +specie should not be accepted in purchasing national lands. His demagogy +bloomed forth magnificently. He advocated an appeal to the people, who, +to use his flattering expression, "ought alone to give the law in a +matter so interesting." The newspapers of the period, in reporting his +speech, noted it with the very significant remark, "This discourse was +loudly applauded." + +To him replied Brillat-Savarin. He called attention to the depreciation +of _assignats_ already felt. He tried to make the Assembly see that +natural laws work as inexorably in France as elsewhere; he predicted +that if this new issue were made there would come a depreciation of +thirty per cent. Singular, that the man who so fearlessly stood against +this tide of unreason has left to the world simply a reputation as +the most brilliant cook that ever existed! He was followed by the Abbe +Goutes, who declared,--what seems grotesque to those who have read +the history of an irredeemable paper currency in any country--that +new issues of paper money "will supply a circulating medium which will +protect public morals from corruption." [17] + +Into this debate was brought a report by Necker. He was not, indeed, +the great statesman whom France especially needed at this time, of all +times. He did not recognize the fact that the nation was entering a +great revolution, but he could and did see that, come what might, +there were simple principles of finance which must be adhered to. Most +earnestly, therefore, he endeavored to dissuade the Assembly from +the proposed issue; suggesting that other means could be found for +accomplishing the result, and he predicted terrible evils. But the +current was running too fast. The only result was that Necker was +spurned as a man of the past; he sent in his resignation and left +France forever. [18] The paper-money demagogues shouted for joy at his +departure; their chorus rang through the journalism of the time. No +words could express their contempt for a man who was unable to see the +advantages of filling the treasury with the issues of a printing press. +Marat, Hébert, Camille Desmoulins and the whole mass of demagogues so +soon to follow them to the guillotine were especially jubilant. [19] + +Continuing the debate, Rewbell attacked Necker, saying that the +_assignats_ were not at par because there were not yet enough of them; +he insisted that payments for public lands be received in _assignats_ +alone; and suggested that the church bells of the kingdom be melted down +into small money. Le Brun attacked the whole scheme in the Assembly, as +he had done in the Committee, declaring that the proposal, instead +of relieving the nation, would wreck it. The papers of the time very +significantly say that at this there arose many murmurs. Chabroud came +to the rescue. He said that the issue of _assignats_ would relieve the +distress of the people and he presented very neatly the new theory of +paper money and its basis in the following words: "The earth is the +source of value; you cannot distribute the earth in a circulating value, +but this paper becomes representative of that value and it is evident +that the creditors of the nation will not be injured by taking it." On +the other hand, appeared in the leading paper, the "Moniteur," a very +thoughtful article against paper money, which sums up all by saying, +"It is, then, evident that all paper which cannot, at the will of the +bearer, be converted into specie cannot discharge the functions of +money." This article goes on to cite Mirabeau's former opinion in his +letter to Cerutti, published in 1789,--the famous opinion of paper money +as "a nursery of tyranny, corruption and delusion; a veritable debauch +of authority in delirium." Lablache, in the Assembly, quoted a saying +that "paper money is the emetic of great states." [20] + +Boutidoux, resorting to phrasemaking, called the _assignats_ _"un papier +terre,"_ or "land converted into paper." Boislandry answered vigorously +and foretold evil results. Pamphlets continued to be issued,--among +them, one so pungent that it was brought into the Assembly and read +there,--the truth which it presented with great clearness being simply +that doubling the quantity of money or substitutes for money in a nation +simply increases prices, disturbs values, alarms capital, diminishes +legitimate enterprise, and so decreases the demand both for products +and for labor; that the only persons to be helped by it are the rich +who have large debts to pay. This pamphlet was signed "A Friend of the +People," and was received with great applause by the thoughtful minority +in the Assembly. Du Pont de Nemours, who had stood by Necker in the +debate on the first issue of _assignats_, arose, avowed the pamphlet to +be his, and said sturdily that he had always voted against the emission +of irredeemable paper and always would. [21] + +Far more important than any other argument against inflation was the +speech of Talleyrand. He had been among the boldest and most radical +French statesmen. He it was,--a former bishop,--who, more than any +other, had carried the extreme measure of taking into the possession of +the nation the great landed estates of the Church, and he had supported +the first issue of four hundred millions. But he now adopted a judicial +tone--attempted to show to the Assembly the very simple truth that the +effect of a second issue of _assignats_ may be different from that of +the first; that the first was evidently needed; that the second may be +as injurious as the first was useful. He exhibited various weak points +in the inflation fallacies and presented forcibly the trite truth that +no laws and no decrees can keep large issues of irredeemable paper at +par with specie. + +In his speech occur these words: "You can, indeed, arrange it so that +the people shall be forced to take a thousand _livres_ in paper for a +thousand _livres_ in specie; but you can never arrange it so that a man +shall be obliged to give a thousand _livres_ in specie for a thousand +_livres_ in paper,--in that fact is embedded the entire question; and on +account of that fact the whole system fails." [22] + +The nation at large now began to take part in the debate; thoughtful +men saw that here was the turning Point between good and evil, that the +nation stood at the parting of the ways. Most of the great commercial +cities bestirred themselves and sent up remonstrances against the new +emission,--twenty-five being opposed and seven in favor of it. + +But eloquent theorists arose to glorify paper and among these, Royer, +who on September 14, 1790, put forth a pamphlet entitled "Reflections of +a patriotic Citizen on the issue of _Assignats_," in which he gave many +specious reasons of the why the _assignats_ could not be depressed, and +spoke of the argument against them as "vile clamors of people bribed +to affect public opinion." He said to the National Assembly, "If it +is necessary to create five thousand millions, and more, of the paper, +decree such a creation gladly." He, too, predicted, as many others had +done, a time when gold was to lose all its value, since all exchanges +would be made with this admirable, guaranteed paper, and therefore that +coin would come out from the places where it was hoarded. He foretold +prosperous times to France in case these great issues of paper were +continued and declared these "the only means to insure happiness, glory +and liberty to the French nation." Speeches like this gave courage to +a new swarm of theorists,--it began to be especially noted that men who +had never shown any ability to make or increase fortunes for themselves +abounded in brilliant plans for creating and increasing wealth for the +country at large. + +Greatest force of all, on September 27, 1790, came Mirabeau's final +speech. The most sober and conservative of his modern opponents speaks +of its eloquence as "prodigious." In this the great orator dwelt first +on the political necessity involved, declaring that the most pressing +need was to get the government lands into the hands of the people, and +so to commit to the nation and against the old privileged classes the +class of landholders thus created. + +Through the whole course of his arguments there is one leading point +enforced with all his eloquence and ingenuity--the excellence of the +proposed currency, its stability and its security. He declares that, +being based on the pledge of public lands and convertible into them, the +notes are better secured than if redeemable in specie; that the precious +metals are only employed in the secondary arts, while the French paper +money represents the first and most real of all property, the source of +all production, the land; that while other nations have been obliged to +emit paper money, none have ever been so fortunate as the French nation, +for the reason that none had ever before been able to give this landed +security; that whoever takes French paper money has practically a +mortgage to secure it,--and on landed property which can easily be sold +to satisfy his claims, while other nations have been able only to give a +vague claim on the entire nation. "And," he ones, "I would rather have a +mortgage on a garden than on a kingdom!" + +Other arguments of his are more demagogical. He declares that the only +interests affected will be those of bankers and capitalists, but +that manufacturers will see prosperity restored to them. Some of his +arguments seem almost puerile, as when he says, "If gold has been +hoarded through timidity or malignity, the issue of paper will show that +gold is not necessary, and it will then come forth." But, as a whole, +the speech was brilliant; it was often interrupted by applause; it +settled the question. People did not stop to consider that it was the +dashing speech of an orator and not the matured judgment of a financial +expert; they did not see that calling Mirabeau or Talleyrand to advise +upon a monetary policy, because they had shown boldness in danger and +strength in conflict, was like summoning a prize-fighter to mend a +watch. + +In vain did Maury show that, while the first issues of John Law's paper +had brought prosperity, those that followed brought misery; in vain did +he quote from a book published in John Law's time, showing that Law was +at first considered a patriot and friend of humanity; in vain did he +hold up to the Assembly one of Law's bills and appeal to their memories +of the wretchedness brought upon France by them; in vain did Du Pont +present a simple and really wise plan of substituting notes in the +payment of the floating debt which should not form a part of the +ordinary circulating medium; nothing could resist the eloquence of +Mirabeau. Barnave, following, insisted that "Law's paper was based +upon the phantoms of the Mississippi; ours, upon the solid basis of +ecclesiastical lands," and he proved that the _assignats_ could not +depreciate further. Prudhomme's newspaper poured contempt over gold as +security for the currency, extolled real estate as the only true basis +and was fervent in praise of the convertibility and self-adjusting +features of the proposed scheme. In spite of all this plausibility and +eloquence, a large minority stood firm to their earlier principles; but +on the 29th of September, 1790, by a vote of 508 to 423, the deed was +done; a bill was passed authorizing the issue of eight hundred millions +of new _assignats_, but solemnly declaring that in no case should the +entire amount put in circulation exceed twelve hundred millions. To make +assurance doubly sure, it also provided that as fast as the _assignats_ +were paid into the treasury for land they should be burned, and thus a +healthful contraction be constantly maintained. Unlike the first issue, +these new notes were to bear no interest. [23] + +Great were the plaudits of the nation at this relief. Among the +multitudes of pamphlets expressing this joy which have come down to us +the "Friend of the Revolution" is the most interesting. It begins as +follows: "Citizens, the deed is done. The _assignats_ are the keystone +of the arch. It has just been happily put in position. Now I can +announce to you that the Revolution is finished and there only remain +one or two important questions. All the rest is but a matter of detail +which cannot deprive us any longer of the pleasure of admiring this +important work in its entirety. The provinces and the commercial cities +which were at first alarmed at the proposal to issue so much paper money +now send expressions of their thanks; specie is coming out to be joined +with paper money. Foreigners come to us from all parts of Europe to seek +their happiness under laws which they admire; and soon France, enriched +by her new property and by the national industry which is preparing for +fruitfulness, will demand still another creation of paper money." + +France was now fully committed to a policy of inflation; and, if there +had been any question of this before, all doubts were removed now by +various acts very significant as showing the exceeding difficulty of +stopping a nation once in the full tide of a depreciating currency. The +National Assembly had from the first shown an amazing liberality to all +sorts of enterprises, wise or foolish, which were urged "for the good of +the people." As a result of these and other largesses the old cry of the +"lack of a circulating medium" broke forth again; and especially loud +were the clamors for more small bills. The cheaper currency had largely +driven out the dearer; paper had caused small silver and copper money +mainly to disappear; all sorts of notes of hand, circulating under the +name of "confidence bills," flooded France--sixty-three kinds in Paris +alone. This unguaranteed currency caused endless confusion and fraud. +Different districts of France began to issue their own _assignats_ in +small denominations, and this action stirred the National Assembly to +evade the solemn pledge that the circulation should not go above twelve +hundred millions and that all _assignats_ returned to the treasury for +lands should immediately be burned. [24] Within a short time there had +been received into the treasury for lands one hundred and sixty million +_livres_ in paper. By the terms of the previous acts this amount of +paper ought to have been retired. Instead of this, under the plea of +necessity, the greater part of it was reissued in the form of small +notes. + +There was, indeed, much excuse for new issues of small notes, for, under +the theory that an issue of smaller notes would drive silver out of +circulation, the smallest authorized _assignat_ was for fifty _livres_. +To supply silver and copper and hold it in circulation everything was +tried. Citizens had been spurred on by law to send their silverware and +jewels to the mint. Even the king sent his silver and gold plate, and +the churches and convents were required by law to send to the government +melting pot all silver and gold vessels not absolutely necessary for +public worship. For copper money the church bells were melted down. But +silver and even copper continued to become more and more scarce. In the +midst of all this, various juggleries were tried, and in November, 1790, +the Assembly decreed a single standard of coinage, the chosen metal +being silver, and the ratio between the two precious metals was +changed from 15 1/2 to 1, to 14 1/2 to 1--but all in vain. It was found +necessary to issue the dreaded small paper, and a beginning was made by +issuing one hundred millions in notes of five _francs_, and, ere long, +obedient to the universal clamor, there were issued parchment notes for +various small amounts down to a single _sou_. [25] + +Yet each of these issues, great or small, was but as a drop of cold +water to a parched throat. Although there was already a rise in prices +which showed that the amount needed for circulation had been exceeded, +the cry for "more circulating medium" was continued. The pressure for +new issues became stronger and stronger. The Parisian populace and the +Jacobin Club were especially loud in their demands for them; and, a few +months later, on June 19, 1791, with few speeches, in a silence very +ominous, a new issue was made of six hundred millions more;--less than +nine months after the former great issue, with its solemn pledges +to keep down the amount in circulation. With the exception of a few +thoughtful men, the whole nation again sang paeans. [26] + +In this comparative ease of new issues is seen the action of a law +in finance as certain as the working of a similar law in natural +philosophy. If a material body fall from a height its velocity is +accelerated, by a well-known law, in a constantly increasing ratio: so +in issues of irredeemable currency, in obedience to the theories of a +legislative body or of the people at large, there is a natural law of +rapidly increasing emission and depreciation. The first inflation bills +were passed with great difficulty, after very sturdy resistance and by +a majority of a few score out of nearly a thousand votes; but we observe +now that new inflation measures were passed more and more easily and +we shall have occasion to see the working of this same law in a more +striking degree as this history develops itself. + +During the various stages of this debate there cropped up a doctrine +old and ominous. It was the same which appeared toward the end of the +nineteenth century in the United States during what became known as the +"greenback craze" and the free "silver craze." In France it had +been refuted, a generation before the Revolution, by Turgot, just as +brilliantly as it was met a hundred years later in the United States +by James A. Garfield and his compeers. This was the doctrine that all +currency, whether gold, paper, leather or any other material, derives +its efficiency from the official stamp it bears, and that, this being +the case, a government may relieve itself of its debts and make itself +rich and prosperous simply by means of a printing press:--fundamentally +the theory which underlay the later American doctrine of "fiat money." + +There came mutterings and finally speeches in the Jacobin Club, in the +Assembly and in newspaper articles and pamphlets throughout the country, +taking this doctrine for granted. These could hardly affect thinking +men who bore in mind the calamities brought upon the whole people, +and especially upon the poorer classes, by this same theory as put in +practice by John Law, or as refuted by Turgot, but it served to swell +the popular chorus in favor of the issue of more _assignats_ and plenty +of them. [27] + +The great majority of Frenchmen now became desperate optimists, +declaring that inflation is prosperity. Throughout France there came +temporary good feeling. The nation was becoming inebriated with paper +money. The good feeling was that of a drunkard just after his draught; +and it is to be noted as a simple historical fact, corresponding to a +physiological fact, that, as draughts of paper money came faster the +successive periods of good feeling grew shorter. + +Various bad signs began to appear. Immediately after each new issue came +a marked depreciation; curious it is to note the general reluctance to +assign the right reason. The decline in the purchasing power of paper +money was in obedience to the simplest laws in economics, but France had +now gone beyond her thoughtful statesmen and taken refuge in unwavering +optimism, giving any explanation of the new difficulties rather than the +right one. A leading member of the Assembly insisted, in an elaborate +speech, that the cause of depreciation was simply the want of knowledge +and of confidence among the rural population and he suggested means of +enlightening them. La Rochefoucauld proposed to issue an address to +the people showing the goodness of the currency and the absurdity of +preferring coin. The address was unanimously voted. As well might they +have attempted to show that a beverage made by mixing a quart of wine +and two quarts of water would possess all the exhilarating quality of +the original, undiluted liquid. + +Attention was aroused by another menacing fact;--specie disappeared +more and more. The explanations of this fact also displayed wonderful +ingenuity in finding false reasons and in evading the true one. A +very common explanation was indicated in Prudhomme's newspaper, "Les +Révolutions de Paris," of January 17, 1791, which declared that coin +"will keep rising until the people shall have hanged a broker." Another +popular theory was that the Bourbon family were, in some mysterious way, +drawing off all solid money to the chief centers of their intrigues in +Germany. Comic and, at the same time, pathetic, were evidences of the +wide-spread idea that if only a goodly number of people engaged in trade +were hanged, the par value of the _assignats_ would be restored. + +Still another favorite idea was that British emissaries were in the +midst of the people, instilling notions hostile to paper. Great efforts +were made to find these emissaries and more than one innocent person +experienced the popular wrath under the supposition that he was engaged +in raising gold and depressing paper. Even Talleyrand, shrewd as he was, +insisted that the cause was simply that the imports were too great and +the exports too little. [28] As well might he explain that fact that, +when oil is mingled with water, water sinks to the bottom, by saying +that this is because the oil rises to the top. This disappearance of +specie was the result of a natural law as simple and as sure in its +action as gravitation; the superior currency had been withdrawn because +an inferior currency could be used. [29] Some efforts were made to remedy +this. In the municipality of Quilleboeuf a considerable amount in specie +having been found in the possession of a citizen, the money was seized +and sent to the Assembly. The people of that town treated this hoarded +gold as the result of unpatriotic wickedness or madness, instead of +seeing that it was but the sure result of a law working in every land +and time, when certain causes are present. Marat followed out this +theory by asserting that death was the proper penalty for persons who +thus hid their money. + +Still another troublesome fact began now to appear. Though paper money +had increased in amount, prosperity had steadily diminished. In spite of +all the paper issues, commercial activity grew more and more spasmodic. +Enterprise was chilled and business became more and more stagnant. +Mirabeau, in his speech which decided the second great issue of paper, +had insisted that, though bankers might suffer, this issue would be of +great service to manufacturers and restore prosperity to them and their +workmen. The latter were for a time deluded, but were at last rudely +awakened from this delusion. The plenty of currency had at first +stimulated production and created a great activity in manufactures, but +soon the markets were glutted and the demand was diminished. In spite of +the wretched financial policy of years gone by, and especially in spite +of the Revocation of the Edict of Nantes, by which religious bigotry +had driven out of the kingdom thousands of its most skillful Protestant +workmen, the manufactures of France had before the Revolution come into +full bloom. In the finer woolen goods, in silk and satin fabrics of all +sorts, in choice pottery and porcelain, in manufactures of iron, steel, +and copper, they had again taken their old leading place upon the +Continent. All the previous changes had, at the worst, done no more +than to inflict a momentary check on this highly developed system of +manufactures. But what the bigotry of Louis XIV and the shiftlessness +of Louis XV could not do in nearly a century, was accomplished by this +tampering with the currency in a few months. One manufactory after +another stopped. At one town, Lodève, five thousand workmen were +discharged from the cloth manufactories. Every cause except the right +one was assigned for this. Heavy duties were put upon foreign goods; +everything that tariffs and custom-houses could do was done. Still the +great manufactories of Normandy were closed, those of the rest of the +kingdom speedily followed, and vast numbers of workmen in all parts of +the country were thrown out of employment. [30] Nor was this the case +with the home demand alone. The foreign demand, which at first had been +stimulated, soon fell off. In no way can this be better stated than by +one of the most thoughtful historians of modern times, who says, "It is +true that at first the _assignats_ gave the same impulse to business +in the city as in the country, but the apparent improvement had no firm +foundation, even in the towns. Whenever a great quantity of paper money +is suddenly issued we invariably see a rapid increase of trade. The +great quantity of the circulating medium sets in motion all the energies +of commerce and manufactures; capital for investment is more easily +found than usual and trade perpetually receives fresh nutriment. If this +paper represents real credit, founded upon order and legal security, +from which it can derive a firm and lasting value, such a movement may +be the starting point of a great and widely-extended prosperity, as, for +instance, a splendid improvement in English agriculture was undoubtedly +owing to the emancipation of the country bankers. If on the contrary, +the new paper is of precarious value, as was clearly seen to be the case +with the French _assignats_ as early as February, 1791, it can confer no +lasting benefits. For the moment, perhaps, business receives an impulse, +all the more violent because every one endeavors to invest his doubtful +paper in buildings, machines and goods, which, under all circumstances, +retain some intrinsic value. Such a movement was witnessed in France +in 1791, and from every quarter there came satisfactory reports of the +activity of manufactures." + +"But, for the moment, the French manufacturers derived great advantage +from this state of things. As their products could be so cheaply paid +for, orders poured in from foreign countries to such a degree that it +was often difficult for the manufacturers to satisfy their customers. +It is easy to see that prosperity of this kind must very soon find +its limit.... When a further fall in the _assignats_ took place this +prosperity would necessarily collapse, and be succeeded by a crisis +all the more destructive the more deeply men had engaged in speculation +under the influence of the first favorable prospects." [31] + +Thus came a collapse in manufacturing and commerce, just as it had come +previously in France: just as it came at various periods in Austria, +Russia, America, and in all countries where men have tried to build up +prosperity on irredeemable paper. [32] + +All this breaking down of the manufactures and commerce of the nation +made fearful inroads on the greater fortunes; but upon the lesser, and +upon the little properties of the masses of the nation who relied upon +their labor, it pressed with intense severity. The capitalist could put +his surplus paper money into the government lands and await results; but +the men who needed their money from day to day suffered the worst of +the misery. Still another difficulty appeared. There had come a complete +uncertainty as to the future. Long before the close of 1791 no one knew +whether a piece of paper money representing a hundred _livres_ would, +a month later, have a purchasing power of ninety or eighty or sixty +_livres_. The result was that capitalists feared to embark their means +in business. Enterprise received a mortal blow. Demand for labor was +still further diminished; and here came a new cause of calamity: for +this uncertainty withered all far-reaching undertakings. The business +of France dwindled into a mere living from hand to mouth. This state of +things, too, while it bore heavily upon the moneyed classes, was +still more ruinous to those in moderate and, most of all, to those in +straitened circumstances. With the masses of the people, the purchase of +every article of supply became a speculation--a speculation in which +the professional speculator had an immense advantage over the ordinary +buyer. Says the most brilliant of apologists for French revolutionary +statesmanship, "Commerce was dead; betting took its place." [33] + +Nor was there any compensating advantage to the mercantile classes. The +merchant was forced to add to his ordinary profit a sum sufficient to +cover probable or possible fluctuations in value, and while prices of +products thus went higher, the wages of labor, owing to the number of +workmen who were thrown out of employment, went lower. + +But these evils, though great, were small compared to those far more +deep-seated signs of disease which now showed themselves throughout the +country. One of these was the _obliteration of thrift_ from the minds +of the French people. The French are naturally thrifty; but, with such +masses of money and with such uncertainty as to its future value, the +ordinary motives for saving and care diminished, And a loose luxury +spread throughout the country. A still worse outgrowth was the increase +of speculation and gambling. With the plethora of paper currency in +1791 appeared the first evidences of that cancerous disease which +always follows large issues of irredeemable currency,--a disease more +permanently injurious to a nation than war, pestilence or famine. For +at the great metropolitan centers grew a luxurious, speculative, +stock-gambling body, which, like a malignant tumor, absorbed into itself +the strength of the nation and sent out its cancerous fibres to the +remotest hamlets. At these city centers abundant wealth seemed to be +piled up: in the country at, large there grew a dislike of steady labor +and a contempt for moderate gains and simple living. In a pamphlet +published in May, 1791, we see how, in regard to this also, public +opinion was blinded. The author calls attention to the increase of +gambling in values of all sorts in these words: "What shall I say of the +stock-jobbing, as frightful as it is scandalous, which goes on in Paris +under the very eyes of our legislators,--a most terrible evil, yet, +under the present circumstances,--necessary?" The author also speaks +of these stock-gamblers as using the most insidious means to influence +public opinion in favor of their measures; and then proposes, seriously, +a change in various matters of detail, thinking that this would prove a +sufficient remedy for an evil which had its roots far down in the whole +system of irredeemable currency. As well might a physician prescribe a +pimple wash for a diseased liver. [34] + +Now began to be seen more plainly some of the many ways in which an +inflation policy robs the working class. As these knots of plotting +schemers at the city centers were becoming bloated with sudden wealth, +the producing classes of the country, though having in their possession +more and more currency, grew lean. In the schemes and speculations put +forth by stock-jobbers and stimulated by the printing of more currency, +multitudes of small fortunes were absorbed and lost while a few swollen +fortunes were rapidly aggregated in the larger cities. This crippled a +large class in the country districts, which had employed a great number +of workmen. + +In the leading French cities now arose a luxury and license which was +a greater evil even than the plundering which ministered to it. In +the country the gambling spirit spread more and more. Says the same +thoughtful historian whom I have already quoted: "What a prospect for +a country when its rural population was changed into a great band of +gamblers!" [35] + +Nor was this reckless and corrupt spirit confined to business men; it +began to break out in official circles, and public men who, a few +years before, had been thought above all possibility of taint, became +luxurious, reckless, cynical and finally corrupt. Mirabeau, himself, +who, not many months previous, had risked imprisonment and even death +to establish constitutional government, was now--at this very +time--secretly receiving heavy bribes. When, at the downfall of the +monarchy a few years later, the famous iron chest of the Tuileries was +opened, there were found evidences that, in this carnival of inflation +and corruption, he had been a regularly paid servant of the Royal +court. [36] The artful plundering of the people at large was bad enough, +but worse still was this growing corruption in official and legislative +circles. Out of the speculating and gambling of the inflation period +grew luxury, and, out of this, corruption. It grew as naturally as a +fungus on a muck heap. It was first felt in business operations, +but soon began to be seen in the legislative body and in journalism. +Mirabeau was, by no means, the only example. Such members of the +legislative body as Jullien of Toulouse, Delaunay of Angers, Fabre +d'Eglantine and their disciples, were among the most noxious of those +conspiring by legislative action to raise and depress securities for +stock-jobbing purposes. Bribery of legislators followed as a matter of +course, Delaunay, Jullien and Chabot accepted a bribe of five hundred +thousand _livres_ for aiding legislation calculated to promote the +purposes of certain stock-jobbers. It is some comfort to know that +nearly all concerned were guillotined for it. [37] + +It is true that the number of these corrupt legislators was small, far +less than alarmists led the nation to suppose, but there were enough to +cause wide-spread distrust, cynicism and want of faith in any patriotism +or any virtue. + + + + +II. + +Even worse than this was the breaking down of the morals of the country +at large, resulting from the sudden building up of ostentatious wealth +in a few large cities, and from the gambling, speculative spirit +spreading from these to the small towns and rural districts. From this +was developed an even more disgraceful result,--the decay of a true +sense of national good faith. The patriotism which the fear of the +absolute monarchy, the machinations of the court party, the menaces of +the army and the threats of all monarchical Europe had been unable +to shake was gradually disintegrated by this same speculative, +stock-jobbing habit fostered by the superabundant currency. At the +outset, in the discussions preliminary to the first issue of paper +money, Mirabeau and others who had favored it had insisted that +patriotism as well as an enlightened self-interest, would lead the +people to keep up the value of paper money. The very opposite of this +was now revealed, for there appeared, as another outgrowth of this +disease, what has always been seen under similar circumstances. It is +a result of previous, and a cause of future evils. This outgrowth was a +vast debtor class in the nation, directly interested in the depreciation +of the currency in which they were to pay their debts. The nucleus of +this class was formed by those who had purchased the church lands from +the government. Only small payments down had been required and the +remainder was to be paid in deferred installments: an indebtedness of a +multitude of people had thus been created to the amount of hundreds of +millions. This body of debtors soon saw, of course, that their interest +was to depreciate the currency in which their debts were to be paid; +and these were speedily joined by a far more influential class;--by that +class whose speculative tendencies had been stimulated by the abundance +of paper money, and who had gone largely into debt, looking for a rise +in nominal values. Soon demagogues of the viler sort in the political +clubs began to pander to it; a little later important persons in this +debtor class were to be found intriguing in the Assembly--first in its +seats and later in more conspicuous places of public trust. Before long, +the debtor class became a powerful body extending through all ranks of +society. From the stock-gambler who sat in the Assembly to the small +land speculator in the rural districts; from the sleek inventor of +_canards_ on the Paris Exchange to the lying stock-jobber in the +market town, all pressed vigorously for new issues of paper; all were +apparently able to demonstrate to the people that in new issues of paper +lay the only chance for national prosperity. + +This great debtor class, relying on the multitude who could be +approached by superficial arguments, soon gained control. Strange as it +might seem to those who have not watched the same causes at work at a +previous period in France and at various times in other countries, while +every issue of paper money really made matters worse, a superstition +gained ground among the people at large that, if only _enough_ paper +money were issued and were more cunningly handled the poor would be made +rich. Henceforth, all opposition was futile. In December, 1791, a report +was made in the Legislative Assembly in favor of yet another great issue +of three hundred millions more of paper money. In regard to this report +Cambon said that more money was needed but asked, "Will you, in a moment +when stock-jobbing is carried on with such fury, give it new power by +adding so much more to the circulation?" But such high considerations +were now little regarded. Dorisy declared, "There is not enough money +yet in circulation; if there were more the sales of national lands would +be more rapid." And the official report of his speech states that these +words were applauded. + +Dorisy then went on to insist that the government lands were worth at +least thirty-five hundred million _livres_ and said: "Why should members +ascend the tribunal and disquiet France? Fear nothing; your currency +reposes upon a sound mortgage." Then followed a glorification of the +patriotism of the French people, which, he asserted, would carry the +nation through all its difficulties. + +Becquet, speaking next, declared that "The circulation is becoming more +rare every day." + +On December 17, 1791, a new issue was ordered, making in all twenty-one +hundred millions authorized. Coupled with this was the declaration that +the total amount in actual circulation should never reach more than +sixteen hundred millions. Before this issue the value of the 100 +_livres_ note had fallen at Paris to about 80 _livres_; [38] immediately +afterward it fell to about 68 _livres_. What limitations of the currency +were worth may be judged from the fact that not only had the declaration +made hardly a year before, limiting the amount in circulation to twelve +hundred millions, been violated, but the declaration, made hardly a +month previous, in which the Assembly had as solemnly limited the amount +of circulation to fourteen hundred millions, had also been repudiated. + +The evils which we have already seen arising from the earlier issues +were now aggravated; but the most curious thing evolved out of all this +chaos was a _new system of political economy_. In speeches, newspapers +and pamphlets about this time, we begin to find it declared that, after +all, a depreciated currency is a blessing; that gold and silver form an +unsatisfactory standard for measuring values: that it is a good thing to +have a currency that will not go out of the kingdom and which separates +France from other nations: that thus shall manufacturers be encouraged; +that commerce with other nations may be a curse, and hindrance thereto +may be a blessing; that the laws of political economy however applicable +in other times, are not applicable to this particular period, and, +however operative in other nations, are not now so in France; that the +ordinary rules of political economy are perhaps suited to the minions of +despotism but not to the free and enlightened inhabitants of France at +the close of the eighteenth century; that the whole state of present +things, so far from being an evil is a blessing. All these ideas, and +others quite as striking, were brought to the surface in the debates on +the various new issues. [39] + +Within four months came another report to the Assembly as ingenious as +those preceding. It declared: "Your committee are thoroughly persuaded +that the amount of the circulating medium before the Revolution was +greater than that of the _assignats_ today: but at that time the money +circulated slowly and now it passes rapidly so that one thousand million +_assignats_ do the work of two thousand millions of specie." The report +foretells further increase in prices, but by some curious jugglery +reaches a conclusion favorable to further inflation. Despite these +encouragements the _assignats_ nominally worth 100 _livres_ had fallen, +at the beginning of February, 1792, to about 60 _livres_, and during +that month fell to 53 _livres_. [40] + +In March, Clavière became minister of finance. He was especially proud +of his share in the invention and advocacy of the _assignats_, and now +pressed their creation more vigorously than ever, and on April 30th, of +the same year, came the fifth great issue of paper money, amounting to +three hundred millions: at about the same time Cambon sneered ominously +at public creditors as "rich people, old financiers and bankers." +Soon payment was suspended on dues to public creditors for all amounts +exceeding ten thousand _francs_. + +This was hailed by many as a measure in the interests of the poorer +classes of people, but the result was that it injured them most of all. +Henceforward, until the end of this history, capital was quietly taken +from labor and locked up in all the ways that financial ingenuity could +devise. All that saved thousands of laborers in France from starvation +was that they were drafted off into the army and sent to be killed on +foreign battlefields. + +On the last day of July, 1792, came another brilliant report from +Fouquet, showing that the total amount of currency already issued was +about twenty-four hundred millions, but claiming that the national lands +were worth a little more than this sum. A decree was now passed issuing +three hundred millions more. By this the prices of everything were again +enhanced save one thing, and that one thing was labor. Strange as it may +at first appear, while the depreciation of the currency had raised all +products enormously in price, the stoppage of so many manufactories and +the withdrawal of capital caused wages in the summer of 1792, after all +the inflation, to be as small as they had been four years before--viz., +fifteen _sous_ per day. No more striking example can be seen of the +truth uttered by Daniel Webster, that "of all the contrivances for +cheating the laboring classes of mankind, none has been more effective +than that which deludes them with paper-money." [41] + +Issue after issue followed at intervals of a few months, until, on +December 14, 1792, we have an official statement to the effect that +thirty-five hundred millions had been put forth, of which six hundred +millions had been burned, leaving in circulation twenty-eight hundred +millions. + +When it is remembered that there was little business to do and that +the purchasing power of the _livre_ or franc, when judged by the staple +products of the country, was equal to about half the present purchasing +power of our own dollar, it will be seen into what evils France had +drifted. As the mania for paper money ran its course, even the _sous_, +obtained by melting down the church bells, were more and more driven out +of circulation and more and more parchment notes from twenty _four_ to +five were issued, and at last pieces of one _sou_, of half a _sou_ and +even of one-quarter of a _sou_ were put in circulation. [42] + +But now another source of wealth was opened to the nation. There came a +confiscation of the large estates of landed proprietors who had fled +the country. An estimate in 1793 made the value of these estates three +billions of _francs_. As a consequence, the issues of paper money +were continued in increased amounts, on the old theory that they were +guaranteed by the solemn pledge of these lands belonging to the state. +Under the Legislative Assembly through the year 1792 new issues were +made virtually every month, so that at the end of January, 1793, it +was more and more realized that the paper money actually in circulation +amounted close upon three thousand millions of _francs_. All this had +been issued publicly, in open sessions of the National and Legislative +Assemblies; but now under the National Convention, the two Committees +of Public Safety and of Finance began to decree new issues privately, in +secret session. + +As a result, the issues became larger still, and four hundred workmen +were added to those previously engaged in furnishing this paper money, +and these were so pressed with work from six o'clock in the morning +until eight in the evening that they struck for higher wages and were +successful. [43] + +The consequences of these overissues now began to be more painfully +evident to the people at large. Articles of common consumption became +enormously dear and prices were constantly rising. Orators in the +Legislative Assembly, clubs, local meetings and elsewhere now endeavored +to enlighten people by assigning every reason for this depreciation save +the true one. They declaimed against the corruption of the ministry, the +want of patriotism among the Moderates, the intrigues of the emigrant +nobles, the hard-heartedness of the rich, the monopolizing spirit of the +merchants, the perversity of the shopkeepers,---each and all of these as +causes of the difficulty. [44] + +This decline in the government paper was at first somewhat masked by +fluctuations. For at various times the value of the currency _rose_. The +victory of Jemappes and the general success of the French army against +the invaders, with the additional security offered by new confiscations +of land, caused, in November, 1792, an appreciation in the value of the +currency; the franc had stood at 57 and it rose to about 69; but +the downward tendency was soon resumed and in September, 1793, +the _assignats_ had sunk below 30. Then sundry new victories and +coruscations of oratory gave momentary confidence so that in December, +1793, they rose above 50. But despite these fluctuations the downward +tendency soon became more rapid than ever. [45] + +The washerwomen of Paris, finding soap so dear that they could hardly +purchase it, insisted that all the merchants who were endeavoring to +save something of their little property by refusing to sell their goods +for the wretched currency with which France was flooded, should be +punished with death; the women of the markets and the hangers-on of the +Jacobin Club called loudly for a law "to equalize the value of paper +money and silver coin." It was also demanded that a tax be laid +especially on the rich, to the amount of four hundred million _francs_, +to buy bread. Marat declared loudly that the people, by hanging +shopkeepers and plundering stores, could easily remove the trouble. The +result was that on the 28th of February, 1793, at eight o'clock in the +evening, a mob of men and women in disguise began plundering the +stores and shops of Paris. At first they demanded only bread; soon they +insisted on coffee and rice and sugar; at last they seized everything +on which they could lay their hands--cloth, clothing, groceries and +luxuries of every kind. Two hundred such places were plundered. This was +endured for six hours and finally order was restored only by a grant of +seven million _francs_ to buy off the mob. The new political economy was +beginning to bear, its fruits luxuriantly. A gaudy growth of it appeared +at the City Hall of Paris when, in response to the complaints of the +plundered merchants, Roux declared, in the midst of great applause, that +"shopkeepers were only giving back to the people what they had hitherto +robbed them of." + +The mob having thus been bought off by concessions and appeased by +oratory, the government gained time to think, and now came a series of +amazing expedients,--and yet all perfectly logical. + +Three of these have gained in French history an evil pre-eminence, and +first of the three was the Forced Loan. + +In view of the fact that the well-to-do citizens were thought to be +lukewarm in their support of the politicians controlling the country, +various demagogues in the National Convention, which had now succeeded +the National, Constituent and Legislative Assemblies, found ample matter +for denunciations long and loud. The result outside the Convention +was increased activity of the guillotine; the results inside were new +measures against all who had money, and on June 22, 1793, the +Convention determined that there should be a Forced Loan, secured on the +confiscated lands of the emigrants and levied upon all married men +with incomes of ten thousand _francs_, and upon all unmarried men with +incomes of six thousand _francs_. It was calculated that these +would bring into the treasury a thousand millions of _francs_. But a +difficulty was found. So many of the rich had lied or had concealed +their wealth that only a fifth of the sum required could be raised, and +therefore a law was soon passed which levied forced loans upon incomes +as low as one thousand, _francs_,--or, say, two hundred dollars +of American money. This tax was made progressive. On the smaller +proprietors it was fixed at one-tenth and on the larger, that is, on all +incomes above nine thousand _francs_, it was made one-half of the entire +income. Little if any provision was made for the repayment of this loan +but the certificates might be used for purchasing the confiscated real +estate of the church and of the nobility. [46] + +But if this first expedient shows how naturally a "fiat" money system +runs into despotism, the next is no less instructive in showing how +easily it becomes repudiation and dishonor. + +As we have seen, the first issue of the _assignats_,--made by the +National Assembly, bore a portrait of the king; but on the various +issues after the establishment of a republic this emblem had been +discarded. This change led to a difference in value between the earlier +and the later paper money. The wild follies of fanatics and demagogues +had led to an increasing belief that the existing state of things could +not last; that the Bourbons must ere long return; that in such case, +while a new monarch would repudiate all the vast mass of the later paper +issued by the Republic, he would recognize that first issue bearing the +face and therefore the guarantee of the king. So it was that this first +issue came to bear a higher value than those of later date. To meet this +condition of things it was now proposed to repudiate an that earlier +issue. In vain did sundry more thoughtful members of the Convention +plead that this paper money, amounting to five hundred and fifty-eight +millions of _francs_, bore the solemn guarantee of the nation, as well +as of the king; the current was irresistible. All that Cambon, the great +leader of finance at that time, could secure was a clause claiming to +protect the poor, to the effect that this demonetization should not +extend to notes below a hundred _francs_ in value; and it was also +agreed that any of the notes, large or small, might be received in +payment of taxes and for the confiscated property of the clergy and +nobility. To all the arguments advanced against this breach of the +national faith Danton, then at the height of his power, simply declared +that only aristocrats could favor notes bearing the royal portrait, and +gave forth his famous utterance: "Imitate Nature, which watches over the +preservation of the race but has no regard for individuals." The decree +was passed on the 31st of July, 1793, yet its futility was apparent in +less than two months, when the Convention decreed that there should be +issued two thousand millions of _francs_ more in _assignats_ between the +values of ten _sous_ and four hundred _francs_, and when, before the end +of the year, five hundred millions more were authorized. [47] + +The third outgrowth of the vast issue of fiat money was the _Maximum_. +As far back as November, 1792, the Terrorist associate of Robespierre, +St. Just, in view of the steady rise in prices of the necessaries of +life, had proposed a scheme by which these prices should be established +by law, at a rate proportionate to the wages of the working classes. +This plan lingered in men's minds, taking shape in various resolutions +and decrees until the whole culminated on September 29, 1793, in the Law +of the _Maximum_. + +While all this legislation was high-handed, it was not careless. Even +statesmen of the greatest strength, having once been drawn into this +flood, were borne on into excesses which, a little earlier, would have +appalled them. Committees of experts were appointed to study the whole +subject of prices, and at last there were adopted the great "four rules" +which seemed to statesmen of that time a masterly solution of the whole +difficulty. [48] + +_First_, the price of each article of necessity was to be fixed at one +and one-third its price in 1790. _Secondly_, all transportation was to +be added at a fixed rate per league. _Thirdly_, five per cent was to be +added for the profit of the wholesaler. _Fourthly_, ten per cent was +to be added for the profit of the retailer. Nothing could look more +reasonable. Great was the jubilation. The report was presented and +supported by Barrère,--"the tiger monkey,"--then in all the glory +of his great orations: now best known from his portrait by Macaulay. +Nothing could withstand Barrère's eloquence. He insisted that France +had been suffering from a "_Monarchical_ commerce which only sought +wealth," while what she needed and what she was now to receive was a +"_Republican_ commerce--a commerce of moderate profits and virtuous." He +exulted in the fact that "France alone enjoys such a commerce,--that it +exists in no other nation." He poured contempt over political economy as +"that science which quacks have corrupted, which pedants have obscured +and which academicians have depreciated." France, he said, has something +better, and he declared in conclusion, "The needs of the people will +no longer be spied upon in order that the commercial classes may +arbitrarily take advantage." [49] + +The first result of the _Maximum_ was that every means was taken to +evade the fixed price imposed, and the farmers brought in as little +produce as they possibly could. This increased the scarcity, and the +people of the large cities were put on an allowance. Tickets were issued +authorizing the bearer to obtain at the official prices a certain +amount of bread or sugar or soap or wood or coal to cover immediate +necessities. [50] + +But it was found that the _Maximum_, with its divinely revealed four +rules, could not be made to work well--even by the shrewdest devices. In +the greater part of France it could not be enforced. As to merchandise +of foreign origin or merchandise into which any foreign product entered, +the war had raised it far above the price allowed under the first rule, +namely, the price of 1790, with an addition of one-third. Shopkeepers +therefore could not sell such goods without ruin. The result was that +very many went out of business and the remainder forced buyers to pay +enormous charges under the very natural excuse that the seller risked +his life in trading at all. That this excuse was valid is easily seen +by the daily lists of those condemned to the guillotine, in which +not infrequently figure the names of men charged with violating the +_Maximum_ laws. Manufactures were very generally crippled and frequently +destroyed, and agriculture was fearfully depressed. To detect goods +concealed by farmers and shopkeepers, a spy system was established +with a reward to the informer of one-third of the value of the goods +discovered. To spread terror, the Criminal Tribunal at Strassburg was +ordered to destroy the dwelling of any one found guilty of selling goods +above the price set by law. The farmer often found that he could not +raise his products at anything like the price required by the new law, +and when he tried to hold back his crops or cattle, alleging that he +could not afford to sell them at the prices fixed by law, they were +frequently taken from him by force and he was fortunate if paid even +in the depreciated fiat money--fortunate, indeed, if he finally escaped +with his life. [51] + +Involved in all these perplexities, the Convention tried to cut the +Gordian knot. It decreed that any person selling gold or silver coin, +or making any difference in any transaction between paper and specie, +should be imprisoned in irons for six years:--that any one who refused +to accept a payment in _assignats_, or accepted _assignats_ at a +discount, should pay a fine of three thousand _francs_; and that any one +committing this crime a second time should pay a fine of six thousand +_francs_ and suffer imprisonment twenty years in irons. Later, on the +8th of September, 1793, the penalty for such offences was made death, +with confiscation of the criminal's property, and so reward was offered +to any person informing the authorities regarding any such criminal +transaction. To reach the climax of ferocity, the Convention decreed, +in May, 1794, that the death penalty should be inflicted on any person +convicted of "having asked, before a bargain was concluded, in what +money payment was to be made." Nor was this all. The great finance +minister, Cambon, soon saw that the worst enemies of his policy were +gold and silver. Therefore it was that, under his lead, the Convention +closed the Exchange and finally, on November 13, 1793, under terrifying +penalties, suppressed all commerce in the precious metals. About a year +later came the abolition of the Maximum itself. [52] + +It is easily seen that these _Maximum_ laws were perfectly logical. +Whenever any nation intrusts to its legislators the issue of a currency +not based on the idea of redemption in standard coin recognized in the +commerce of civilized nations, it intrusts to them the power to raise or +depress the value of every article in the possession of every citizen. +Louis XIV had claimed that all property in Prance was his own, and that +what private persons held was as much his as if it were in his coffers. +But even this assumption is exceeded by the confiscating power exercised +in a country, where, instead of leaving values to be measured by a +standard common to the whole world, they are left to be depressed or +raised at the whim, caprice or interest of a body of legislators. When +this power is given, the power of prices is inevitably included in +it. [53] + +It may be said that these measures were made necessary by the war then +going on. Nothing could be more baseless than such an objection. In this +war the French soon became generally successful. It was quickly pushed +mainly upon foreign soil. Numerous contributions were levied upon the +subjugated countries to support the French armies. The war was one of +those in which the loss, falling apparently on future generations, first +stimulates, in a sad way, trade and production. The main cause of these +evils was tampering with the circulating medium of an entire nation; +keeping all values in fluctuation; discouraging enterprise; paralyzing +energy; undermining sobriety; obliterating thrift; promoting +extravagance and exciting riot by the issue of an irredeemable currency. +The true business way of meeting the enormous demands on France during +the first years of the Revolution had been stated by a true statesman +and sound financier, Du Pont de Nemours, at the very beginning. He had +shown that using the same paper as a circulating medium and as a means +for selling the national real estate was like using the same implement +for an oyster knife and a razor. [54] + +It has been argued that the _assignats_ sank in value because they were +not well secured,--that securing them on government real estate was as +futile as if the United States had, in the financial troubles of its +early days, secured notes on its real estate. This objection is utterly +fallacious. The government lands of our country were remote from the +centers of capital and difficult to examine; the French national real +estate was near these centers--even _in_ them--and easy to examine. +Our national real estate was unimproved and unproductive; theirs +was improved and productive--its average productiveness in market in +ordinary times being from four to five per cent. [55] + +It has also been objected that the attempt to secure the _assignats_ on +government real estate failed because of the general want of confidence +in the title derived by the purchasers from the new government. Every +thorough student of that period must know that this is a misleading +statement. Everything shows that the vast majority of the French people +had a fanatical confidence in the stability of the new government during +the greater part of the Revolution. There were disbelievers in the +security of the _assignats_ just as there were disbelievers in the +paper money of the United States throughout our Civil War; but they were +usually a small minority. Even granting that there was a doubt as to +investment in French lands, the French people certainly had as much +confidence in the secure possession of government lands as any people +can ever have in large issues of government bonds: indeed, it is certain +that they had far more confidence in their lands as a security than +modern nations can usually have in large issues of bonds obtained by +payments of irredeemable paper. One simple fact, as stated by John +Stuart Mill, which made _assignats_ difficult to convert into real +estate was that the vast majority of people could not afford to make +investments outside their business; and this fact is no less fatal +to any attempt to contract large issues of irredeemable paper--save, +perhaps, a bold, statesmanlike attempt, which seizes the best time and +presses every advantage, eschewing all juggling devices and sacrificing +everything to maintain a sound currency based on standards common to the +entire financial world. + +And now was seen, taking possession of the nation, that idea which +developed so easily out of the fiat money system;--the idea that the +ordinary needs of government may be legitimately met wholly by the means +of paper currency;--that taxes may be dispensed with. As a result, it +was found that the _assignat_ printing press was the one resource left +to the government, and the increase in the volume of paper money became +every day more appalling. + +It will doubtless surprise many to learn that, in spite of these evident +results of too much currency, the old cry of a "scarcity of circulating +medium" was not stilled; it appeared not long after each issue, no +matter how large. + +But every thoughtful student of financial history knows that this cry +always comes after such issues--nay, that it _must_ come,--because +in obedience to a natural law, the former scarcity, or rather +_insufficiency_ of currency recurs just as soon as prices become +adjusted to the new volume, and there comes some little revival of +business with the usual increase of credit. [56] + +In August, 1793, appeared a new report by Cambon. No one can read it +without being struck by its mingled ability and folly. His final plan +of dealing with the public debt has outlasted all revolutions since, +but his disposition of the inflated currency came to a wretched failure. +Against Du Pont, who showed conclusively that the wild increase of paper +money was leading straight to, ruin, Cambon carried the majority in +the great assemblies and clubs by sheer audacity--the audacity of +desperation. Zeal in supporting the _assignats_ became his religion. The +National Convention which succeeded the Legislative Assembly, issued in +1793 over three thousand millions of _assignats_, and, of these, over +twelve hundred millions were poured into the circulation. And yet Cambon +steadily insisted that the security for the _assignat_ currency was +perfect. The climax of his zeal was reached when he counted as assets +in the national treasury the indemnities which, he declared, France +was sure to receive after future victories over the allied nations +with which she was then waging a desperate war. As patriotism, it was +sublime; as finance it was deadly. [57] + +Everything was tried. Very elaborately he devised a funding scheme +which, taken in connection with his system of issues, was in effect +what in these days would be called an "_interconvertibility scheme_" By +various degrees of persuasion or force,--the guillotine looming up in +the background,--holders of _assignats_ were urged to convert them into +evidence of national debt, bearing interest at five per cent, with the +understanding that if more paper were afterward needed more would be +issued. All in vain. The official tables of depreciation show that the +_assignats_ continued to fall. A forced loan, calling in a billion +of these, checked this fall, but only for a moment. The +"_interconvertibility scheme_" between currency and bonds failed as +dismally as the "_interconvertibility scheme_" between currency and land +had failed. [58] + +A more effective expedient was a law confiscating the property of all +Frenchmen who left France after July 14, 1789, and who had not returned. +This gave new land to be mortgaged for the security of paper money. + +All this vast chapter in financial folly is sometimes referred to as if +it resulted from the direct action of men utterly unskilled in finance. +This is a grave error. That wild schemers and dreamers took a leading +part in setting the fiat money system going is true; that speculation +and interested financiers made it worse is also true: but the men who +had charge of French finance during the Reign of Terror and who made +these experiments, which seem to us so monstrous, in order to rescue +themselves and their country from the flood which was sweeping +everything to financial ruin were universally recognized as among the +most skillful and honest financiers in Europe. Cambon, especially, +ranked then and ranks now as among the most expert in any period. The +disastrous results of all his courage and ability in the attempt to +stand against the deluge of paper money show how powerless are the most +skillful masters of finance to stem the tide of fiat money calamity +when once it is fairly under headway; and how useless are all enactments +which they can devise against the underlying laws of nature. + +Month after month, year after year new issues went on. Meanwhile +everything possible was done to keep up the value of paper. The city +authorities of Metz took a solemn oath that the _assignats_ should bear +the same price whether in paper or specie,--and whether in buying +or selling, and various other official bodies throughout the nation +followed this example. In obedience to those who believed with the +market women of Paris, as stated in their famous petition, that "laws +should be passed making paper money as good as gold," Couthon, in +August, 1793, had proposed and carried a law punishing any person +who should sell _assignats_ at less than their nominal value with +imprisonment for twenty years in chains, and later carried a law making +investments in foreign countries by Frenchmen punishable with death. [59] + +But to the surprise of the great majority of the French people, the +value of the _assignats_ was found, after the momentary spasm of fear +had passed, not to have been permanently increased by these measures: on +the contrary, this "fiat" paper persisted in obeying the natural laws of +finance and, as new issues increased, their value decreased. Nor did the +most lavish aid of nature avail. The paper money of the nation seemed to +possess a magic power to transmute prosperity into adversity and plenty +into famine. The year 1794 was exceptionally fruitful: and yet with the +autumn came scarcity of provisions and with the winter came distress. +The reason is perfectly simple. The sequences in that whole history are +absolutely logical. First, the Assembly had inflated the currency and +raised prices enormously. Next, it had been forced to establish an +arbitrary maximum price for produce. But this price, large as it +seemed, soon fell below the real value of produce; many of the farmers, +therefore, raised less produce or refrained from bringing what they had +to market. [60] But, as is usual in such cases, the trouble was ascribed +to everything rather than the real cause, and the most severe measures +were established in all parts of the country to force farmers to bring +produce to market, millers to grind and shopkeepers to sell it. [61] The +issues of paper money continued. Toward the end of 1794 seven thousand +millions in _assignats_ were in circulation. [62] By the end of May, +1795, the circulation was increased to ten thousand millions, at the +end of July, to fourteen thousand millions; and the value of one hundred +_francs_ in paper fell steadily, first to four _francs_ in gold, then to +three, then to two and one-half. [63] But, curiously enough, while this +depreciation was rapidly going on, as at various other periods when +depreciation was rapid, there came an apparent revival of business. The +hopes of many were revived by the fact that in spite of the decline of +paper there was an exceedingly brisk trade in all kinds of permanent +property. Whatever articles of permanent value certain needy people were +willing to sell certain cunning people were willing to buy and to pay +good prices for in _assignats_. At this, hope revived for a time in +certain quarters. But ere long it was discovered that this was one of +the most distressing results of a natural law which is sure to come into +play under such circumstances. It was simply a feverish activity caused +by the intense desire of a large number of the shrewder class to convert +their paper money into anything and everything which they could hold and +hoard until the collapse which they foresaw should take place. This very +activity in business simply indicated the disease. It was simply legal +robbery of the more enthusiastic and trusting by the more cold-hearted +and keen. It was, the "unloading" of the _assignats_ upon the mass of +the people. [64] + +Interesting is it to note in the midst of all this the steady action +of another simple law in finance. Prisons, guillotines, enactments +inflicting twenty years' imprisonment in chains upon persons twice +convicted of buying or selling paper money at less than its nominal +value, and death upon investors in foreign securities, were powerless. +The National Convention, fighting a world in arms and with an armed +revolt on its own soil, showed titanic power, but in its struggle to +circumvent one simple law of nature its weakness was pitiable. The +_louis d'or_ stood in the market as a monitor, noting each day, with +unerring fidelity, the decline in value of the _assignat_; a monitor not +to be bribed, not to be scared. As well might the National Convention +try to bribe or scare away the polarity of the mariner's compass. On +August 1, 1795, this gold _louis_ of 25 _francs_ was worth in paper, +920 _francs_; on September 1st, 1,200 _francs_; on November 1st, 2,600 +_francs_; on December 1st, 3,050 _francs_. In February, 1796, it was +worth 7,200 _francs_ or one franc in gold was worth 288 _francs_ in +paper. Prices of all commodities went up nearly in proportion. [65] +The writings of this period give curious details. Thibaudeau, in his +Memoirs, speaks of sugar as 500 _francs_ a pound, soap, 230 _francs_, +candles, 140 _francs_. Mercier, in his lifelike pictures of the French +metropolis at that period, mentions 600 _francs_ as carriage hire for a +single drive, and 6,000 for an entire day. Examples from other sources +are such as the following:--a measure of flour advanced from two +_francs_ in 1790, to 225 _francs_ in 1795; a pair of shoes, from +five _francs_ to 200; a hat, from 14 _francs_ to 500; butter, to, +560 _francs_ a pound; a turkey, to 900 _francs_. [66] Everything +was enormously inflated in price _except the wages of labor_. As +manufacturers had closed, wages had fallen, until all that kept them up +seemed to be the fact that so many laborers were drafted off into the +army. From this state of things came grievous wrong and gross fraud. +Men who had foreseen these results and had gone into debt were of course +jubilant. He who in 1790 had borrowed 10,000 _francs_ could pay his +debts in 1796 for about 35 _francs_. Laws were made to meet these +abuses. As far back as 1794 a plan was devised for publishing official +"tables of depreciation" to be used in making equitable settlements of +debts, but all such machinery proved futile. On the 18th of May, 1796, a +young man complained to the National Convention that his elder brother, +who had been acting as administrator of his deceased father's estate, +had paid the heirs in _assignats_, and that he had received scarcely one +three-hundredth part of the real value of his share. [67] To meet cases +like this, a law was passed establishing a "scale of proportion." Taking +as a standard the value of the _assignat_ when there were two billions +in circulation, this law declared that, in payment of debts, one-quarter +should be added to the amount originally borrowed for every five hundred +millions added to the circulation. In obedience to this law a man +who borrowed two thousand _francs_ when there were two billions in +circulation would have to pay his creditors twenty-five hundred +_francs_ when half a billion more were added to the currency, and over +thirty-five thousand _francs_ before the emissions of paper reached +their final amount. This brought new evils, worse, if possible, than the +old. [68] + +The question will naturally be asked, _On whom did this vast +depreciation mainly fall at last_? When this currency had sunk to +about one three-hundredth part of its nominal value and, after that, +to nothing, in whose hands was the bulk of it? The answer is simple. I +shall give it in the exact words of that thoughtful historian from whom +I have already quoted: "Before the end of the year 1795 the paper money +was almost exclusively in the hands of the working classes, employees +and men of small means, whose property was not large enough to invest in +stores of goods or national lands. [69] Financiers and men of large means +were shrewd enough to put as much of their property as possible into +objects of permanent value. The working classes had no such foresight +or skill or means. On them finally came the great crushing weight of the +loss. After the first collapse came up the cries of the starving. Roads +and bridges were neglected; many manufactures were given up in utter +helplessness." To continue, in the words of the historian already cited: +"None felt any confidence in the future in any respect; few dared to +make a business investment for any length of time and it was accounted a +folly to curtail the pleasures of the moment, to accumulate or save for +so uncertain a future." [70] + +This system in finance was accompanied by a system in politics no less +startling, and each system tended to aggravate the other. The wild +radicals, having sent to the guillotine first all the Royalists and +next all the leading Republicans they could entrap, the various +factions began sending each other to the same destination:--Hébertists, +Dantonists, with various other factions and groups, and, finally, the +Robespierrists, followed each other in rapid succession. After these +declaimers and phrase-mongers had thus disappeared there came to power, +in October, 1795, a new government,--mainly a survival of the more +scoundrelly,--the Directory. It found the country utterly impoverished +and its only resource at first was to print more paper and to issue even +while wet from the press. These new issues were made at last by the two +great committees, with or without warrant of law, and in greater sums +than ever. Complaints were made that the array of engravers and printers +at the mint could not meet the demand for _assignats_--that they +could produce only from sixty to seventy millions per day and that +the government was spending daily from eighty to ninety millions. Four +thousand millions of _francs_ were issued during one month, a little +later three thousand millions, a little later four thousand millions, +until there had been put forth over thirty-five thousand millions. The +purchasing power of this paper having now become almost nothing, it was +decreed, on the 22nd of December, 1795, that the whole amount issued +should be limited to forty thousand millions, including all that had +previously been put forth and that when this had been done the copper +plates should be broken. Even in spite of this, additional issues +were made amounting to about ten thousand millions. But on the 18th of +February, 1796, at nine o'clock in the morning, in the presence of a +great crowd, the machinery, plates and paper for printing _assignats_ +were brought to the Place Vendome and there, on the spot where the +Napoleon Column now stands, these were solemnly broken and burned. + +Shortly afterward a report by Camus was made to the Assembly that +the entire amount of paper money issued in less than six years by the +Revolutionary Government of France had been over forty-five thousand +millions of _francs_--that over six thousand millions had been annulled +and burned and that at the final catastrophe there were in circulation +close upon forty thousand millions. It will be readily seen that it +was fully time to put an end to the system, for the gold "_louis_" of +twenty-five _francs_ in specie had, in February, 1796, as we have seen, +become worth 7,200 _francs_, and, at the latest quotation of all, no +less than 15,000 _francs_ in paper money--that is, one franc in gold was +nominally worth 600 _francs_ in paper. + +Such were the results of allowing dreamers, schemers, phrase-mongers, +declaimers and strong men subservient to these to control a +government. [71] + + + + +III. + +The first new expedient of the Directory was to secure a forced loan of +six hundred million _francs_ from the wealthier classes; but this was +found fruitless. Ominous it was when persons compelled to take this +loan found for an _assignat_ of one hundred _francs_ only one franc was +allowed. Next a National Bank was proposed; but capitalists were loath +to embark in banking while the howls of the mob against all who had +anything especially to do with money resounded in every city. At last +the Directory bethought themselves of another expedient. This was by no +means new. It had been fully tried on our continent twice before that +time: and once, since--first, in our colonial period; next, during +our Confederation; lastly, by the "Southern Confederacy" and here, +as elsewhere, always in vain. But experience yielded to theory--plain +business sense to financial metaphysics. It was determined to issue a +new paper which should be "fully secured" and "as good as gold." + +Pursuant to this decision it was decreed that a new paper money "fully +secured and as good as gold" be issued under the name of "_mandats_." In +order that these new notes should be "fully secured," choice public real +estate was set apart to an amount fully equal to the nominal value of +the issue, and any one offering any amount of the _mandats_ could at +once take possession of government lands; the price of the lands to be +determined by two experts, one named by the government and one by the +buyer, and without the formalities and delays previously established in +regard to the purchase of lands with _assignats_. + +Perhaps the most whimsical thing in the whole situation was the +fact that the government, pressed as it was by demands of all sorts, +continued to issue the old _assignats_ at the same time that it was +discrediting them by issuing the new _mandats_. And yet in order to make +the _mandats_ "as good as gold" it was planned by forced loans and other +means to reduce the quantity of _assignats_ in circulation, so that the +value of each _assignat_ should be raised to one-thirtieth of the value +of gold, then to make _mandats_ legal tender and to substitute them for +_assignats_ at the rate of one for thirty. Never were great expectations +more cruelly disappointed. Even before the _mandats_ could be issued +from the press they fell to thirty-five per cent of their nominal value; +from this they speedily fell to fifteen, and soon after to five per +cent, and finally, in August, 1796, six months from their first issue, +to three per cent. This plan failed--just as it failed in New England in +1737; just as it failed under our own Confederation in 1781; just as it +failed under the Southern Confederacy during our Civil War. [72] + +To sustain this new currency the government resorted to every method +that ingenuity could devise. Pamphlets suited to people of every +capacity were published explaining its advantages. Never was there more +skillful puffing. A pamphlet signed "Marchant" and dedicated to "People +of Good Faith" was widely circulated, in which Marchant took pains +to show the great advantage of the _mandats_ as compared with +_assignats_,--how land could be more easily acquired with them; how +their security was better than with _assignats_; how they could not, by +any possibility, sink in values as the _assignats_ had done. But even +before the pamphlet was dry from the press the depreciation of the +_mandats_ had refuted his entire argument. [73] + +The old plan of penal measures was again pressed. Monot led off by +proposing penalties against those who shall speak publicly against +the _mandats_; Talot thought the penalties ought to be made especially +severe; and finally it was enacted that any persons "who by their +discourse or writing shall decry the _mandats_ shall be condemned to a +fine of not less than one thousand _francs_ or more than ten thousand; +and in case of a repetition of the offence, to four years in irons." It +was also decreed that those who refused to receive the _mandats_ should +be fined,--the first time, the exact sum which they refuse; the second +time, ten times as much; and the third time, punished with two years in +prison. But here, too, came in the action of those natural laws which +are alike inexorable in all countries. This attempt proved futile in +France just as it had proved futile less than twenty years before in +America. No enactments could stop the downward tendency of this new +paper "fully secured," "as good as gold"; the laws that finally govern +finance are not made in conventions or congresses. [74] + +From time to time various new financial juggles were tried, some of them +ingenious, most of them drastic. It was decreed that all _assignats_ +above the value of one hundred _francs_ should cease to circulate after +the beginning of June, 1796. But this only served to destroy the +last vestige of, confidence in government notes of any kind. Another +expedient was seen in the decree that paper money should be made to +accord with a natural and immutable standard of value and that one franc +in paper should thenceforth be worth ten pounds of wheat. This also +failed. On July 16th another decree seemed to show that the authorities +despaired of regulating the existing currency and it was decreed that +all paper, whether _mandats_ or _assignats_, should be taken at its +real value, and that bargains might be made in whatever currency people +chose. The real value of the _mandats_ speedily sank to about two per +cent of their nominal value and the only effect of this legislation +seemed to be that both _assignats_ and _mandats_ went still lower. Then +from February 4 to February 14, 1797, came decrees and orders that the +engraving apparatus for the _mandats_ should be destroyed as that for +the _assignats_ had been, that neither _assignats_ nor _mandats_ should +longer be a legal tender and that old debts to the state might be paid +for a time with government paper at the rate of one per cent of their +face value. [75] Then, less than three months later, it was decreed that +the twenty-one billions of _assignats_ still in circulation should be +annulled. Finally, on September 30, 1797, as the culmination of these +and various other experiments and expedients, came an order of the +Directory that the national debts should be paid two-thirds in bonds +which might be used in purchasing confiscated real estate, and the +remaining "Consolidated Third," as it was called, was to be placed on +the "Great Book" of the national debt to be paid thenceforth as the +government should think best. + +As to the bonds which the creditors of the nation were thus forced to +take, they sank rapidly, as the _assignats_ and _mandats_ had done, even +to three per cent of their value. As to the "Consolidated Third," that +was largely paid, until the coming of Bonaparte, in paper money which +sank gradually to about six per cent of its face value. Since May, 1797, +both _assignats_ and _mandats_ had been virtually worth nothing. + +So ended the reign of paper money in France. The twenty-five hundred +millions of _mandats_ went into the common heap of refuse with the +previous forty-five thousand millions of _assignats_: the nation in +general, rich and poor alike, was plunged into financial ruin from one +end to the other. + +On the prices charged for articles of ordinary use light is thrown by +extracts from a table published in 1795, reduced to American coinage. + + + 1790 1795 + For a bushel of flour 40 cents 45 dollars + For a bushel of oats 18 cents 10 dollars + For a cartload of wood 4 dollars 500 dollars + For a bushel of coal 7 cents 2 dollars + For a pound of sugar 18 cents 12 1/2 dollars + For a pound of soap 18 cents 8 dollars + For a pound of candles 18 cents 8 dollars + For one cabbage 8 cents 5 1/2 dollars + For a pair of shoes 1 dollar 40 dollars + For twenty-five eggs 24 cents 5 dollars + + +But these prices about the middle of 1795 were moderate compared with +those which were reached before the close of that year and during the +year following. Perfectly authentic examples were such as the following: + + A pound of bread 9 dollars + A bushel of potatoes 40 dollars + A pound of candles 40 dollars + A cartload of wood 250 dollars + +So much for the poorer people. Typical of those esteemed wealthy may be +mentioned a manufacturer of hardware who, having retired from business +in 1790 with 321,000 _livres_, found his property in 1796 worth 14,000 +_francs_. [76] + +For this general distress arising from the development and collapse of +"fiat" money in France, there was, indeed, one exception. In Paris and +a few of the other great cities, men like Tallien, of the heartless, +debauched, luxurious, speculator, contractor and stock-gambler class, +had risen above the ruins of the multitudes of smaller fortunes. +Tallien, one of the worst demagogue "reformers," and a certain number +of men like him, had been skillful enough to become millionaires, while +their dupes, who had clamored for issues of paper money, had become +paupers. + +The luxury and extravagance of the currency gamblers and their families +form one of the most significant features in any picture of the social +condition of that period. [77] + +A few years before this the leading women in French society showed a +nobility of character and a simplicity in dress worthy of Roman matrons. +Of these were Madame Boland and Madame Desmoulins; but now all was +changed. At the head of society stood Madame Tallien and others like +her, wild in extravagance, daily seeking new refinements in luxury, and +demanding of their husbands and lovers vast sums to array them and to +feed their whims. If such sums could not be obtained honestly they must +be had dishonestly. The more closely one examines that period, the more +clearly he sees that the pictures, given by Thibaudeau and Challamel and +De Goncourt are not at all exaggerated. [78] + +The contrast between these gay creatures of the Directory period and the +people at large was striking. Indeed much as the vast majority of the +wealthy classes suffered from impoverishment, the laboring classes, +salaried employees of all sorts, and people of fixed income and of small +means, especially in the cities, underwent yet greater distress. These +were found, as a rule, to subsist mainly on daily government rations of +bread at the rate of one pound per person. This was frequently unfit +for food and was distributed to long lines of people, men, women and +children, who were at times obliged to wait their turn even from dawn +to dusk. The very rich could, by various means, especially by bribery, +obtain better bread, but only at enormous cost. In May, 1796, the market +price of good bread was, in paper, 80 _francs_ (16 dollars) per pound +and a little later provisions could not be bought for paper money at any +price. [79] + +And here it may be worth mentioning that there was another financial +trouble especially vexatious. While, as we have seen, such enormous +sums, rising from twenty to forty thousand millions of _francs_ in +paper, were put in circulation by the successive governments of the +Revolution, enormous sums had been set afloat in counterfeits by +criminals and by the enemies of France. These came not only from +various parts of the French Republic but from nearly all the surrounding +nations, the main source being London. Thence it was that Count Joseph +de Puisaye sent off cargoes of false paper, excellently engraved and +printed, through ports in Brittany and other disaffected parts of +France. One seizure by General Hoche was declared by him to exceed in +nominal value ten thousand millions of _francs_. With the exception of +a few of these issues, detection was exceedingly difficult, even for +experts; for the vast majority of the people it was impossible. + +Nor was this all. At various times the insurgent royalists in La Vendee +and elsewhere put _their_ presses also in operation, issuing notes +bearing the Bourbon arms,--the _fleur-de-lis_, the portrait of the +Dauphin (as Louis XVII) with the magic legend "_De Par le Roi_," and +large bodies of the population in the insurgent districts were _forced_ +to take these. Even as late as 1799 these notes continued to appear. [80] + +The financial agony was prolonged somewhat by attempts to secure funds +by still another "forced loan," and other discredited measures, but +when all was over with paper money, specie began to reappear--first in +sufficient sums to do the small amount of business which remained after +the collapse. Then as the business demand increased, the amount of +specie flowed in from the world at large to meet it and the nation +gradually recovered from that long paper-money debauch. + +Thibaudeau, a very thoughtful observer, tells us in his Memoirs that +great fears were felt as to a want of circulating medium between the +time when paper should go out and coin should come in; but that no +such want was severely felt--that coin came in gradually as it was +wanted. [81] + +Nothing could better exemplify the saying of one of the most shrewd of +modern statesmen that "There will always be money." [82] + +But though there soon came a degree of prosperity--as compared with the +distress during the paper-money orgy, convalescence was slow. The acute +suffering from the wreck and rain brought by _assignats_, _mandats_ and +other paper currency in process of repudiation lasted nearly ten years, +but the period of recovery lasted longer than the generation which +followed. It required fully forty years to bring capital, industry, +commerce and credit up to their condition when the Revolution began, and +demanded a "man on horseback," who established monarchy on the ruins of +the Republic and thew away millions of lives for the Empire, to be added +to the millions which had been sacrificed by the Revolution. [83] + +Such, briefly sketched in its leading features, is the history of the +most skillful, vigorous and persistent attempt ever made to substitute +for natural laws in finance the ability of legislative bodies, and, for +a standard of value recognized throughout the world, a national standard +devised by theorists and manipulated by schemers. Every other attempt +of the same kind in human history, under whatever circumstances, has +reached similar results in kind if not in degree; all of them show the +existence of financial laws as real in their operation as those which +hold the planets in their courses. [84] + +I have now presented this history in its chronological order--the order +of events: let me, in conclusion, sum it up, briefly, in its _logical_ +order,--the order of cause and effect. + +And, first, in the economic department. From the early reluctant and +careful issues of paper we saw, as an immediate result, improvement and +activity in business. Then arose the clamor for more paper money. At +first, new issues were made with great difficulty; but, the dyke once +broken, the current of irredeemable currency poured through; and, the +breach thus enlarging, this currency was soon swollen beyond control. +It was urged on by speculators for a rise in values; by demagogues who +persuaded the mob that a nation, by its simple fiat, could stamp real +value to any amount upon valueless objects. As a natural consequence a +great debtor class grew rapidly, and this class gave its influence to +depreciate more and more the currency in which its debts were to be +paid. [85] + +The government now began, and continued by spasms to grind out still +more paper; commerce was at first stimulated by the difference in +exchange; but this cause soon ceased to operate, and commerce, having +been stimulated unhealthfully, wasted away. + +Manufactures at first received a great impulse; but, ere long, this +overproduction and overstimulus proved as fatal to them as to commerce. +From time to time there was a revival of hope caused by an apparent +revival of business; but this revival of business was at last seen to +be caused more and more by the desire of far-seeing and cunning men of +affairs to exchange paper money for objects of permanent value. As +to the people at large, the classes living on fixed incomes and small +salaries felt the pressure first, as soon as the purchasing power of +their fixed incomes was reduced. Soon the great class living on wages +felt it even more sadly. + +Prices of the necessities of life increased: merchants were obliged to +increase them, not only to cover depreciation of their merchandise, but +also to cover their risk of loss from fluctuation; and, while the prices +of products thus rose, wages, which had at first gone up, under +the general stimulus, lagged behind. Under the universal doubt and +discouragement, commerce and manufactures were checked or destroyed. +As a consequence the demand for labor was diminished; laboring men were +thrown out of employment, and, under the operation of the simplest +law of supply and demand, the price of labor--the daily wages of the +laboring class--went down until, at a time when prices of food, clothing +and various articles of consumption were enormous, wages were nearly as +low as at the time preceding the first issue of irredeemable currency. + +The mercantile classes at first thought themselves exempt from the +general misfortune. They were delighted at the apparent advance in the +value of the goods upon their shelves. But they soon found that, as they +increased prices to cover the inflation of currency and the risk +from fluctuation and uncertainty, purchases became less in amount +and payments less sure; a feeling of insecurity spread throughout the +country; enterprise was deadened and stagnation followed. + +New issues of paper were then clamored for as more drams are demanded by +a drunkard. New issues only increased the evil; capitalists were all the +more reluctant to embark their money on such a sea of doubt. Workmen of +all sorts were more and more thrown out of employment. Issue after issue +of currency came; but no relief resulted save a momentary stimulus, +which aggravated the disease. The most ingenious evasions of natural +laws in finance which the most subtle theorists could contrive were +tried--all in vain; the most brilliant substitutes for those laws were +tried; "self-regulating" schemes, "interconverting" schemes--all +equally vain. [86] All thoughtful men had lost confidence. All men were +_waiting_; stagnation became worse and worse. At last came the collapse +and then a return, by a fearful shock, to a state of things which +presented something like certainty of remuneration to capital and labor. +Then, and not till then, came the beginning of a new era of prosperity. + +Just as dependent on the law of cause and effect was the _moral_ +development. Out of the inflation of prices grew a speculating class; +and, in the complete uncertainty as to the future, all business became +a game of chance, and all business men, gamblers. In city centers came a +quick growth of stock-jobbers and speculators; and these set a debasing +fashion in business which spread to the remotest parts of the country. +Instead of satisfaction with legitimate profits, came a passion for +inordinate gains. Then, too, as values became more and more uncertain, +there was no longer any motive for care or economy, but every motive for +immediate expenditure and present enjoyment. So came upon the nation +the _obliteration of thrift_. In this mania for yielding to present +enjoyment rather than providing for future comfort were the seeds of +new growths of wretchedness: luxury, senseless and extravagant, set in: +this, too, spread as a fashion. To feed it, there came cheatery in +the nation at large and corruption among officials and persons holding +trusts. While men set such fashions in private and official business, +women set fashions of extravagance in dress and living that added to the +incentives to corruption. Faith in moral considerations, or even in +good impulses, yielded to general distrust. National honor was thought +a fiction cherished only by hypocrites. Patriotism was eaten out by +cynicism. + +Thus was the history of France logically developed in obedience to +natural laws; such has, to a greater or less degree, always been the +result of irredeemable paper, created according to the whim or interest +of legislative assemblies rather than based upon standards of value +permanent in their nature and agreed upon throughout the entire world. +Such, we may fairly expect, will always be the result of them until +the fiat of the Almighty shall evolve laws in the universe radically +different from those which at present obtain. [87] + +And, finally, as to the general development of the theory and practice +which all this history records: my subject has been Fiat Money in +France; How it came; What it brought; and How it ended. + +It came by seeking a remedy for a comparatively small evil in an evil +infinitely more dangerous. To cure a disease temporary in its character, +a corrosive poison was administered, which ate out the vitals of French +prosperity. + +It progressed according to a law in social physics which we may call +the "_law of accelerating issue and depreciation._" It was comparatively +easy to refrain from the first issue; it was exceedingly difficult to +refrain from the second; to refrain from the third and those following +was practically impossible. + +It brought, as we have seen, commerce and manufactures, the mercantile +interest, the agricultural interest, to ruin. It brought on these the +same destruction which would come to a Hollander opening the dykes of +the sea to irrigate his garden in a dry summer. + +It ended in the complete financial, moral and political prostration of +France-a prostration from which only a Napoleon could raise it. + +But this history would be incomplete without a brief sequel, showing how +that great genius profited by all his experience. When Bonaparte took +the consulship the condition of fiscal affairs was appalling. The +government was bankrupt; an immense debt was unpaid. The further +collection of taxes seemed impossible; the assessments were in hopeless +confusion. War was going on in the East, on the Rhine, and in Italy, and +civil war, in La Vendée. All the armies had long been unpaid, and the +largest loan that could for the moment be effected was for a sum hardly +meeting the expenses of the government for a single day. At the first +cabinet council Bonaparte was asked what he intended to do. He replied, +"I will pay cash or pay nothing." From this time he conducted all his +operations on this basis. He arranged the assessments, funded the debt, +and made payments in cash; and from this time--during all the campaigns +of Marengo, Austerlitz, Jena, Eylau, Friedland, down to the Peace of +Tilsit in 1807--there was but one suspension of specie payment, and this +only for a few days. When the first great European coalition was formed +against the Empire, Napoleon was hard pressed financially, and it was +proposed to resort to paper money; but he wrote to his minister, "While +I live I will never resort to irredeemable paper." He never did, and +France, under this determination, commanded all the gold she needed. +When Waterloo came, with the invasion of the Allies, with war on her +own soil, with a change of dynasty, and with heavy expenses for war and +indemnities, France, on a specie basis, experienced no severe financial +distress. + +If we glance at the financial history of France during the +Franco-Prussian War and the Communist struggle, in which a far more +serious pressure was brought upon French finances than our own recent +Civil War put upon American finance, and yet with no national stagnation +or distress, but with a steady progress in prosperity, we shall see +still more clearly the advantage of meeting a financial crisis in an +honest and straightforward way, and by methods sanctioned by the world's +most costly experience, rather than by yielding to dreamers, theorists, +phrase-mongers, declaimers, schemers, speculators or to that sort of, +"Reform" which is "the last refuge of a scoundrel." [88] + +There is a lesson in all this which it behooves every thinking man to +ponder. + + + + +NOTES + + +Note: The White Collection at the Cornell University library mentioned +in many of the following notes is described here: + +http://rmc.library.cornell.edu/collections/subjects/frrev.html + + + +THE BANK OF NEW YORK, established in 1784, was the only Bank in +existence in the city of New York at the time of the French experiment +with fiat money. + +THE BANK OF NEW YORK AND TRUST COMPANY, which celebrates its one-hundred +and fiftieth anniversary in March, 1934, considers it a privilege to +be able to distribute some copies of this scholarly article of the late +Andrew D. White. The article emphasizes the fact that the use of fiat +money in France was in its beginning a sincere effort on the part of +intelligent members of the National Assembly to stem the tide of misery +and wretchedness which had brought about the Revolution in 1789. But the +article also shows clearly that once started on a small scale, it became +utterly impossible to control the currency inflation and that after some +slight indications of improvement in conditions, the situation went from +bad to worse. In the long run, those most injured were the people whom +it was most desired to help--the laborer, the wage earner and those +whose incomes from previous savings were smallest. + +ANDREW D. WHITE had a long and distinguished career as educator, +historian, economist and diplomat; his description of the events +in France that followed the experiment with fiat money is intensely +interesting and well Worth the attention of every thinking person in the +United States of 1933. + + + + +FOOTNOTES: + + +[Footnote 1: A paper read before a meeting of Senators and Members of +the House of Representatives of both political parties, at Washington, +April 12th, and before the Union League Club, at New York, April 13th, +1876, and now (1914) revised and extended.] + +[Footnote 2: For proof that the financial situation of France at that +time was by no means hopeless, see Storch, "Economie Politique," vol. +iv, p. 159.] + +[Footnote 3: See Moniteur, sitting of April 10, 1790.] + +[Footnote 4: Ibid., sitting of April 15, 1790.] + +[Footnote 5: For details of this struggle, see Buchez and Roux, +"Histoire Parlementaire de la Révolution Française," vol. iii, pp. +364, 365, 404. For the wild utterances of Marat throughout this whole +history, see the full set of his "L'ami du peuple" in the President +White Collection of the Cornell University. For Bergasse's pamphlet and +a mass of similar publications, see the same collection. For the effect +produced by them, see Challamel, "Les Français sous la Révolution"; +also De Goncourt, "La Société Française pendant la Révolution," &c.] + +For the Report referred to, see Levasseur, "Histoire des classes +ouvriès et de l'industrie en France de 1789 à 1870," Paris, 1903, vol. +i., chap. 6. Levasseur (vol. 1, p. 120), a very strong conservative in +such estimates, sets the total value of church property at two thousand +millions; other authorities put it as high as twice that sum. See +especially Taine, liv. ii, ch. I., who gives the valuation as "about +four milliards." Sybel, "Gesch. der Revolutionszeit," gives it as two +milliards and Briand, "La séparation" &c., agrees with him. See also De +Nerve, "Finances Françaises," vol. ii, pp. 236-240; also Alison, +"History of Europe," vol. i.] + +[Footnote 6: For striking pictures of this feeling among the younger +generation of Frenchmen, see Challamel, "Sur la Révolution," p. 305. +For general history of John Law's paper money, see Henri Martin, +"Histoire de France"; also Blanqui, "Histoire de l'économie politique," +vol. ii, pp. 65-87; also Senior on "Paper Money," sec. iii, Pt. I, also +Thiers, "Histoire de Law"; also Levasseur, op. cit. Liv. i., chap. VI. +Several specimens of John Law's paper currency are to be found in the +White Collection in the Library of Cornell University,--some, numbered +with enormous figures.] + +[Footnote 7: See Buchez and Roux, "Histoire Parlementaire," vol. v, p. +321, et seq. For an argument to prove that the _assignats_ were, after +all, not so well secured as John Law's money, see Storch, "Economie +Politique," vol. iv, p. 160.] + +[Footnote 8: For specimens of this first issue and of nearly every other +issue during the French Revolution, see the extensive collection of +originals in the Cornell University Library. For a virtually complete +collection of photographic copies, see Dewamin, "Cent ans de +numismatique française," vol. i, passim.] + +[Footnote 9: See "Addresse de l'Assemblée nationals sur lea emissions +_d'assignats_ monnaies," p. 5.] + +[Footnote 10: Ibid., p. 10.] + +[Footnote 11: For Sarot, see "Lettre de M. Sarot," Paris, April 19, +1790. As to the sermon referred to see Levasseur as above, vol. i, p. +136.] + +[Footnote 12: Von Sybel, "History of the French Revolution," vol. i, p. +252; also Levasseur, as above, pp. 137 and following.] + +[Footnote 13: For Mirabeau's real opinion on irredeemable paper, see his +letter to Cerutti, in a leading article of the "Moniteur"; also +"Mèmoires do Mirabeau," vol. vii, pp. 23, 24 and elsewhere. For his +pungent remarks above quoted, see Levasseur, ibid., vol. i, p. 118.] + +[Footnote 14: See "Moniteur," August 27, 1790.] + +[Footnote 15: "Moniteur," August 28, 1790; also Levasseur, as above, pp. +139 _et seq_.] + +[Footnote 16: "Par une seule opération, grande, simple, magnifique." +See "Moniteur." The whole sounds curiously like the proposals of the +"Greenbackers," regarding the American debt, some years since.] + +[Footnote 17: "Moniteur," August 29, 1790.] + +[Footnote 18: See Lacretelle, "18me Siécle," vol. viii, pp. 84-87; also +Thiers and Mignet.] + +[Footnote 19: See Hatin, Histoire de la Presse en France, vols. v and +vi.] + +[Footnote 20: See "Moniteur," Sept. 5, 6 and 20, 1790.] + +[Footnote 21: See Levasseur, vol. i, p. 142.] + +[Footnote 22: See speech in "Moniteur"; also in Appendix to Thiers' +"History of the French Revolution."] + +[Footnote 23: See Levassear, "Classes ouvrières," etc., vol. i, p. +149.] + +[Footnote 24: See Levasseur, pp. 151 et seq. Various examples of these +"confidence bills" are to be seen in the Library of Cornell University.] + +[Footnote 25: See Levasseur, vol. i, pp. 155-156.] + +[Footnote 26: See Von Sybel, "History of the Revolution," vol. i, p. +265; also Levasseur, as above, vol. i, pp. 152-160.] + +[Footnote 27: For Turgot's argument against "fiat money" theory, see A. +D. White, "Seven Great Statesmen in the Warfare of Humanity with +Unreason," article on Turgot, pp. 169, et seq.] + +[Footnote 28: See De Goncourt, "Société française," for other +explanations; "Les Révolutions de Paris," vol. ii, p. 216; Challamel, +"Les Français sous la Révolution"; Senior, "On Some Effects of Paper +Money," p. 82; Buchez and Roux, "Histoire Parlementaire," etc., vol. x, +p. 216; Aulard, "Paris pendant la Révolution thermidorienne," _passim_, +and especially "Rapport du bureau de surveillance," vol. ii, pp. 562, et +seq. (Dec. 4-24, 1795.)] + +[Footnote 29: For statements and illustration of the general action of +this law, see Sumner, "History of American Currency," pp. 157, 158; also +Jevons, on "Money," p. 80.] + +[Footnote 30: See De Goncourt, "Société Française," p. 214.] + +[Footnote 31: See Von Sybel, History of the French Revolution, vol. 1, +pp. 281, 283.] + +[Footnote 32: For proofs that issues of irredeemable paper at first +stimulated manufactures and commerce in Austria and afterward ruined +them, see Storch's "Economie politique," vol. iv, p. 223, note; and for +the same effect produced by the same causes in Russia, see ibid., end of +vol. iv. For the same effects in America, see Sumner's "History of +American Currency." For general statement of effect of inconvertible +issues on foreign exchanges see McLeod on "Banking," p. 186.] + +[Footnote 33: See Louis Blanc, "Histoire de la Révolution," tome xii, +p. 113.] + +[Footnote 34: See "Extrait du registre des délibérations de la section +de la bibliothèque," May 3, 1791, pp. 4, 5.] + +[Footnote 35: Von Sybel, vol. i, p. 273.] + +[Footnote 36: For general account, see Thiers' "Révolution," chap. xiv; +also Lacretelle, vol. viii, p. 109; also "Memoirs of Mallet du Pan." For +a good account of the intrigues between the court and Mirabeau and of +the prices paid him, see Reeve, "Democracy and Monarchy in France," vol. +i, pp. 213-220. For a very striking caricature published after the iron +chest in the Tuileries was opened and the evidences of bribery of +Mirabeau fully revealed, see Challamel, "Musée," etc. Vol. i, p. 341, +is represented as a skeleton sitting on a pile of letters, holding the +French crown in one hand and a purse of gold in the other.] + +[Footnote 37: Thiers, chap. ix.] + +[Footnote 38: For this and other evidences of steady decline in the +purchasing power of the _assignats_, see Caron, "Tableaux de +Dépréciation du papier-monnaie," Paris, 1909, p. 386.] + +[Footnote 39: See especially "Discours de Fabre d'Eglantine," in +"Moniteur" for August 11, 1793; also debate in "Moniteur" of September +15, 1793; also Prudhomme's "Révolutions de Paris." For arguments of +much the same tenor, see vast numbers of pamphlets, newspaper articles +and speeches during the "Greenback Craze,"--and the craze for unlimited +coinage of silver,--in the United States.] + +[Footnote 40: See Caron, "Tableaux de Dépréciation," as above, p. +386.] + +[Footnote 41: Von Sybel, vol. i, pp. 509, 510, 515; also Villeneuve +Bargemont, "Histoire de l'Economie Politique," vol. ii, p. 213.] + +[Footnote 42: As to the purchasing power of money at that time, see +Arthur Young, "Travels in France during the Years 1787, 1788 and 1789." +For notices of the small currency with examples of satirical verses +written regarding it, see Challamel, "Les français sous la +Révolution," pp. 307, 308. See also Mercier, "Le Nouveau Paris," +edition of 1800, chapter ccv., entitled "Parchemin Monnaie." A series of +these petty notes will be found in the White collection of the Cornell +University Library. They are very dirty and much worn, but being printed +on parchment, remain perfectly legible. For issue of quarter-"_sou_" +pieces see Levasseur, p. 180.] + +[Footnote 43: See Levasseur, vol. i, p. 176.] + +[Footnote 44: For Chaumette's brilliant display of fictitious reasons +for the decline see Thiers, Shoberl's translation, published by Bentley, +vol. iii, p. 248.] + +[Footnote 45: For these fluctuations, see Caron, as above, p. 387.] + +[Footnote 46: One of the Forced Loan certificates will be found in the +White Collection in the Library of Cornell University.] + +[Footnote 47: For details of these transactions, see Levasseur, as +above, vol. i, chap. 6, pp. 181, et seq. Original specimens of these +notes, bearing the portrait of Louis XVI will be found in the Cornell +University Library (White Collection) and for the whole series perfectly +photographed in the same collection, Dewarmin, "Cent ans de numismatique +française," vol. i, pp. 143-165.] + +[Footnote 48: For statements showing the distress and disorder that +forced the Convention to establish the "_Maximum_" see Levasseur, vol. +i, pp. 188-193.] + +[Footnote 49: See Levasseur, as above, vol. i, pp. 195-225.] + +[Footnote 50: See specimens of these tickets in the White Collection in +the Cornell Library.] + +[Footnote 51: For these condemnations to the guillotine see the +officially published trials and also the lists of the condemned, in the +White Collection, also the lists given daily in the "Moniteur." For the +spy system, see Levasseur, vol. i, p. 194.] + +[Footnote 52: See Levasseur, as above, vol. i, p. 186. For an argument +to show that the Convention was led into this Draconian legislation, not +by necessity, but by its despotic tendencies, see Von Sybel's "History +of the French Revolution," vol. iii, pp. 11, 12. For general statements +of theories underlying the "_Maximum_," see Thiers; for a very +interesting picture, by an eye-witness, of the absurdities and miseries +it caused, see Mercier, "Nouveau Paris," edition of 1800, chapter XLIV.] + +[Footnote 53: For a summary of the report of the Committee, with list of +articles embraced under it, and for various interesting details, see +Villeneuve Bargemont, "Histoire de l'Economie Politique," vol. ii, pp. +213-239; also Levasseur, as above. For curious examples of severe +penalties for very slight infringements on the law on the subject, see +Louis Blanc, "Histoire de la Révolution française," tome x, p. 144. +For Louis XIVth's claim see "Memoirs of Louis XIV for the Instruction of +the Dauphin."] + +For a simple exposition of the way in which the exercise of this power +became simply confiscation of all private property in France, see Mallet +Du Pan's "Memoirs," London, 1852, vol. ii, p. 14.] + +[Footnote 54: See Du Pont's arguments, as given by Levasseur.] + +[Footnote 55: Louis Blanc calls attention to this very fact in showing +the superiority of the French _assignats_ to the old American +Continental currency, See his "Histoire de la Révolution française," +tome xii, p. 98.] + +[Footnote 56: See Sumner, as above, p. 220.] + +[Footnote 57: See Levasseur, as above, vol. i, p. 178.] + +[Footnote 58: See Cambon's "Report," Aug. 15, 1793, pp. 49-60; also, +"Decree of Aug. 24, 1793," sec. 31, chapters XCVI-CIII. Also, "Tableaux +de la dépréciation de papier monnaie dans le department de la Seine."] + +[Footnote 59: For the example of Metz and other authorities, see +Levasseur, as above, vol. i, p. 180.] + +[Footnote 60: See Von Sybel, vol. iii, p. 173.] + +[Footnote 61: See Thiers; also, for curious details of measures taken to +compel farmers and merchants, see Senior, Lectures on "Results of Paper +Money," pp. 86, 87.] + +[Footnote 62: See Von Sybel, vol. iv, p. 231.] + +[Footnote 63: See Von Sybel, vol. iv, p. 330; also tables of +depreciation in "Moniteur"; also official reports in the White +Collection; also Caron's "Tables," etc.] + +[Footnote 64: For a lifelike sketch of the way in which these exchanges +of _assignats_ for valuable property went on at periods of the rapid +depreciation of paper, see Challamel, "Les français sous la +Révolution," p. 309; also Say, "Economic Politique."] + +[Footnote 65: For a very complete table of the depreciation from day to +day, see "Supplement to the Moniteur" of October 2, 1797; also Caron, as +above. For the market prices of the _louis d'or_ at the first of every +month, as the collapse approached, see Montgaillard. See also "Official +Lists" in the White Collection. For a table showing the steady rise of +the franc in gold during a single week, from 251 to 280 _francs_, see +Dewarmin, as above, vol. i, p. 136.] + +[Footnote 66: See "Mèmoires de Thibaudeau," vol. ii, p. 26, also +Mercier, "Lo Nouveau Paris," vol. ii, p. 90; for curious example of the +scales of depreciation see the White Collection. See also extended table +of comparative values in 1790 and 1795. See Levasseur, as above, vol. i, +pp. 223-4.] + +[Footnote 67: For a striking similar case in our own country, see +Sumner, "History of American Currency," p. 47.] + +[Footnote 68: See Villeneuve Bargemont, "Histoire de l'économie +politique," vol. ii, p. 229.] + +[Footnote 69: See Von Sybel, vol. iv, pp. 337, 338. See also for +confirmation Challamel, "Histoire Musée," vol. ii, p. 179. For a +thoughtful statement of the reasons why such paper was not invested in +lands by men of moderate means, and workingmen, see Mill, "Political +Economy," vol. ii, pp. 81, 82.] + +[Footnote 70: See Von Sybel, vol. iv, p. 222.] + +[Footnote 71: See especially Levasseur, "Histoire des classes +ouvrières," etc. vol. i, pp. 219, 230 and elsewhere; also De Nervo, +"Finance française," p. 280; also Stourm, as already cited. The exact +amount of _assignats_ in circulation at the final suppression is given +by Dowarmin, (vol. i, p. 189), as 39,999,945,428 _livres_ or _francs_.] + +[Footnote 72: For details of the mandat system very thoroughly given, +see Thiers' "History of the French Revolution," Bentley's edition, vol. +iv, pp. 410-412. For the issue of _assignats_ and _mandats_ at the same +time, see Dewarmin, vol. i, p. 136; also Levasseur, vol. i, pp. 230-257. +For an account of "new tenor bills" in America and their failure in +1737, see Summer, pp. 27-31; for their failure in 1781, see Morse, "Life +of Alexander Hamilton," vol. i, pp. 86, 87. For similar failure in +Austria, see Summer, p. 314.] + +[Footnote 73: See Marchant, "Lettre aux gens de bonne foi."] + +[Footnote 74: See Summer, p. 44; also De Nervo, "Finances françaises," +p. 282.] + +[Footnote 75: See De Nervo, "Finances françaises," p. 282; also +Levasseur, vol. i, p. 236 et seq.] + +[Footnote 76: See Table from "Gazette de France" and extracts from other +sources in Levasseur, vol. i, pp. 223-4.] + +[Footnote 77: Among the many striking accounts of the debasing effects +of "inflation" upon France under the Directory perhaps the best is that +of Lacretelle, vol. xiii, pp. 32-36. For similar effect, produced by the +same cause in our own country in 1819, see statement from Niles' +"Register," in Sumner, p. 80. For the jumble of families reduced to +beggary with families lifted into sudden wealth and for the mass of +folly and misery thus mingled, see Levassour, vol. i, p. 237.] + +[Footnote 78: For Madame Tallien and luxury of the stock-gambler +classes, see Challamel, "Les français sous la Révolution," pp. 30, 33; +also De Goncourt, "Les français sous le Directoire." Regarding the +outburst of vice in Paris and the demoralization of the police, see +Levasseur, as above.] + +[Footnote 79: See Levasseur, Vol. i, p. 237, et seq.] + +[Footnote 80: For specimens of counterfeit _assignats_, see the White +Collection in the Cornell University Library, but for the great series +of various issues of them in fac-simile, also for detective warnings and +attempted descriptions of many varieties of them, and for the history of +their Issue, see especially Dewarmin, vol. i, pp. 152-161. For +photographic copies of Royalist _assignats_, etc., see also Dewarmin, +ibid., pp. 192-197, etc. For a photograph of probably the last of the +Royalist notes ever issued, bearing the words "Pro Deo, pro Rege, pro +Patria" and "Armée Catholique et Royale" with the date 1799, and for +the sum of 100 _livres_, see Dewarmin, vol. i, p. 204.] + +[Footnote 81: For similar expectation of a "shock," which did not occur, +at the resumption of specie payments in Massachusetts, see Sumner, +"History of American Currency," p. 34.] + +[Footnote 82: See Thiers.] + +[Footnote 83: See Levasseur, vol. i, p. 246.] + +[Footnote 84: For examples of similar effects in Russia, Austria and +Denmark, see Storch, "Economie Politique," vol. iv; for similar effects +in the United States, see Gouge, "Paper Money and Banking in the United +States," also Summer, "History of American Currency." For working out of +the same principles in England, depicted in a masterly way, see +Macaulay, "History of England," chap. xxi; and for curious exhibition of +the same causes producing same results in ancient Greece, see a curious +quotation by Macaulay in same chapter.] + +[Footnote 85: For parallel cases in the early history of our own +country, see Sumner, p. 21, and elsewhere.] + +[Footnote 86: For a review of some of these attempts, with eloquent +statement of their evil results, see "Mémoires de Durand de Maillane," +pp. 166-169.] + +[Footnote 87: For similar effect of inflated currency in enervating and +undermining trade, husbandry, manufactures and morals in our own +country, see Daniel Webster, cited in Sumner, pp. 45-50. For similar +effects in other countries, see Senior, Storch, Macaulay and others +already cited.] + +[Footnote 88: For facts regarding French finance under Napoleon I am +indebted to Hon. David A. Wells. For more recent triumphs of financial +commonsense in France, see Bonnet's articles, translated by the late +George Walker, Esq. For general subject, see Levasseur.] + + + + + + + +End of the Project Gutenberg EBook of Fiat Money Inflation in France, by +Andrew Dickson White + +*** END OF THIS PROJECT GUTENBERG EBOOK FIAT MONEY INFLATION IN FRANCE *** + +***** This file should be named 6949-8.txt or 6949-8.zip ***** +This and all associated files of various formats will be found in: + http://www.gutenberg.org/6/9/4/6949/ + +Produced by Gordon Keener + +Updated editions will replace the previous one--the old editions +will be renamed. + +Creating the works from public domain print editions means that no +one owns a United States copyright in these works, so the Foundation +(and you!) can copy and distribute it in the United States without +permission and without paying copyright royalties. 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You may copy it, give it away or +re-use it under the terms of the Project Gutenberg License included +with this eBook or online at www.gutenberg.org + + +Title: Fiat Money Inflation in France + How It Came, What It Brought, and How It Ended + +Author: Andrew Dickson White + +Release Date: March 28, 2009 [EBook #6949] + +Language: English + +Character set encoding: UTF-8 + +*** START OF THIS PROJECT GUTENBERG EBOOK FIAT MONEY INFLATION IN FRANCE *** + + + + +Produced by Gordon Keener, and David Widger + + + + + + +</pre> + + +<br><br> + +<h1> + FIAT MONEY INFLATION IN FRANCE +</h1> +<h3> +How It Came, What It Brought, and How It Ended +</h3><br><br> + +<h2> +by Andrew Dickson White, LL.D., Ph.D., D.C.L. +</h2><br><br> + + +<blockquote>Late President and Professor of History at Cornell University; Sometime +United States Minister to Russia and Ambassador to Germany; Author of "A +History of the Warfare of Science with Theology," etc.</blockquote> + + + + + +<br> +<br> +<hr> +<br> +<br> + + +<h2>Contents</h2> + + + +<center><a href="#2H_INTR"> +INTRODUCTION +</a><br><br> + +<a href="#2H_FORE"> +FOREWORD BY MR. JOHN MACKAY +</a><br><br> + +<a href="#2H_4_0003"> +<b>FIAT MONEY INFLATION IN FRANCE</b> +</a><br></center> + + +<center> +<table summary=""> +<tr><td> + + +<p class="toc"><a href="#2H_4_0004"> +I. +</a></p> +<p class="toc"><a href="#2H_4_0005"> +II. +</a></p> +<p class="toc"><a href="#2H_4_0006"> +III. +</a></p> + + + +</td></tr> +</table> +</center> + + + +<center> +<a href="#2H_NOTE"> +NOTES +</a><br><br> + +<a href="#2H_FOOT"> +FOOTNOTES +</a><br><br></center> + +<br> +<br> +<hr> +<br> +<br> + + + +<a name="2H_INTR"><!-- H2 anchor --></a> + + + +<h2> + INTRODUCTION +</h2> +<p> +As far back as just before our Civil War I made, in France and +elsewhere, a large collection of documents which had appeared during the +French Revolution, including newspapers, reports, speeches, pamphlets, +illustrative material of every sort, and, especially, specimens of +nearly all the Revolutionary issues of paper money,—from notes of ten +thousand <i>livres</i> to those of one <i>sou</i>. +</p> +<p> +Upon this material, mainly, was based a course of lectures then given +to my students, first at the University of Michigan and later at Cornell +University, and among these lectures, one on "Paper Money Inflation in +France." +</p> +<p> +This was given simply because it showed one important line of facts in +that great struggle; and I recall, as if it were yesterday, my feeling +of regret at being obliged to bestow so much care and labor upon a +subject to all appearance so utterly devoid of practical value. I +am sure that it never occurred, either to my Michigan students or to +myself, that it could ever have any bearing on our own country. It +certainly never entered into our minds that any such folly as that +exhibited in those French documents of the eighteenth century could ever +find supporters in the United States of the nineteenth. +</p> +<p> +Some years later, when there began to be demands for large issues of +paper money in the United States, I wrought some of the facts thus +collected into a speech in the Senate of the State of New York, showing +the need of especial care in such dealings with financial necessities. +</p> +<p> +In 1876, during the "greenback craze," General Garfield and Mr. S. B. +Crittenden, both members of the House of Representatives at that time, +asked me to read a paper on the same general subject before an audience +of Senators and Representatives of both parties in Washington. This I +did, and also gave it later before an assemblage of men of business at +the Union League Club in New York. +</p> +<p> +Various editions of the paper were afterward published, among them, two +or three for campaign purposes, in the hope that they might be of use +in showing to what folly, cruelty, wrong and rain the passion for "fiat +money" may lead. +</p> +<p> +Other editions were issued at a later period, in view of the principle +involved in the proposed unlimited coinage of silver in the United +States, which was, at bottom, the idea which led to that fearful wreck +of public and private prosperity in France. +</p> +<p> +For these editions there was an added reason in the fact that the +utterances of sundry politicians at that time pointed clearly to issues +of paper money practically unlimited. These men were logical enough +to see that it would be inconsistent to stop at the unlimited issue +of silver dollars which cost really something when they could issue +unlimited paper dollars which virtually cost nothing. +</p> +<p> +In thus exhibiting facts which Bishop Butler would have recognized as +confirming his theory of "The Possible Insanity of States," it is but +just to acknowledge that the French proposal was vastly more sane than +that made in our own country. Those French issues of paper rested not +merely "on the will of a free people," but on one-third of the entire +landed property of France; on the very choicest of real property in city +and country—the confiscated estates of the Church and of the fugitive +aristocracy—and on the power to use the paper thus issued in purchasing +this real property at very low prices. +</p> +<p> +I have taken all pains to be exact, revising the whole paper in the +light of the most recent publications and giving my authority for every +important statement, and now leave the whole matter with my readers. +</p> +<p> +At the request of a Canadian friend, who has expressed a strong wish +that this work be brought down to date, I have again restudied the +subject in the light of various works which have appeared since +my earlier research,—especially Levasseur's "Histoire des classes +ouvrières et de l'industrie en France,"—one of the really great books +of the twentieth century;—Dewarmin's superb "Cent Ans de numismatique +Française" and sundry special treatises. The result has been that +large additions have been made regarding some important topics, and +that various other parts of my earlier work have been made more clear by +better arrangement and supplementary information. +</p> +<p> +ANDREW D. WHITE. Cornell University, September, 1912. +</p> + +<br> +<br> +<hr> +<br> +<br> + +<a name="2H_FORE"><!-- H2 anchor --></a> + +<div style="height: 4em;"><br><br><br><br></div> + +<h2> + FOREWORD BY MR. JOHN MACKAY +</h2> +<p> +I am greatly indebted to the generosity of Mr. Andrew D. White, the +distinguished American scholar, author and diplomatist, for permission +to print and to circulate privately a small edition of his exceedingly +valuable account of the great currency-making experiment of the French +Revolutionary Government. The work has been revised and considerably +enlarged by Mr. White for the purpose of the present issue. +</p> +<p> +The story of "Fiat Money Inflation in France" is one of great interest +to legislators, to economic students, and to all business and thinking +men. It records the most gigantic attempt ever made in the history of +the world by a government to create an inconvertible paper currency, and +to maintain its circulation at various levels of value. It also records +what is perhaps the greatest of all governmental efforts—with the +possible exception of Diocletian's—to enact and enforce a legal limit +of commodity prices. Every fetter that could hinder the will or thwart +the wisdom of democracy had been shattered, and in consequence every +device and expedient that untrammelled power and unrepressed optimism +could conceive were brought to bear. But the attempts failed. They left +behind them a legacy of moral and material desolation and woe, from +which one of the most intellectual and spirited races of Europe has +suffered for a century and a quarter, and will continue to suffer until +the end of time. There are limitations to the powers of governments and +of peoples that inhere in the constitution of things, and that neither +despotisms nor democracies can overcome. +</p> +<p> +Legislatures are as powerless to abrogate moral and economic laws as +they are to abrogate physical laws. They cannot convert wrong into right +nor divorce effect from cause, either by parliamentary majorities, or +by unity of supporting public opinion. The penalties of such +legislative folly will always be exacted by inexorable time. While these +propositions may be regarded as mere commonplaces, and while they are +acknowledged in a general way, they are in effect denied by many of +the legislative experiments and the tendencies of public opinion of the +present day. The story, therefore, of the colossal folly of France in +the closing part Of the eighteenth century and its terrible fruits, is +full of instruction for all men who think upon the problems of our own +time. +</p> +<p> +From among an almost infinite variety, there are four great and +fundamental facts that clearly emerge, namely,— +</p> +<p> +(1) Notwithstanding the fact that the paper currency issued was the +direct obligation of the State, that much of it was interest bearing, +and that all of it was secured upon the finest real estate in France, +and that penalties in the way of fines, imprisonments and death were +enacted from time to time to maintain its circulation at fixed values, +there was a steady depreciation in value until it reached zero point and +culminated in repudiation. The aggregate of the issues amounted to no +less than the enormous and unthinkable sum of $9,500,000,000, and in +the middle of 1797 when public repudiation took place, there was no +less than $4,200,000,000 in face value of <i>assignats</i> and <i>mandats</i> +outstanding; the loss, as always, falling mostly upon the poor and the +ignorant. +</p> +<p> +(2) In the attempt to maintain fixed values for the paper currency the +Government became involved in an equally futile attempt to maintain a +tariff of legal prices for commodities. Here again penalties of fines, +of imprisonments and of death were powerless to accomplish the end in +view. +</p> +<p> +(3) An wholesale demoralisation of society took place under which +thrift, integrity, humanity, and every principle of morality were thrown +into the welter of seething chaos and cruelty. +</p> +<p> +(4) The real estate upon which the paper currency was secured +represented confiscations by the State of the lands of the Church and +of the Emigrant Noblemen. These lands were appraised, according to Mr. +White's narrative and other authorities, at $1,000,000,000. Here was +a straight addition to the State's resources of $1,000,000,000. It is +ominously significant that within one hundred years under the "Peace of +Frankfort" signed on the 10th May, 1871, the French nation agreed to pay +a war indemnity to victorious Germany of exactly the same sum, namely, +$1,000,000,000 in addition to the surrender of the province of Alsace +and a considerable part of Lorraine. The great addition to the national +wealth, therefore, effected by the immoral confiscation of the lands in +question disappeared with compound territorial interest added under the +visitation of relentless retribution. +</p> +<p> +Public opinion in our own country is so far sound on the question +of currency, but signs are not lacking in some lay quarters of +an inclination to sanction dangerous experiments. The doctrine of +governmental regulation of prices, has, however, made its appearance in +embryo. Class dissatisfaction is also on the increase. The confiscation +of property rights under legal forms and processes is apt to be condoned +when directed against unpopular interests and when limited to amounts +that do not revolt the conscience. The wild and terrible expression +given to these insidious principles in the havoc of the Revolution +should be remembered by all. Nor should the fact be overlooked that, as +Mr. White points out on Page 6, the National Assembly of France which +originated and supported these measures contained in its membership the +ablest Frenchmen of the day. +</p> +<p> +JOHN MACKAY. Toronto General Trusts Building, Toronto, 31st March, 1914. +</p> + + +<br> +<br> +<hr> +<br> +<br> + +<a name="2H_4_0003"><!-- H2 anchor --></a> + + + +<h1> + FIAT MONEY INFLATION IN FRANCE +</h1> +<h3> + How It Came, What It Brought, and How It Ended <a href="#note-1" name="noteref-1"><small>1</small></a> +</h3> +<a name="2H_4_0004"><!-- H2 anchor --></a> + +<div style="height: 4em;"><br><br><br><br></div> + +<h2> + I. +</h2> +<p> +Early in the year 1789 the French nation found itself in deep financial +embarrassment: there was a heavy debt and a serious deficit. +</p> +<p> +The vast reforms of that period, though a lasting blessing politically, +were a temporary evil financially. There was a general want of +confidence in business circles; capital had shown its proverbial +timidity by retiring out of sight as far as possible; throughout the +land was stagnation. +</p> +<p> +Statesmanlike measures, careful watching and wise management would, +doubtless, have ere long led to a return of confidence, a reappearance +of money and a resumption of business; but these involved patience +and self-denial, and, thus far in human history, these are the rarest +products of political wisdom. Few nations have ever been able to +exercise these virtues; and France was not then one of these few. <a href="#note-2" name="noteref-2"><small>2</small></a> +</p> +<p> +There was a general search for some short road to prosperity: ere long +the idea was set afloat that the great want of the country was more of +the circulating medium; and this was speedily followed by calls for an +issue of paper money. The Minister of Finance at this period was Necker. +In financial ability he was acknowledged as among the great bankers of +Europe, but his was something more than financial ability: he had a +deep feeling of patriotism and a high sense of personal honor. The +difficulties in his way were great, but he steadily endeavored to +keep France faithful to those principles in monetary affairs which the +general experience of modern times had found the only path to national +safety. As difficulties arose the National Assembly drew away from him, +and soon came among the members renewed suggestions of paper money: +orators in public meetings, at the clubs and in the Assembly, proclaimed +it a panacea—a way of "securing resources without paying interest." +Journalists caught it up and displayed its beauties, among these men, +Marat, who, in his newspaper, "The Friend of the People," also joined +the cries against Necker, picturing him—a man of sterling honesty, who +gave up health and fortune for the sake of France—as a wretch seeking +only to enrich himself from the public purse. +</p> +<p> +Against this tendency toward the issue of irredeemable paper Necker +contended as best he might. He knew well to what it always had led, +even when surrounded by the most skillful guarantees. Among those who +struggled to support ideas similar to his was Bergasse, a deputy from +Lyons, whose pamphlets, then and later, against such issues exerted a +wider influence, perhaps, than any others: parts of them seem fairly +inspired. Any one to-day reading his prophecies of the evils sure to +follow such a currency would certainly ascribe to him a miraculous +foresight, were it not so clear that his prophetic power was due simply +to a knowledge of natural laws revealed by history. But this current in +favor of paper money became so strong that an effort was made to breast +it by a compromise: and during the last months of 1789 and the first +months of 1790 came discussions in the National Assembly looking to +issues of notes based upon the landed property of the Church,—which was +to be confiscated for that purpose. But care was to be taken; the issue +was to be largely in the shape of notes of 1,000, 300 and 200 <i>livres</i>, +too large to be used as ordinary currency, but of convenient size to +be used in purchasing the Church lands; besides this, they were to bear +interest and this would tempt holders to hoard them. The Assembly thus +held back from issuing smaller obligations. +</p> +<p> +Remembrances of the ruin which had come from the great issues of smaller +currency at an earlier day were still vivid. Yet the pressure toward +a popular currency for universal use grew stronger and stronger. The +finance committee of the Assembly reported that "the people demand a new +circulating medium"; that "the circulation of paper money is the best of +operations"; that "it is the most free because it reposes on the will +of the people"; that "it will bind the interest of the citizens to the +public good." +</p> +<p> +The report appealed to the patriotism of the French people with the +following exhortation: "Let us show to Europe that we understand our +own resources; let us immediately take the broad road to our liberation +instead of dragging ourselves along the tortuous and obscure paths of +fragmentary loans." It concluded by recommending an issue of paper money +carefully guarded, to the full amount of four hundred million <i>livres</i>, +and the argument was pursued until the objection to smaller notes faded +from view. Typical in the debate on the whole subject, in its various +phases, were the declarations of M. Matrineau. He was loud and long for +paper money, his only fear being that the Committee had not authorized +enough of it; he declared that business was stagnant, and that the sole +cause was a want of more of the circulating medium; that paper money +ought to be made a legal tender; that the Assembly should rise above +prejudices which the failures of John Law's paper money had caused, +several decades before. Like every supporter of irredeemable paper money +then or since, he seemed to think that the laws of Nature had changed +since previous disastrous issues. He said: "Paper money under +a despotism is dangerous; it favors corruption; but in a nation +constitutionally governed, which itself takes care in the emission of +its notes, which determines their number and use, that danger no longer +exists." He insisted that John Law's notes at first restored prosperity, +but that the wretchedness and ruin they caused resulted from their +overissue, and that such an overissue is possible only under a +despotism. <a href="#note-3" name="noteref-3"><small>3</small></a> +</p> +<p> +M. de la Rochefoucauld gave his opinion that "the <i>assignats</i> will draw +specie out of the coffers where it is now hoarded. <a href="#note-4" name="noteref-4"><small>4</small></a> +</p> +<p> +On the other hand Cazalès and Maury showed that the result could only +be disastrous. Never, perhaps, did a political prophecy meet with more +exact fulfillment in every line than the terrible picture drawn in one +of Cazalès' speeches in this debate. Still the current ran stronger and +stronger; Petion made a brilliant oration in favor of the report, and +Necker's influence and experience were gradually worn away. +</p> +<p> +Mingled with the financial argument was a strong political plea. The +National Assembly had determined to confiscate the vast real property +of the French Church,—the pious accumulations of fifteen hundred +years. There were princely estates in the country, bishops' palaces and +conventual buildings in the towns; these formed between one-fourth and +one-third of the entire real property of France, and amounted in value +to at least two thousand million <i>livres</i>. By a few sweeping strokes +all this became the property of the nation. Never, apparently, did a +government secure a more solid basis for a great financial future. <a href="#note-5" name="noteref-5"><small>5</small></a> +</p> +<p> +There were two special reasons why French statesmen desired speedily to +sell these lands. First, a financial reason,—to obtain money to +relieve the government. Secondly, a political reason,—to get this land +distributed among the thrifty middle-classes, and so commit them to the +Revolution and to the government which gave their title. +</p> +<p> +It was urged, then, that the issue of four hundred millions of paper, +(not in the shape of interest-bearing bonds, as had at first been +proposed, but in notes small as well as large), would give the treasury +something to pay out immediately, and relieve the national necessities; +that, having been put into circulation, this paper money would stimulate +business; that it would give to all capitalists, large or small, the +means for buying from the nation the ecclesiastical real estate, and +that from the proceeds of this real estate the nation would pay its +debts and also obtain new funds for new necessities: never was theory +more seductive both to financiers and statesmen. +</p> +<p> +It would be a great mistake to suppose that the statesmen of France, or +the French people, were ignorant of the dangers in issuing irredeemable +paper money. No matter how skillfully the bright side of such a currency +was exhibited, all thoughtful men in France remembered its dark side. +They knew too well, from that ruinous experience, seventy years before, +in John Law's time, the difficulties and dangers of a currency not well +based and controlled. They had then learned how easy it is to issue it; +how difficult it is to check its overissue; how seductively it leads to +the absorption of the means of the workingmen and men of small fortunes; +how heavily it falls on all those living on fixed incomes, salaries or +wages; how securely it creates on the ruins of the prosperity of all +men of meagre means a class of debauched speculators, the most +injurious class that a nation can harbor,—more injurious, indeed, than +professional criminals whom the law recognizes and can throttle; how +it stimulates overproduction at first and leaves every industry flaccid +afterward; how it breaks down thrift and develops political and social +immorality. All this France had been thoroughly taught by experience. +Many then living had felt the result of such an experiment—the issues +of paper money under John Law, a man who to this day is acknowledged +one of the most ingenious financiers the world has ever known; and there +were then sitting in the National Assembly of France many who owed the +poverty of their families to those issues of paper. Hardly a man in the +country who had not heard those who issued it cursed as the authors of +the most frightful catastrophe France had then experienced. <a href="#note-6" name="noteref-6"><small>6</small></a> +</p> +<p> +It was no mere attempt at theatrical display, but a natural impulse, +which led a thoughtful statesman, during the debate, to hold up a piece +of that old paper money and to declare that it was stained with the +blood and tears of their fathers. +</p> +<p> +And it would also be a mistake to suppose that the National Assembly, +which discussed this matter, was composed of mere wild revolutionists; +no inference could be more wide of the fact. Whatever may have been the +character of the men who legislated for France afterward, no thoughtful +student of history can deny, despite all the arguments and sneers +of reactionary statesmen and historians, that few more keen-sighted +legislative bodies have ever met than this first French Constitutional +Assembly. In it were such men as Sieyès, Bailly, Necker, Mirabeau, +Talleyrand, DuPont de Nemours and a multitude of others who, in various +sciences and in the political world, had already shown and were destined +afterward to show themselves among the strongest and shrewdest men that +Europe has yet seen. +</p> +<p> +But the current toward paper money had become irresistible. It was +constantly urged, and with a great show of force, that if any nation +could safely issue it, France was now that nation; that she was fully +warned by her severe experience under John Law; that she was now a +constitutional government, controlled by an enlightened, patriotic +people,—not, as in the days of the former issues of paper money, an +absolute monarchy controlled by politicians and adventurers; that +she was able to secure every <i>livre</i> of her paper money by a virtual +mortgage on a landed domain vastly greater in value than the entire +issue; that, with men like Bailly, Mirabeau and Necker at her head, she +could not commit the financial mistakes and crimes from which France had +suffered under John Law, the Regent Duke of Orleans and Cardinal Dubois. +</p> +<p> +Oratory prevailed over science and experience. In April, 1790, came the +final decree to issue four hundred millions of <i>livres</i> in paper money, +based upon confiscated property of the Church for its security. The +deliberations on this first decree and on the bill carrying it into +effect were most interesting; prominent in the debate being Necker, Du +Pont de Nemours, Maury, Cazalès, Petion, Bailly and many others hardly +inferior. The discussions were certainly very able; no person can read +them at length in the "Moniteur," nor even in the summaries of the +parliamentary history, without feeling that various modern historians +have done wretched injustice to those men who were then endeavoring to +stand between France and ruin. +</p> +<p> +This sum—four hundred millions, so vast in those days, was issued in +<i>assignats</i>, which were notes secured by a pledge of productive +real estate and bearing interest to the holder at three per cent. No +irredeemable currency has ever claimed a more scientific and practical +guarantee for its goodness and for its proper action on public finances. +On the one hand, it had what the world recognized as a most practical +security,—a mortgage an productive real estate of vastly greater value +than the issue. On the other hand, as the notes bore interest, there +seemed cogent reason for their being withdrawn from circulation whenever +they became redundant. <a href="#note-7" name="noteref-7"><small>7</small></a> +</p> +<p> +As speedily as possible the notes were put into circulation. Unlike +those issued in John Law's time, they were engraved in the best style +of the art. To stimulate loyalty, the portrait of the king was placed +in the center; to arouse public spirit, patriotic legends and emblems +surrounded it; to stimulate public cupidity, the amount of interest +which the note would yield each day to the holder was printed in the +margin; and the whole was duly garnished with stamps and signatures to +show that it was carefully registered and controlled. <a href="#note-8" name="noteref-8"><small>8</small></a> +</p> +<p> +To crown its work the National Assembly, to explain the advantages +of this new currency, issued an address to the French people. In this +address it spoke of the nation as "delivered by this grand means from +all uncertainty and from all ruinous results of the credit system." It +foretold that this issue "would bring back into the public treasury, +into commerce and into all branches of industry strength, abundance and +prosperity." <a href="#note-9" name="noteref-9"><small>9</small></a> +</p> +<p> +Some of the arguments in this address are worth recalling, and, among +them, the following:—"Paper money is without inherent value unless +it represents some special property. Without representing some special +property it is inadmissible in trade to compete with a metallic +currency, which has a value real and independent of the public action; +therefore it is that the paper money which has only the public authority +as its basis has always caused ruin where it has been established; that +is the reason why the bank notes of 1720, issued by John Law, after +having caused terrible evils, have left only frightful memories. +Therefore it is that the National Assembly has not wished to expose +you to this danger, but has given this new paper money not only a value +derived from the national authority but a value real and immutable, a +value which permits it to sustain advantageously a competition with the +precious metals themselves." <a href="#note-10" name="noteref-10"><small>10</small></a> +</p> +<p> +But the final declaration was, perhaps, the most interesting. It was as +follows:— +</p> +<p> +"These <i>assignats</i>, bearing interest as they do, will soon be considered +better than the coin now hoarded, and will bring it out again into +circulation." The king was also induced to issue a proclamation +recommending that his people receive this new money without objection. +</p> +<p> +All this caused great joy. Among the various utterances of this feeling +was the letter of M. Sarot, directed to the editor of the Journal of the +National Assembly, and scattered through France. M. Sarot is hardly able +to contain himself as he anticipates the prosperity and glory that this +issue of paper is to bring to his country. One thing only vexes him, and +that is the pamphlet of M. Bergasse against the <i>assignats</i>; therefore +it is after a long series of arguments and protestations, in order to +give a final proof of his confidence in the paper money and his entire +skepticism as to the evils predicted by Bergasse and others, M. Sarot +solemnly lays his house, garden and furniture upon the altar of his +country and offers to sell them for paper money alone. +</p> +<p> +There were, indeed, some gainsayers. These especially appeared among the +clergy, who, naturally, abhorred the confiscation of Church property. +Various ecclesiastics made speeches, some of them full of pithy and +weighty arguments, against the proposed issue of paper, and there is +preserved a sermon from one priest threatening all persons handling the +new money with eternal damnation. But the great majority of the French +people, who had suffered ecclesiastical oppression so long, regarded +these utterances as the wriggling of a fish on the hook, and enjoyed the +sport all the better. <a href="#note-11" name="noteref-11"><small>11</small></a> +</p> +<p> +The first result of this issue was apparently all that the most sanguine +could desire: the treasury was at once greatly relieved; a portion of +the public debt was paid; creditors were encouraged; credit revived; +ordinary expenses were met, and, a considerable part of this paper +money having thus been passed from the government into the hands of +the people, trade increased and all difficulties seemed to vanish. The +anxieties of Necker, the prophecies of Maury and Cazalès seemed proven +utterly futile. And, indeed, it is quite possible that, if the national +authorities had stopped with this issue, few of the financial evils +which afterwards arose would have been severely felt; the four hundred +millions of paper money then issued would have simply discharged the +function of a similar amount of specie. But soon there came another +result: times grew less easy; by the end of September, within five +months after the issue of the four hundred millions in <i>assignats</i>, the +government had spent them and was again in distress. <a href="#note-12" name="noteref-12"><small>12</small></a> +</p> +<p> +The old remedy immediately and naturally recurred to the minds of +men. Throughout the country began a cry for another issue of paper; +thoughtful men then began to recall what their fathers had told them +about the seductive path of paper-money issues in John Law's time, and +to remember the prophecies that they themselves had heard in the debate +on the first issue of <i>assignats</i> less than six months before. +</p> +<p> +At that time the opponents of paper had prophesied that, once on the +downward path of inflation, the nation could not be restrained and that +more issues would follow. The supporters of the first issue had asserted +that this was a calumny; that the people were now in control and that +they could and would check these issues whenever they desired. +</p> +<p> +The condition of opinion in the Assembly was, therefore, chaotic: a few +schemers and dreamers were loud and outspoken for paper money; many +of the more shallow and easy-going were inclined to yield; the more +thoughtful endeavored to breast the current. +</p> +<p> +One man there was who could have withstood the pressure: Mirabeau. He +was the popular idol,—the great orator of the Assembly and much more +than a great orator,—he had carried the nation through some of its +worst dangers by a boldness almost godlike; in the various conflicts he +had shown not only oratorical boldness, but amazing foresight. As to his +real opinion on an irredeemable currency there can be no doubt. It was +the opinion which all true statesmen have held, before his time and +since,—in his own country, in England, in America, in every modern +civilized nation. In his letter to Cerutti, written in January, 1789, +hardly six months before, he had spoken of paper money as "A nursery of +tyranny, corruption and delusion; a veritable debauch of authority in +delirium." In one of his early speeches in the National Assembly he had +called such money, when Anson covertly suggested its issue, "a loan +to an armed robber," and said of it: "that infamous word, paper money, +ought to be banished from our language." In his private letters written +at this very time, which were revealed at a later period, he showed that +he was fully aware of the dangers of inflation. But he yielded to the +pressure: partly because he thought it important to sell the government +lands rapidly to the people, and so develop speedily a large class of +small landholders pledged to stand by the government which gave them +their titles; partly, doubtless, from a love of immediate rather than +of remote applause; and, generally, in a vague hope that the severe, +inexorable laws of finance which had brought heavy punishments upon +governments emitting an irredeemable currency in other lands, at other +times, might in some way at this time, be warded off from France. <a href="#note-13" name="noteref-13"><small>13</small></a> +</p> +<p> +The question was brought up by Montesquieu's report on the 27th +of August, 1790. This report favored, with evident reluctance, an +additional issue of paper. It went on to declare that the original issue +of four hundred millions, though opposed at the beginning, had proved +successful; that <i>assignats</i> were economical, though they had dangers; +and, as a climax, came the declaration: "We must save the country." <a href="#note-14" name="noteref-14"><small>14</small></a> +</p> +<p> +Upon this report Mirabeau then made one of his most powerful speeches. +He confessed that he had at first feared the issue of <i>assignats</i>, but +that he now dared urge it; that experience had shown the issue of +paper money most serviceable; that the report proved the first issue +of <i>assignats</i> a success; that public affairs had come out of distress; +that ruin had been averted and credit established. He then argued that +there was a difference between paper money of the recent issue and +that from which the nation had suffered so much in John Law's time; he +declared that the French nation had now become enlightened and he added, +"Deceptive subtleties can no longer mislead patriots and men of sense in +this matter." He then went on to say: "We must accomplish that which +we have begun," and declared that there must be one more large issue +of paper, guaranteed by the national lands and by the good faith of the +French nation. To show how practical the system was he insisted that +just as soon as paper money should become too abundant it would be +absorbed in rapid purchases of national lands; and he made a very +striking comparison between this self-adjusting, self-converting system +and the rains descending in showers upon the earth, then in swelling +rivers discharged into the sea, then drawn up in vapor and finally +scattered over the earth again in rapidly fertilizing showers. He +predicted that the members would be surprised at the astonishing success +of this paper money and that there would be none too much of it. +</p> +<p> +His theory grew by what it fed upon,—as the paper-money theory has +generally done. Toward the close, in a burst of eloquence, he suggested +that <i>assignats</i> be created to an amount sufficient to cover the +national debt, and that all the national lands be exposed for sale +immediately, predicting that thus prosperity would return to the nation +and that an classes would find this additional issue of paper money a +blessing. <a href="#note-15" name="noteref-15"><small>15</small></a> +</p> +<p> +This speech was frequently interrupted by applause; a unanimous vote +ordered it printed, and copies were spread throughout France. The +impulse given by it permeated all subsequent discussion; Gouy arose +and proposed to liquidate the national debt of twenty-four hundred +millions,—to use his own words—"by one single operation, grand, +simple, magnificent." <a href="#note-16" name="noteref-16"><small>16</small></a> This "operation" was to be the emission of +twenty-four hundred millions in legal tender notes, and a law that +specie should not be accepted in purchasing national lands. His demagogy +bloomed forth magnificently. He advocated an appeal to the people, who, +to use his flattering expression, "ought alone to give the law in a +matter so interesting." The newspapers of the period, in reporting his +speech, noted it with the very significant remark, "This discourse was +loudly applauded." +</p> +<p> +To him replied Brillat-Savarin. He called attention to the depreciation +of <i>assignats</i> already felt. He tried to make the Assembly see that +natural laws work as inexorably in France as elsewhere; he predicted +that if this new issue were made there would come a depreciation of +thirty per cent. Singular, that the man who so fearlessly stood against +this tide of unreason has left to the world simply a reputation as +the most brilliant cook that ever existed! He was followed by the Abbe +Goutes, who declared,—what seems grotesque to those who have read +the history of an irredeemable paper currency in any country—that +new issues of paper money "will supply a circulating medium which will +protect public morals from corruption." <a href="#note-17" name="noteref-17"><small>17</small></a> +</p> +<p> +Into this debate was brought a report by Necker. He was not, indeed, +the great statesman whom France especially needed at this time, of all +times. He did not recognize the fact that the nation was entering a +great revolution, but he could and did see that, come what might, +there were simple principles of finance which must be adhered to. Most +earnestly, therefore, he endeavored to dissuade the Assembly from +the proposed issue; suggesting that other means could be found for +accomplishing the result, and he predicted terrible evils. But the +current was running too fast. The only result was that Necker was +spurned as a man of the past; he sent in his resignation and left +France forever. <a href="#note-18" name="noteref-18"><small>18</small></a> The paper-money demagogues shouted for joy at his +departure; their chorus rang through the journalism of the time. No +words could express their contempt for a man who was unable to see the +advantages of filling the treasury with the issues of a printing press. +Marat, Hébert, Camille Desmoulins and the whole mass of demagogues so +soon to follow them to the guillotine were especially jubilant. <a href="#note-19" name="noteref-19"><small>19</small></a> +</p> +<p> +Continuing the debate, Rewbell attacked Necker, saying that the +<i>assignats</i> were not at par because there were not yet enough of them; +he insisted that payments for public lands be received in <i>assignats</i> +alone; and suggested that the church bells of the kingdom be melted down +into small money. Le Brun attacked the whole scheme in the Assembly, as +he had done in the Committee, declaring that the proposal, instead +of relieving the nation, would wreck it. The papers of the time very +significantly say that at this there arose many murmurs. Chabroud came +to the rescue. He said that the issue of <i>assignats</i> would relieve the +distress of the people and he presented very neatly the new theory of +paper money and its basis in the following words: "The earth is the +source of value; you cannot distribute the earth in a circulating value, +but this paper becomes representative of that value and it is evident +that the creditors of the nation will not be injured by taking it." On +the other hand, appeared in the leading paper, the "Moniteur," a very +thoughtful article against paper money, which sums up all by saying, +"It is, then, evident that all paper which cannot, at the will of the +bearer, be converted into specie cannot discharge the functions of +money." This article goes on to cite Mirabeau's former opinion in his +letter to Cerutti, published in 1789,—the famous opinion of paper money +as "a nursery of tyranny, corruption and delusion; a veritable debauch +of authority in delirium." Lablache, in the Assembly, quoted a saying +that "paper money is the emetic of great states." <a href="#note-20" name="noteref-20"><small>20</small></a> +</p> +<p> +Boutidoux, resorting to phrasemaking, called the <i>assignats</i> <i>"un papier +terre,"</i> or "land converted into paper." Boislandry answered vigorously +and foretold evil results. Pamphlets continued to be issued,—among +them, one so pungent that it was brought into the Assembly and read +there,—the truth which it presented with great clearness being simply +that doubling the quantity of money or substitutes for money in a nation +simply increases prices, disturbs values, alarms capital, diminishes +legitimate enterprise, and so decreases the demand both for products +and for labor; that the only persons to be helped by it are the rich +who have large debts to pay. This pamphlet was signed "A Friend of the +People," and was received with great applause by the thoughtful minority +in the Assembly. Du Pont de Nemours, who had stood by Necker in the +debate on the first issue of <i>assignats</i>, arose, avowed the pamphlet to +be his, and said sturdily that he had always voted against the emission +of irredeemable paper and always would. <a href="#note-21" name="noteref-21"><small>21</small></a> +</p> +<p> +Far more important than any other argument against inflation was the +speech of Talleyrand. He had been among the boldest and most radical +French statesmen. He it was,—a former bishop,—who, more than any +other, had carried the extreme measure of taking into the possession of +the nation the great landed estates of the Church, and he had supported +the first issue of four hundred millions. But he now adopted a judicial +tone—attempted to show to the Assembly the very simple truth that the +effect of a second issue of <i>assignats</i> may be different from that of +the first; that the first was evidently needed; that the second may be +as injurious as the first was useful. He exhibited various weak points +in the inflation fallacies and presented forcibly the trite truth that +no laws and no decrees can keep large issues of irredeemable paper at +par with specie. +</p> +<p> +In his speech occur these words: "You can, indeed, arrange it so that +the people shall be forced to take a thousand <i>livres</i> in paper for a +thousand <i>livres</i> in specie; but you can never arrange it so that a man +shall be obliged to give a thousand <i>livres</i> in specie for a thousand +<i>livres</i> in paper,—in that fact is embedded the entire question; and on +account of that fact the whole system fails." <a href="#note-22" name="noteref-22"><small>22</small></a> +</p> +<p> +The nation at large now began to take part in the debate; thoughtful +men saw that here was the turning Point between good and evil, that the +nation stood at the parting of the ways. Most of the great commercial +cities bestirred themselves and sent up remonstrances against the new +emission,—twenty-five being opposed and seven in favor of it. +</p> +<p> +But eloquent theorists arose to glorify paper and among these, Royer, +who on September 14, 1790, put forth a pamphlet entitled "Reflections of +a patriotic Citizen on the issue of <i>Assignats</i>," in which he gave many +specious reasons of the why the <i>assignats</i> could not be depressed, and +spoke of the argument against them as "vile clamors of people bribed +to affect public opinion." He said to the National Assembly, "If it +is necessary to create five thousand millions, and more, of the paper, +decree such a creation gladly." He, too, predicted, as many others had +done, a time when gold was to lose all its value, since all exchanges +would be made with this admirable, guaranteed paper, and therefore that +coin would come out from the places where it was hoarded. He foretold +prosperous times to France in case these great issues of paper were +continued and declared these "the only means to insure happiness, glory +and liberty to the French nation." Speeches like this gave courage to +a new swarm of theorists,—it began to be especially noted that men who +had never shown any ability to make or increase fortunes for themselves +abounded in brilliant plans for creating and increasing wealth for the +country at large. +</p> +<p> +Greatest force of all, on September 27, 1790, came Mirabeau's final +speech. The most sober and conservative of his modern opponents speaks +of its eloquence as "prodigious." In this the great orator dwelt first +on the political necessity involved, declaring that the most pressing +need was to get the government lands into the hands of the people, and +so to commit to the nation and against the old privileged classes the +class of landholders thus created. +</p> +<p> +Through the whole course of his arguments there is one leading point +enforced with all his eloquence and ingenuity—the excellence of the +proposed currency, its stability and its security. He declares that, +being based on the pledge of public lands and convertible into them, the +notes are better secured than if redeemable in specie; that the precious +metals are only employed in the secondary arts, while the French paper +money represents the first and most real of all property, the source of +all production, the land; that while other nations have been obliged to +emit paper money, none have ever been so fortunate as the French nation, +for the reason that none had ever before been able to give this landed +security; that whoever takes French paper money has practically a +mortgage to secure it,—and on landed property which can easily be sold +to satisfy his claims, while other nations have been able only to give a +vague claim on the entire nation. "And," he ones, "I would rather have a +mortgage on a garden than on a kingdom!" +</p> +<p> +Other arguments of his are more demagogical. He declares that the only +interests affected will be those of bankers and capitalists, but +that manufacturers will see prosperity restored to them. Some of his +arguments seem almost puerile, as when he says, "If gold has been +hoarded through timidity or malignity, the issue of paper will show that +gold is not necessary, and it will then come forth." But, as a whole, +the speech was brilliant; it was often interrupted by applause; it +settled the question. People did not stop to consider that it was the +dashing speech of an orator and not the matured judgment of a financial +expert; they did not see that calling Mirabeau or Talleyrand to advise +upon a monetary policy, because they had shown boldness in danger and +strength in conflict, was like summoning a prize-fighter to mend a +watch. +</p> +<p> +In vain did Maury show that, while the first issues of John Law's paper +had brought prosperity, those that followed brought misery; in vain did +he quote from a book published in John Law's time, showing that Law was +at first considered a patriot and friend of humanity; in vain did he +hold up to the Assembly one of Law's bills and appeal to their memories +of the wretchedness brought upon France by them; in vain did Du Pont +present a simple and really wise plan of substituting notes in the +payment of the floating debt which should not form a part of the +ordinary circulating medium; nothing could resist the eloquence of +Mirabeau. Barnave, following, insisted that "Law's paper was based +upon the phantoms of the Mississippi; ours, upon the solid basis of +ecclesiastical lands," and he proved that the <i>assignats</i> could not +depreciate further. Prudhomme's newspaper poured contempt over gold as +security for the currency, extolled real estate as the only true basis +and was fervent in praise of the convertibility and self-adjusting +features of the proposed scheme. In spite of all this plausibility and +eloquence, a large minority stood firm to their earlier principles; but +on the 29th of September, 1790, by a vote of 508 to 423, the deed was +done; a bill was passed authorizing the issue of eight hundred millions +of new <i>assignats</i>, but solemnly declaring that in no case should the +entire amount put in circulation exceed twelve hundred millions. To make +assurance doubly sure, it also provided that as fast as the <i>assignats</i> +were paid into the treasury for land they should be burned, and thus a +healthful contraction be constantly maintained. Unlike the first issue, +these new notes were to bear no interest. <a href="#note-23" name="noteref-23"><small>23</small></a> +</p> +<p> +Great were the plaudits of the nation at this relief. Among the +multitudes of pamphlets expressing this joy which have come down to us +the "Friend of the Revolution" is the most interesting. It begins as +follows: "Citizens, the deed is done. The <i>assignats</i> are the keystone +of the arch. It has just been happily put in position. Now I can +announce to you that the Revolution is finished and there only remain +one or two important questions. All the rest is but a matter of detail +which cannot deprive us any longer of the pleasure of admiring this +important work in its entirety. The provinces and the commercial cities +which were at first alarmed at the proposal to issue so much paper money +now send expressions of their thanks; specie is coming out to be joined +with paper money. Foreigners come to us from all parts of Europe to seek +their happiness under laws which they admire; and soon France, enriched +by her new property and by the national industry which is preparing for +fruitfulness, will demand still another creation of paper money." +</p> +<p> +France was now fully committed to a policy of inflation; and, if there +had been any question of this before, all doubts were removed now by +various acts very significant as showing the exceeding difficulty of +stopping a nation once in the full tide of a depreciating currency. The +National Assembly had from the first shown an amazing liberality to all +sorts of enterprises, wise or foolish, which were urged "for the good of +the people." As a result of these and other largesses the old cry of the +"lack of a circulating medium" broke forth again; and especially loud +were the clamors for more small bills. The cheaper currency had largely +driven out the dearer; paper had caused small silver and copper money +mainly to disappear; all sorts of notes of hand, circulating under the +name of "confidence bills," flooded France—sixty-three kinds in Paris +alone. This unguaranteed currency caused endless confusion and fraud. +Different districts of France began to issue their own <i>assignats</i> in +small denominations, and this action stirred the National Assembly to +evade the solemn pledge that the circulation should not go above twelve +hundred millions and that all <i>assignats</i> returned to the treasury for +lands should immediately be burned. <a href="#note-24" name="noteref-24"><small>24</small></a> Within a short time there had +been received into the treasury for lands one hundred and sixty million +<i>livres</i> in paper. By the terms of the previous acts this amount of +paper ought to have been retired. Instead of this, under the plea of +necessity, the greater part of it was reissued in the form of small +notes. +</p> +<p> +There was, indeed, much excuse for new issues of small notes, for, under +the theory that an issue of smaller notes would drive silver out of +circulation, the smallest authorized <i>assignat</i> was for fifty <i>livres</i>. +To supply silver and copper and hold it in circulation everything was +tried. Citizens had been spurred on by law to send their silverware and +jewels to the mint. Even the king sent his silver and gold plate, and +the churches and convents were required by law to send to the government +melting pot all silver and gold vessels not absolutely necessary for +public worship. For copper money the church bells were melted down. But +silver and even copper continued to become more and more scarce. In the +midst of all this, various juggleries were tried, and in November, 1790, +the Assembly decreed a single standard of coinage, the chosen metal +being silver, and the ratio between the two precious metals was +changed from 15 1/2 to 1, to 14 1/2 to 1—but all in vain. It was found +necessary to issue the dreaded small paper, and a beginning was made by +issuing one hundred millions in notes of five <i>francs</i>, and, ere long, +obedient to the universal clamor, there were issued parchment notes for +various small amounts down to a single <i>sou</i>. <a href="#note-25" name="noteref-25"><small>25</small></a> +</p> +<p> +Yet each of these issues, great or small, was but as a drop of cold +water to a parched throat. Although there was already a rise in prices +which showed that the amount needed for circulation had been exceeded, +the cry for "more circulating medium" was continued. The pressure for +new issues became stronger and stronger. The Parisian populace and the +Jacobin Club were especially loud in their demands for them; and, a few +months later, on June 19, 1791, with few speeches, in a silence very +ominous, a new issue was made of six hundred millions more;—less than +nine months after the former great issue, with its solemn pledges +to keep down the amount in circulation. With the exception of a few +thoughtful men, the whole nation again sang paeans. <a href="#note-26" name="noteref-26"><small>26</small></a> +</p> +<p> +In this comparative ease of new issues is seen the action of a law +in finance as certain as the working of a similar law in natural +philosophy. If a material body fall from a height its velocity is +accelerated, by a well-known law, in a constantly increasing ratio: so +in issues of irredeemable currency, in obedience to the theories of a +legislative body or of the people at large, there is a natural law of +rapidly increasing emission and depreciation. The first inflation bills +were passed with great difficulty, after very sturdy resistance and by +a majority of a few score out of nearly a thousand votes; but we observe +now that new inflation measures were passed more and more easily and +we shall have occasion to see the working of this same law in a more +striking degree as this history develops itself. +</p> +<p> +During the various stages of this debate there cropped up a doctrine +old and ominous. It was the same which appeared toward the end of the +nineteenth century in the United States during what became known as the +"greenback craze" and the free "silver craze." In France it had +been refuted, a generation before the Revolution, by Turgot, just as +brilliantly as it was met a hundred years later in the United States +by James A. Garfield and his compeers. This was the doctrine that all +currency, whether gold, paper, leather or any other material, derives +its efficiency from the official stamp it bears, and that, this being +the case, a government may relieve itself of its debts and make itself +rich and prosperous simply by means of a printing press:—fundamentally +the theory which underlay the later American doctrine of "fiat money." +</p> +<p> +There came mutterings and finally speeches in the Jacobin Club, in the +Assembly and in newspaper articles and pamphlets throughout the country, +taking this doctrine for granted. These could hardly affect thinking +men who bore in mind the calamities brought upon the whole people, +and especially upon the poorer classes, by this same theory as put in +practice by John Law, or as refuted by Turgot, but it served to swell +the popular chorus in favor of the issue of more <i>assignats</i> and plenty +of them. <a href="#note-27" name="noteref-27"><small>27</small></a> +</p> +<p> +The great majority of Frenchmen now became desperate optimists, +declaring that inflation is prosperity. Throughout France there came +temporary good feeling. The nation was becoming inebriated with paper +money. The good feeling was that of a drunkard just after his draught; +and it is to be noted as a simple historical fact, corresponding to a +physiological fact, that, as draughts of paper money came faster the +successive periods of good feeling grew shorter. +</p> +<p> +Various bad signs began to appear. Immediately after each new issue came +a marked depreciation; curious it is to note the general reluctance to +assign the right reason. The decline in the purchasing power of paper +money was in obedience to the simplest laws in economics, but France had +now gone beyond her thoughtful statesmen and taken refuge in unwavering +optimism, giving any explanation of the new difficulties rather than the +right one. A leading member of the Assembly insisted, in an elaborate +speech, that the cause of depreciation was simply the want of knowledge +and of confidence among the rural population and he suggested means of +enlightening them. La Rochefoucauld proposed to issue an address to +the people showing the goodness of the currency and the absurdity of +preferring coin. The address was unanimously voted. As well might they +have attempted to show that a beverage made by mixing a quart of wine +and two quarts of water would possess all the exhilarating quality of +the original, undiluted liquid. +</p> +<p> +Attention was aroused by another menacing fact;—specie disappeared +more and more. The explanations of this fact also displayed wonderful +ingenuity in finding false reasons and in evading the true one. A +very common explanation was indicated in Prudhomme's newspaper, "Les +Révolutions de Paris," of January 17, 1791, which declared that coin +"will keep rising until the people shall have hanged a broker." Another +popular theory was that the Bourbon family were, in some mysterious way, +drawing off all solid money to the chief centers of their intrigues in +Germany. Comic and, at the same time, pathetic, were evidences of the +wide-spread idea that if only a goodly number of people engaged in trade +were hanged, the par value of the <i>assignats</i> would be restored. +</p> +<p> +Still another favorite idea was that British emissaries were in the +midst of the people, instilling notions hostile to paper. Great efforts +were made to find these emissaries and more than one innocent person +experienced the popular wrath under the supposition that he was engaged +in raising gold and depressing paper. Even Talleyrand, shrewd as he was, +insisted that the cause was simply that the imports were too great and +the exports too little. <a href="#note-28" name="noteref-28"><small>28</small></a> As well might he explain that fact that, +when oil is mingled with water, water sinks to the bottom, by saying +that this is because the oil rises to the top. This disappearance of +specie was the result of a natural law as simple and as sure in its +action as gravitation; the superior currency had been withdrawn because +an inferior currency could be used. <a href="#note-29" name="noteref-29"><small>29</small></a> Some efforts were made to remedy +this. In the municipality of Quilleboeuf a considerable amount in specie +having been found in the possession of a citizen, the money was seized +and sent to the Assembly. The people of that town treated this hoarded +gold as the result of unpatriotic wickedness or madness, instead of +seeing that it was but the sure result of a law working in every land +and time, when certain causes are present. Marat followed out this +theory by asserting that death was the proper penalty for persons who +thus hid their money. +</p> +<p> +Still another troublesome fact began now to appear. Though paper money +had increased in amount, prosperity had steadily diminished. In spite of +all the paper issues, commercial activity grew more and more spasmodic. +Enterprise was chilled and business became more and more stagnant. +Mirabeau, in his speech which decided the second great issue of paper, +had insisted that, though bankers might suffer, this issue would be of +great service to manufacturers and restore prosperity to them and their +workmen. The latter were for a time deluded, but were at last rudely +awakened from this delusion. The plenty of currency had at first +stimulated production and created a great activity in manufactures, but +soon the markets were glutted and the demand was diminished. In spite of +the wretched financial policy of years gone by, and especially in spite +of the Revocation of the Edict of Nantes, by which religious bigotry +had driven out of the kingdom thousands of its most skillful Protestant +workmen, the manufactures of France had before the Revolution come into +full bloom. In the finer woolen goods, in silk and satin fabrics of all +sorts, in choice pottery and porcelain, in manufactures of iron, steel, +and copper, they had again taken their old leading place upon the +Continent. All the previous changes had, at the worst, done no more +than to inflict a momentary check on this highly developed system of +manufactures. But what the bigotry of Louis XIV and the shiftlessness +of Louis XV could not do in nearly a century, was accomplished by this +tampering with the currency in a few months. One manufactory after +another stopped. At one town, Lodève, five thousand workmen were +discharged from the cloth manufactories. Every cause except the right +one was assigned for this. Heavy duties were put upon foreign goods; +everything that tariffs and custom-houses could do was done. Still the +great manufactories of Normandy were closed, those of the rest of the +kingdom speedily followed, and vast numbers of workmen in all parts of +the country were thrown out of employment. <a href="#note-30" name="noteref-30"><small>30</small></a> Nor was this the case +with the home demand alone. The foreign demand, which at first had been +stimulated, soon fell off. In no way can this be better stated than by +one of the most thoughtful historians of modern times, who says, "It is +true that at first the <i>assignats</i> gave the same impulse to business +in the city as in the country, but the apparent improvement had no firm +foundation, even in the towns. Whenever a great quantity of paper money +is suddenly issued we invariably see a rapid increase of trade. The +great quantity of the circulating medium sets in motion all the energies +of commerce and manufactures; capital for investment is more easily +found than usual and trade perpetually receives fresh nutriment. If this +paper represents real credit, founded upon order and legal security, +from which it can derive a firm and lasting value, such a movement may +be the starting point of a great and widely-extended prosperity, as, for +instance, a splendid improvement in English agriculture was undoubtedly +owing to the emancipation of the country bankers. If on the contrary, +the new paper is of precarious value, as was clearly seen to be the case +with the French <i>assignats</i> as early as February, 1791, it can confer no +lasting benefits. For the moment, perhaps, business receives an impulse, +all the more violent because every one endeavors to invest his doubtful +paper in buildings, machines and goods, which, under all circumstances, +retain some intrinsic value. Such a movement was witnessed in France +in 1791, and from every quarter there came satisfactory reports of the +activity of manufactures." +</p> +<p> +"But, for the moment, the French manufacturers derived great advantage +from this state of things. As their products could be so cheaply paid +for, orders poured in from foreign countries to such a degree that it +was often difficult for the manufacturers to satisfy their customers. +It is easy to see that prosperity of this kind must very soon find +its limit.... When a further fall in the <i>assignats</i> took place this +prosperity would necessarily collapse, and be succeeded by a crisis +all the more destructive the more deeply men had engaged in speculation +under the influence of the first favorable prospects." <a href="#note-31" name="noteref-31"><small>31</small></a> +</p> +<p> +Thus came a collapse in manufacturing and commerce, just as it had come +previously in France: just as it came at various periods in Austria, +Russia, America, and in all countries where men have tried to build up +prosperity on irredeemable paper. <a href="#note-32" name="noteref-32"><small>32</small></a> +</p> +<p> +All this breaking down of the manufactures and commerce of the nation +made fearful inroads on the greater fortunes; but upon the lesser, and +upon the little properties of the masses of the nation who relied upon +their labor, it pressed with intense severity. The capitalist could put +his surplus paper money into the government lands and await results; but +the men who needed their money from day to day suffered the worst of +the misery. Still another difficulty appeared. There had come a complete +uncertainty as to the future. Long before the close of 1791 no one knew +whether a piece of paper money representing a hundred <i>livres</i> would, +a month later, have a purchasing power of ninety or eighty or sixty +<i>livres</i>. The result was that capitalists feared to embark their means +in business. Enterprise received a mortal blow. Demand for labor was +still further diminished; and here came a new cause of calamity: for +this uncertainty withered all far-reaching undertakings. The business +of France dwindled into a mere living from hand to mouth. This state of +things, too, while it bore heavily upon the moneyed classes, was +still more ruinous to those in moderate and, most of all, to those in +straitened circumstances. With the masses of the people, the purchase of +every article of supply became a speculation—a speculation in which +the professional speculator had an immense advantage over the ordinary +buyer. Says the most brilliant of apologists for French revolutionary +statesmanship, "Commerce was dead; betting took its place." <a href="#note-33" name="noteref-33"><small>33</small></a> +</p> +<p> +Nor was there any compensating advantage to the mercantile classes. The +merchant was forced to add to his ordinary profit a sum sufficient to +cover probable or possible fluctuations in value, and while prices of +products thus went higher, the wages of labor, owing to the number of +workmen who were thrown out of employment, went lower. +</p> +<p> +But these evils, though great, were small compared to those far more +deep-seated signs of disease which now showed themselves throughout the +country. One of these was the <i>obliteration of thrift</i> from the minds +of the French people. The French are naturally thrifty; but, with such +masses of money and with such uncertainty as to its future value, the +ordinary motives for saving and care diminished, And a loose luxury +spread throughout the country. A still worse outgrowth was the increase +of speculation and gambling. With the plethora of paper currency in +1791 appeared the first evidences of that cancerous disease which +always follows large issues of irredeemable currency,—a disease more +permanently injurious to a nation than war, pestilence or famine. For +at the great metropolitan centers grew a luxurious, speculative, +stock-gambling body, which, like a malignant tumor, absorbed into itself +the strength of the nation and sent out its cancerous fibres to the +remotest hamlets. At these city centers abundant wealth seemed to be +piled up: in the country at, large there grew a dislike of steady labor +and a contempt for moderate gains and simple living. In a pamphlet +published in May, 1791, we see how, in regard to this also, public +opinion was blinded. The author calls attention to the increase of +gambling in values of all sorts in these words: "What shall I say of the +stock-jobbing, as frightful as it is scandalous, which goes on in Paris +under the very eyes of our legislators,—a most terrible evil, yet, +under the present circumstances,—necessary?" The author also speaks +of these stock-gamblers as using the most insidious means to influence +public opinion in favor of their measures; and then proposes, seriously, +a change in various matters of detail, thinking that this would prove a +sufficient remedy for an evil which had its roots far down in the whole +system of irredeemable currency. As well might a physician prescribe a +pimple wash for a diseased liver. <a href="#note-34" name="noteref-34"><small>34</small></a> +</p> +<p> +Now began to be seen more plainly some of the many ways in which an +inflation policy robs the working class. As these knots of plotting +schemers at the city centers were becoming bloated with sudden wealth, +the producing classes of the country, though having in their possession +more and more currency, grew lean. In the schemes and speculations put +forth by stock-jobbers and stimulated by the printing of more currency, +multitudes of small fortunes were absorbed and lost while a few swollen +fortunes were rapidly aggregated in the larger cities. This crippled a +large class in the country districts, which had employed a great number +of workmen. +</p> +<p> +In the leading French cities now arose a luxury and license which was +a greater evil even than the plundering which ministered to it. In +the country the gambling spirit spread more and more. Says the same +thoughtful historian whom I have already quoted: "What a prospect for +a country when its rural population was changed into a great band of +gamblers!" <a href="#note-35" name="noteref-35"><small>35</small></a> +</p> +<p> +Nor was this reckless and corrupt spirit confined to business men; it +began to break out in official circles, and public men who, a few +years before, had been thought above all possibility of taint, became +luxurious, reckless, cynical and finally corrupt. Mirabeau, himself, +who, not many months previous, had risked imprisonment and even death +to establish constitutional government, was now—at this very +time—secretly receiving heavy bribes. When, at the downfall of the +monarchy a few years later, the famous iron chest of the Tuileries was +opened, there were found evidences that, in this carnival of inflation +and corruption, he had been a regularly paid servant of the Royal +court. <a href="#note-36" name="noteref-36"><small>36</small></a> The artful plundering of the people at large was bad enough, +but worse still was this growing corruption in official and legislative +circles. Out of the speculating and gambling of the inflation period +grew luxury, and, out of this, corruption. It grew as naturally as a +fungus on a muck heap. It was first felt in business operations, +but soon began to be seen in the legislative body and in journalism. +Mirabeau was, by no means, the only example. Such members of the +legislative body as Jullien of Toulouse, Delaunay of Angers, Fabre +d'Eglantine and their disciples, were among the most noxious of those +conspiring by legislative action to raise and depress securities for +stock-jobbing purposes. Bribery of legislators followed as a matter of +course, Delaunay, Jullien and Chabot accepted a bribe of five hundred +thousand <i>livres</i> for aiding legislation calculated to promote the +purposes of certain stock-jobbers. It is some comfort to know that +nearly all concerned were guillotined for it. <a href="#note-37" name="noteref-37"><small>37</small></a> +</p> +<p> +It is true that the number of these corrupt legislators was small, far +less than alarmists led the nation to suppose, but there were enough to +cause wide-spread distrust, cynicism and want of faith in any patriotism +or any virtue. +</p> +<a name="2H_4_0005"><!-- H2 anchor --></a> + +<div style="height: 4em;"><br><br><br><br></div> + +<h2> + II. +</h2> +<p> +Even worse than this was the breaking down of the morals of the country +at large, resulting from the sudden building up of ostentatious wealth +in a few large cities, and from the gambling, speculative spirit +spreading from these to the small towns and rural districts. From this +was developed an even more disgraceful result,—the decay of a true +sense of national good faith. The patriotism which the fear of the +absolute monarchy, the machinations of the court party, the menaces of +the army and the threats of all monarchical Europe had been unable +to shake was gradually disintegrated by this same speculative, +stock-jobbing habit fostered by the superabundant currency. At the +outset, in the discussions preliminary to the first issue of paper +money, Mirabeau and others who had favored it had insisted that +patriotism as well as an enlightened self-interest, would lead the +people to keep up the value of paper money. The very opposite of this +was now revealed, for there appeared, as another outgrowth of this +disease, what has always been seen under similar circumstances. It is +a result of previous, and a cause of future evils. This outgrowth was a +vast debtor class in the nation, directly interested in the depreciation +of the currency in which they were to pay their debts. The nucleus of +this class was formed by those who had purchased the church lands from +the government. Only small payments down had been required and the +remainder was to be paid in deferred installments: an indebtedness of a +multitude of people had thus been created to the amount of hundreds of +millions. This body of debtors soon saw, of course, that their interest +was to depreciate the currency in which their debts were to be paid; +and these were speedily joined by a far more influential class;—by that +class whose speculative tendencies had been stimulated by the abundance +of paper money, and who had gone largely into debt, looking for a rise +in nominal values. Soon demagogues of the viler sort in the political +clubs began to pander to it; a little later important persons in this +debtor class were to be found intriguing in the Assembly—first in its +seats and later in more conspicuous places of public trust. Before long, +the debtor class became a powerful body extending through all ranks of +society. From the stock-gambler who sat in the Assembly to the small +land speculator in the rural districts; from the sleek inventor of +<i>canards</i> on the Paris Exchange to the lying stock-jobber in the +market town, all pressed vigorously for new issues of paper; all were +apparently able to demonstrate to the people that in new issues of paper +lay the only chance for national prosperity. +</p> +<p> +This great debtor class, relying on the multitude who could be +approached by superficial arguments, soon gained control. Strange as it +might seem to those who have not watched the same causes at work at a +previous period in France and at various times in other countries, while +every issue of paper money really made matters worse, a superstition +gained ground among the people at large that, if only <i>enough</i> paper +money were issued and were more cunningly handled the poor would be made +rich. Henceforth, all opposition was futile. In December, 1791, a report +was made in the Legislative Assembly in favor of yet another great issue +of three hundred millions more of paper money. In regard to this report +Cambon said that more money was needed but asked, "Will you, in a moment +when stock-jobbing is carried on with such fury, give it new power by +adding so much more to the circulation?" But such high considerations +were now little regarded. Dorisy declared, "There is not enough money +yet in circulation; if there were more the sales of national lands would +be more rapid." And the official report of his speech states that these +words were applauded. +</p> +<p> +Dorisy then went on to insist that the government lands were worth at +least thirty-five hundred million <i>livres</i> and said: "Why should members +ascend the tribunal and disquiet France? Fear nothing; your currency +reposes upon a sound mortgage." Then followed a glorification of the +patriotism of the French people, which, he asserted, would carry the +nation through all its difficulties. +</p> +<p> +Becquet, speaking next, declared that "The circulation is becoming more +rare every day." +</p> +<p> +On December 17, 1791, a new issue was ordered, making in all twenty-one +hundred millions authorized. Coupled with this was the declaration that +the total amount in actual circulation should never reach more than +sixteen hundred millions. Before this issue the value of the 100 +<i>livres</i> note had fallen at Paris to about 80 <i>livres</i>; <a href="#note-38" name="noteref-38"><small>38</small></a> immediately +afterward it fell to about 68 <i>livres</i>. What limitations of the currency +were worth may be judged from the fact that not only had the declaration +made hardly a year before, limiting the amount in circulation to twelve +hundred millions, been violated, but the declaration, made hardly a +month previous, in which the Assembly had as solemnly limited the amount +of circulation to fourteen hundred millions, had also been repudiated. +</p> +<p> +The evils which we have already seen arising from the earlier issues +were now aggravated; but the most curious thing evolved out of all this +chaos was a <i>new system of political economy</i>. In speeches, newspapers +and pamphlets about this time, we begin to find it declared that, after +all, a depreciated currency is a blessing; that gold and silver form an +unsatisfactory standard for measuring values: that it is a good thing to +have a currency that will not go out of the kingdom and which separates +France from other nations: that thus shall manufacturers be encouraged; +that commerce with other nations may be a curse, and hindrance thereto +may be a blessing; that the laws of political economy however applicable +in other times, are not applicable to this particular period, and, +however operative in other nations, are not now so in France; that the +ordinary rules of political economy are perhaps suited to the minions of +despotism but not to the free and enlightened inhabitants of France at +the close of the eighteenth century; that the whole state of present +things, so far from being an evil is a blessing. All these ideas, and +others quite as striking, were brought to the surface in the debates on +the various new issues. <a href="#note-39" name="noteref-39"><small>39</small></a> +</p> +<p> +Within four months came another report to the Assembly as ingenious as +those preceding. It declared: "Your committee are thoroughly persuaded +that the amount of the circulating medium before the Revolution was +greater than that of the <i>assignats</i> today: but at that time the money +circulated slowly and now it passes rapidly so that one thousand million +<i>assignats</i> do the work of two thousand millions of specie." The report +foretells further increase in prices, but by some curious jugglery +reaches a conclusion favorable to further inflation. Despite these +encouragements the <i>assignats</i> nominally worth 100 <i>livres</i> had fallen, +at the beginning of February, 1792, to about 60 <i>livres</i>, and during +that month fell to 53 <i>livres</i>. <a href="#note-40" name="noteref-40"><small>40</small></a> +</p> +<p> +In March, Clavière became minister of finance. He was especially proud +of his share in the invention and advocacy of the <i>assignats</i>, and now +pressed their creation more vigorously than ever, and on April 30th, of +the same year, came the fifth great issue of paper money, amounting to +three hundred millions: at about the same time Cambon sneered ominously +at public creditors as "rich people, old financiers and bankers." +Soon payment was suspended on dues to public creditors for all amounts +exceeding ten thousand <i>francs</i>. +</p> +<p> +This was hailed by many as a measure in the interests of the poorer +classes of people, but the result was that it injured them most of all. +Henceforward, until the end of this history, capital was quietly taken +from labor and locked up in all the ways that financial ingenuity could +devise. All that saved thousands of laborers in France from starvation +was that they were drafted off into the army and sent to be killed on +foreign battlefields. +</p> +<p> +On the last day of July, 1792, came another brilliant report from +Fouquet, showing that the total amount of currency already issued was +about twenty-four hundred millions, but claiming that the national lands +were worth a little more than this sum. A decree was now passed issuing +three hundred millions more. By this the prices of everything were again +enhanced save one thing, and that one thing was labor. Strange as it may +at first appear, while the depreciation of the currency had raised all +products enormously in price, the stoppage of so many manufactories and +the withdrawal of capital caused wages in the summer of 1792, after all +the inflation, to be as small as they had been four years before—viz., +fifteen <i>sous</i> per day. No more striking example can be seen of the +truth uttered by Daniel Webster, that "of all the contrivances for +cheating the laboring classes of mankind, none has been more effective +than that which deludes them with paper-money." <a href="#note-41" name="noteref-41"><small>41</small></a> +</p> +<p> +Issue after issue followed at intervals of a few months, until, on +December 14, 1792, we have an official statement to the effect that +thirty-five hundred millions had been put forth, of which six hundred +millions had been burned, leaving in circulation twenty-eight hundred +millions. +</p> +<p> +When it is remembered that there was little business to do and that +the purchasing power of the <i>livre</i> or franc, when judged by the staple +products of the country, was equal to about half the present purchasing +power of our own dollar, it will be seen into what evils France had +drifted. As the mania for paper money ran its course, even the <i>sous</i>, +obtained by melting down the church bells, were more and more driven out +of circulation and more and more parchment notes from twenty <i>four</i> to +five were issued, and at last pieces of one <i>sou</i>, of half a <i>sou</i> and +even of one-quarter of a <i>sou</i> were put in circulation. <a href="#note-42" name="noteref-42"><small>42</small></a> +</p> +<p> +But now another source of wealth was opened to the nation. There came a +confiscation of the large estates of landed proprietors who had fled +the country. An estimate in 1793 made the value of these estates three +billions of <i>francs</i>. As a consequence, the issues of paper money +were continued in increased amounts, on the old theory that they were +guaranteed by the solemn pledge of these lands belonging to the state. +Under the Legislative Assembly through the year 1792 new issues were +made virtually every month, so that at the end of January, 1793, it +was more and more realized that the paper money actually in circulation +amounted close upon three thousand millions of <i>francs</i>. All this had +been issued publicly, in open sessions of the National and Legislative +Assemblies; but now under the National Convention, the two Committees +of Public Safety and of Finance began to decree new issues privately, in +secret session. +</p> +<p> +As a result, the issues became larger still, and four hundred workmen +were added to those previously engaged in furnishing this paper money, +and these were so pressed with work from six o'clock in the morning +until eight in the evening that they struck for higher wages and were +successful. <a href="#note-43" name="noteref-43"><small>43</small></a> +</p> +<p> +The consequences of these overissues now began to be more painfully +evident to the people at large. Articles of common consumption became +enormously dear and prices were constantly rising. Orators in the +Legislative Assembly, clubs, local meetings and elsewhere now endeavored +to enlighten people by assigning every reason for this depreciation save +the true one. They declaimed against the corruption of the ministry, the +want of patriotism among the Moderates, the intrigues of the emigrant +nobles, the hard-heartedness of the rich, the monopolizing spirit of the +merchants, the perversity of the shopkeepers,—-each and all of these as +causes of the difficulty. <a href="#note-44" name="noteref-44"><small>44</small></a> +</p> +<p> +This decline in the government paper was at first somewhat masked by +fluctuations. For at various times the value of the currency <i>rose</i>. The +victory of Jemappes and the general success of the French army against +the invaders, with the additional security offered by new confiscations +of land, caused, in November, 1792, an appreciation in the value of the +currency; the franc had stood at 57 and it rose to about 69; but +the downward tendency was soon resumed and in September, 1793, +the <i>assignats</i> had sunk below 30. Then sundry new victories and +coruscations of oratory gave momentary confidence so that in December, +1793, they rose above 50. But despite these fluctuations the downward +tendency soon became more rapid than ever. <a href="#note-45" name="noteref-45"><small>45</small></a> +</p> +<p> +The washerwomen of Paris, finding soap so dear that they could hardly +purchase it, insisted that all the merchants who were endeavoring to +save something of their little property by refusing to sell their goods +for the wretched currency with which France was flooded, should be +punished with death; the women of the markets and the hangers-on of the +Jacobin Club called loudly for a law "to equalize the value of paper +money and silver coin." It was also demanded that a tax be laid +especially on the rich, to the amount of four hundred million <i>francs</i>, +to buy bread. Marat declared loudly that the people, by hanging +shopkeepers and plundering stores, could easily remove the trouble. The +result was that on the 28th of February, 1793, at eight o'clock in the +evening, a mob of men and women in disguise began plundering the +stores and shops of Paris. At first they demanded only bread; soon they +insisted on coffee and rice and sugar; at last they seized everything +on which they could lay their hands—cloth, clothing, groceries and +luxuries of every kind. Two hundred such places were plundered. This was +endured for six hours and finally order was restored only by a grant of +seven million <i>francs</i> to buy off the mob. The new political economy was +beginning to bear, its fruits luxuriantly. A gaudy growth of it appeared +at the City Hall of Paris when, in response to the complaints of the +plundered merchants, Roux declared, in the midst of great applause, that +"shopkeepers were only giving back to the people what they had hitherto +robbed them of." +</p> +<p> +The mob having thus been bought off by concessions and appeased by +oratory, the government gained time to think, and now came a series of +amazing expedients,—and yet all perfectly logical. +</p> +<p> +Three of these have gained in French history an evil pre-eminence, and +first of the three was the Forced Loan. +</p> +<p> +In view of the fact that the well-to-do citizens were thought to be +lukewarm in their support of the politicians controlling the country, +various demagogues in the National Convention, which had now succeeded +the National, Constituent and Legislative Assemblies, found ample matter +for denunciations long and loud. The result outside the Convention +was increased activity of the guillotine; the results inside were new +measures against all who had money, and on June 22, 1793, the +Convention determined that there should be a Forced Loan, secured on the +confiscated lands of the emigrants and levied upon all married men +with incomes of ten thousand <i>francs</i>, and upon all unmarried men with +incomes of six thousand <i>francs</i>. It was calculated that these +would bring into the treasury a thousand millions of <i>francs</i>. But a +difficulty was found. So many of the rich had lied or had concealed +their wealth that only a fifth of the sum required could be raised, and +therefore a law was soon passed which levied forced loans upon incomes +as low as one thousand, <i>francs</i>,—or, say, two hundred dollars +of American money. This tax was made progressive. On the smaller +proprietors it was fixed at one-tenth and on the larger, that is, on all +incomes above nine thousand <i>francs</i>, it was made one-half of the entire +income. Little if any provision was made for the repayment of this loan +but the certificates might be used for purchasing the confiscated real +estate of the church and of the nobility. <a href="#note-46" name="noteref-46"><small>46</small></a> +</p> +<p> +But if this first expedient shows how naturally a "fiat" money system +runs into despotism, the next is no less instructive in showing how +easily it becomes repudiation and dishonor. +</p> +<p> +As we have seen, the first issue of the <i>assignats</i>,—made by the +National Assembly, bore a portrait of the king; but on the various +issues after the establishment of a republic this emblem had been +discarded. This change led to a difference in value between the earlier +and the later paper money. The wild follies of fanatics and demagogues +had led to an increasing belief that the existing state of things could +not last; that the Bourbons must ere long return; that in such case, +while a new monarch would repudiate all the vast mass of the later paper +issued by the Republic, he would recognize that first issue bearing the +face and therefore the guarantee of the king. So it was that this first +issue came to bear a higher value than those of later date. To meet this +condition of things it was now proposed to repudiate an that earlier +issue. In vain did sundry more thoughtful members of the Convention +plead that this paper money, amounting to five hundred and fifty-eight +millions of <i>francs</i>, bore the solemn guarantee of the nation, as well +as of the king; the current was irresistible. All that Cambon, the great +leader of finance at that time, could secure was a clause claiming to +protect the poor, to the effect that this demonetization should not +extend to notes below a hundred <i>francs</i> in value; and it was also +agreed that any of the notes, large or small, might be received in +payment of taxes and for the confiscated property of the clergy and +nobility. To all the arguments advanced against this breach of the +national faith Danton, then at the height of his power, simply declared +that only aristocrats could favor notes bearing the royal portrait, and +gave forth his famous utterance: "Imitate Nature, which watches over the +preservation of the race but has no regard for individuals." The decree +was passed on the 31st of July, 1793, yet its futility was apparent in +less than two months, when the Convention decreed that there should be +issued two thousand millions of <i>francs</i> more in <i>assignats</i> between the +values of ten <i>sous</i> and four hundred <i>francs</i>, and when, before the end +of the year, five hundred millions more were authorized. <a href="#note-47" name="noteref-47"><small>47</small></a> +</p> +<p> +The third outgrowth of the vast issue of fiat money was the <i>Maximum</i>. +As far back as November, 1792, the Terrorist associate of Robespierre, +St. Just, in view of the steady rise in prices of the necessaries of +life, had proposed a scheme by which these prices should be established +by law, at a rate proportionate to the wages of the working classes. +This plan lingered in men's minds, taking shape in various resolutions +and decrees until the whole culminated on September 29, 1793, in the Law +of the <i>Maximum</i>. +</p> +<p> +While all this legislation was high-handed, it was not careless. Even +statesmen of the greatest strength, having once been drawn into this +flood, were borne on into excesses which, a little earlier, would have +appalled them. Committees of experts were appointed to study the whole +subject of prices, and at last there were adopted the great "four rules" +which seemed to statesmen of that time a masterly solution of the whole +difficulty. <a href="#note-48" name="noteref-48"><small>48</small></a> +</p> +<p> +<i>First</i>, the price of each article of necessity was to be fixed at one +and one-third its price in 1790. <i>Secondly</i>, all transportation was to +be added at a fixed rate per league. <i>Thirdly</i>, five per cent was to be +added for the profit of the wholesaler. <i>Fourthly</i>, ten per cent was +to be added for the profit of the retailer. Nothing could look more +reasonable. Great was the jubilation. The report was presented and +supported by Barrère,—"the tiger monkey,"—then in all the glory +of his great orations: now best known from his portrait by Macaulay. +Nothing could withstand Barrère's eloquence. He insisted that France +had been suffering from a "<i>Monarchical</i> commerce which only sought +wealth," while what she needed and what she was now to receive was a +"<i>Republican</i> commerce—a commerce of moderate profits and virtuous." He +exulted in the fact that "France alone enjoys such a commerce,—that it +exists in no other nation." He poured contempt over political economy as +"that science which quacks have corrupted, which pedants have obscured +and which academicians have depreciated." France, he said, has something +better, and he declared in conclusion, "The needs of the people will +no longer be spied upon in order that the commercial classes may +arbitrarily take advantage." <a href="#note-49" name="noteref-49"><small>49</small></a> +</p> +<p> +The first result of the <i>Maximum</i> was that every means was taken to +evade the fixed price imposed, and the farmers brought in as little +produce as they possibly could. This increased the scarcity, and the +people of the large cities were put on an allowance. Tickets were issued +authorizing the bearer to obtain at the official prices a certain +amount of bread or sugar or soap or wood or coal to cover immediate +necessities. <a href="#note-50" name="noteref-50"><small>50</small></a> +</p> +<p> +But it was found that the <i>Maximum</i>, with its divinely revealed four +rules, could not be made to work well—even by the shrewdest devices. In +the greater part of France it could not be enforced. As to merchandise +of foreign origin or merchandise into which any foreign product entered, +the war had raised it far above the price allowed under the first rule, +namely, the price of 1790, with an addition of one-third. Shopkeepers +therefore could not sell such goods without ruin. The result was that +very many went out of business and the remainder forced buyers to pay +enormous charges under the very natural excuse that the seller risked +his life in trading at all. That this excuse was valid is easily seen +by the daily lists of those condemned to the guillotine, in which +not infrequently figure the names of men charged with violating the +<i>Maximum</i> laws. Manufactures were very generally crippled and frequently +destroyed, and agriculture was fearfully depressed. To detect goods +concealed by farmers and shopkeepers, a spy system was established +with a reward to the informer of one-third of the value of the goods +discovered. To spread terror, the Criminal Tribunal at Strassburg was +ordered to destroy the dwelling of any one found guilty of selling goods +above the price set by law. The farmer often found that he could not +raise his products at anything like the price required by the new law, +and when he tried to hold back his crops or cattle, alleging that he +could not afford to sell them at the prices fixed by law, they were +frequently taken from him by force and he was fortunate if paid even +in the depreciated fiat money—fortunate, indeed, if he finally escaped +with his life. <a href="#note-51" name="noteref-51"><small>51</small></a> +</p> +<p> +Involved in all these perplexities, the Convention tried to cut the +Gordian knot. It decreed that any person selling gold or silver coin, +or making any difference in any transaction between paper and specie, +should be imprisoned in irons for six years:—that any one who refused +to accept a payment in <i>assignats</i>, or accepted <i>assignats</i> at a +discount, should pay a fine of three thousand <i>francs</i>; and that any one +committing this crime a second time should pay a fine of six thousand +<i>francs</i> and suffer imprisonment twenty years in irons. Later, on the +8th of September, 1793, the penalty for such offences was made death, +with confiscation of the criminal's property, and so reward was offered +to any person informing the authorities regarding any such criminal +transaction. To reach the climax of ferocity, the Convention decreed, +in May, 1794, that the death penalty should be inflicted on any person +convicted of "having asked, before a bargain was concluded, in what +money payment was to be made." Nor was this all. The great finance +minister, Cambon, soon saw that the worst enemies of his policy were +gold and silver. Therefore it was that, under his lead, the Convention +closed the Exchange and finally, on November 13, 1793, under terrifying +penalties, suppressed all commerce in the precious metals. About a year +later came the abolition of the Maximum itself. <a href="#note-52" name="noteref-52"><small>52</small></a> +</p> +<p> +It is easily seen that these <i>Maximum</i> laws were perfectly logical. +Whenever any nation intrusts to its legislators the issue of a currency +not based on the idea of redemption in standard coin recognized in the +commerce of civilized nations, it intrusts to them the power to raise or +depress the value of every article in the possession of every citizen. +Louis XIV had claimed that all property in Prance was his own, and that +what private persons held was as much his as if it were in his coffers. +But even this assumption is exceeded by the confiscating power exercised +in a country, where, instead of leaving values to be measured by a +standard common to the whole world, they are left to be depressed or +raised at the whim, caprice or interest of a body of legislators. When +this power is given, the power of prices is inevitably included in +it. <a href="#note-53" name="noteref-53"><small>53</small></a> +</p> +<p> +It may be said that these measures were made necessary by the war then +going on. Nothing could be more baseless than such an objection. In this +war the French soon became generally successful. It was quickly pushed +mainly upon foreign soil. Numerous contributions were levied upon the +subjugated countries to support the French armies. The war was one of +those in which the loss, falling apparently on future generations, first +stimulates, in a sad way, trade and production. The main cause of these +evils was tampering with the circulating medium of an entire nation; +keeping all values in fluctuation; discouraging enterprise; paralyzing +energy; undermining sobriety; obliterating thrift; promoting +extravagance and exciting riot by the issue of an irredeemable currency. +The true business way of meeting the enormous demands on France during +the first years of the Revolution had been stated by a true statesman +and sound financier, Du Pont de Nemours, at the very beginning. He had +shown that using the same paper as a circulating medium and as a means +for selling the national real estate was like using the same implement +for an oyster knife and a razor. <a href="#note-54" name="noteref-54"><small>54</small></a> +</p> +<p> +It has been argued that the <i>assignats</i> sank in value because they were +not well secured,—that securing them on government real estate was as +futile as if the United States had, in the financial troubles of its +early days, secured notes on its real estate. This objection is utterly +fallacious. The government lands of our country were remote from the +centers of capital and difficult to examine; the French national real +estate was near these centers—even <i>in</i> them—and easy to examine. +Our national real estate was unimproved and unproductive; theirs +was improved and productive—its average productiveness in market in +ordinary times being from four to five per cent. <a href="#note-55" name="noteref-55"><small>55</small></a> +</p> +<p> +It has also been objected that the attempt to secure the <i>assignats</i> on +government real estate failed because of the general want of confidence +in the title derived by the purchasers from the new government. Every +thorough student of that period must know that this is a misleading +statement. Everything shows that the vast majority of the French people +had a fanatical confidence in the stability of the new government during +the greater part of the Revolution. There were disbelievers in the +security of the <i>assignats</i> just as there were disbelievers in the +paper money of the United States throughout our Civil War; but they were +usually a small minority. Even granting that there was a doubt as to +investment in French lands, the French people certainly had as much +confidence in the secure possession of government lands as any people +can ever have in large issues of government bonds: indeed, it is certain +that they had far more confidence in their lands as a security than +modern nations can usually have in large issues of bonds obtained by +payments of irredeemable paper. One simple fact, as stated by John +Stuart Mill, which made <i>assignats</i> difficult to convert into real +estate was that the vast majority of people could not afford to make +investments outside their business; and this fact is no less fatal +to any attempt to contract large issues of irredeemable paper—save, +perhaps, a bold, statesmanlike attempt, which seizes the best time and +presses every advantage, eschewing all juggling devices and sacrificing +everything to maintain a sound currency based on standards common to the +entire financial world. +</p> +<p> +And now was seen, taking possession of the nation, that idea which +developed so easily out of the fiat money system;—the idea that the +ordinary needs of government may be legitimately met wholly by the means +of paper currency;—that taxes may be dispensed with. As a result, it +was found that the <i>assignat</i> printing press was the one resource left +to the government, and the increase in the volume of paper money became +every day more appalling. +</p> +<p> +It will doubtless surprise many to learn that, in spite of these evident +results of too much currency, the old cry of a "scarcity of circulating +medium" was not stilled; it appeared not long after each issue, no +matter how large. +</p> +<p> +But every thoughtful student of financial history knows that this cry +always comes after such issues—nay, that it <i>must</i> come,—because +in obedience to a natural law, the former scarcity, or rather +<i>insufficiency</i> of currency recurs just as soon as prices become +adjusted to the new volume, and there comes some little revival of +business with the usual increase of credit. <a href="#note-56" name="noteref-56"><small>56</small></a> +</p> +<p> +In August, 1793, appeared a new report by Cambon. No one can read it +without being struck by its mingled ability and folly. His final plan +of dealing with the public debt has outlasted all revolutions since, +but his disposition of the inflated currency came to a wretched failure. +Against Du Pont, who showed conclusively that the wild increase of paper +money was leading straight to, ruin, Cambon carried the majority in +the great assemblies and clubs by sheer audacity—the audacity of +desperation. Zeal in supporting the <i>assignats</i> became his religion. The +National Convention which succeeded the Legislative Assembly, issued in +1793 over three thousand millions of <i>assignats</i>, and, of these, over +twelve hundred millions were poured into the circulation. And yet Cambon +steadily insisted that the security for the <i>assignat</i> currency was +perfect. The climax of his zeal was reached when he counted as assets +in the national treasury the indemnities which, he declared, France +was sure to receive after future victories over the allied nations +with which she was then waging a desperate war. As patriotism, it was +sublime; as finance it was deadly. <a href="#note-57" name="noteref-57"><small>57</small></a> +</p> +<p> +Everything was tried. Very elaborately he devised a funding scheme +which, taken in connection with his system of issues, was in effect +what in these days would be called an "<i>interconvertibility scheme</i>" By +various degrees of persuasion or force,—the guillotine looming up in +the background,—holders of <i>assignats</i> were urged to convert them into +evidence of national debt, bearing interest at five per cent, with the +understanding that if more paper were afterward needed more would be +issued. All in vain. The official tables of depreciation show that the +<i>assignats</i> continued to fall. A forced loan, calling in a billion +of these, checked this fall, but only for a moment. The +"<i>interconvertibility scheme</i>" between currency and bonds failed as +dismally as the "<i>interconvertibility scheme</i>" between currency and land +had failed. <a href="#note-58" name="noteref-58"><small>58</small></a> +</p> +<p> +A more effective expedient was a law confiscating the property of all +Frenchmen who left France after July 14, 1789, and who had not returned. +This gave new land to be mortgaged for the security of paper money. +</p> +<p> +All this vast chapter in financial folly is sometimes referred to as if +it resulted from the direct action of men utterly unskilled in finance. +This is a grave error. That wild schemers and dreamers took a leading +part in setting the fiat money system going is true; that speculation +and interested financiers made it worse is also true: but the men who +had charge of French finance during the Reign of Terror and who made +these experiments, which seem to us so monstrous, in order to rescue +themselves and their country from the flood which was sweeping +everything to financial ruin were universally recognized as among the +most skillful and honest financiers in Europe. Cambon, especially, +ranked then and ranks now as among the most expert in any period. The +disastrous results of all his courage and ability in the attempt to +stand against the deluge of paper money show how powerless are the most +skillful masters of finance to stem the tide of fiat money calamity +when once it is fairly under headway; and how useless are all enactments +which they can devise against the underlying laws of nature. +</p> +<p> +Month after month, year after year new issues went on. Meanwhile +everything possible was done to keep up the value of paper. The city +authorities of Metz took a solemn oath that the <i>assignats</i> should bear +the same price whether in paper or specie,—and whether in buying +or selling, and various other official bodies throughout the nation +followed this example. In obedience to those who believed with the +market women of Paris, as stated in their famous petition, that "laws +should be passed making paper money as good as gold," Couthon, in +August, 1793, had proposed and carried a law punishing any person +who should sell <i>assignats</i> at less than their nominal value with +imprisonment for twenty years in chains, and later carried a law making +investments in foreign countries by Frenchmen punishable with death. <a href="#note-59" name="noteref-59"><small>59</small></a> +</p> +<p> +But to the surprise of the great majority of the French people, the +value of the <i>assignats</i> was found, after the momentary spasm of fear +had passed, not to have been permanently increased by these measures: on +the contrary, this "fiat" paper persisted in obeying the natural laws of +finance and, as new issues increased, their value decreased. Nor did the +most lavish aid of nature avail. The paper money of the nation seemed to +possess a magic power to transmute prosperity into adversity and plenty +into famine. The year 1794 was exceptionally fruitful: and yet with the +autumn came scarcity of provisions and with the winter came distress. +The reason is perfectly simple. The sequences in that whole history are +absolutely logical. First, the Assembly had inflated the currency and +raised prices enormously. Next, it had been forced to establish an +arbitrary maximum price for produce. But this price, large as it +seemed, soon fell below the real value of produce; many of the farmers, +therefore, raised less produce or refrained from bringing what they had +to market. <a href="#note-60" name="noteref-60"><small>60</small></a> But, as is usual in such cases, the trouble was ascribed +to everything rather than the real cause, and the most severe measures +were established in all parts of the country to force farmers to bring +produce to market, millers to grind and shopkeepers to sell it. <a href="#note-61" name="noteref-61"><small>61</small></a> The +issues of paper money continued. Toward the end of 1794 seven thousand +millions in <i>assignats</i> were in circulation. <a href="#note-62" name="noteref-62"><small>62</small></a> By the end of May, +1795, the circulation was increased to ten thousand millions, at the +end of July, to fourteen thousand millions; and the value of one hundred +<i>francs</i> in paper fell steadily, first to four <i>francs</i> in gold, then to +three, then to two and one-half. <a href="#note-63" name="noteref-63"><small>63</small></a> But, curiously enough, while this +depreciation was rapidly going on, as at various other periods when +depreciation was rapid, there came an apparent revival of business. The +hopes of many were revived by the fact that in spite of the decline of +paper there was an exceedingly brisk trade in all kinds of permanent +property. Whatever articles of permanent value certain needy people were +willing to sell certain cunning people were willing to buy and to pay +good prices for in <i>assignats</i>. At this, hope revived for a time in +certain quarters. But ere long it was discovered that this was one of +the most distressing results of a natural law which is sure to come into +play under such circumstances. It was simply a feverish activity caused +by the intense desire of a large number of the shrewder class to convert +their paper money into anything and everything which they could hold and +hoard until the collapse which they foresaw should take place. This very +activity in business simply indicated the disease. It was simply legal +robbery of the more enthusiastic and trusting by the more cold-hearted +and keen. It was, the "unloading" of the <i>assignats</i> upon the mass of +the people. <a href="#note-64" name="noteref-64"><small>64</small></a> +</p> +<p> +Interesting is it to note in the midst of all this the steady action +of another simple law in finance. Prisons, guillotines, enactments +inflicting twenty years' imprisonment in chains upon persons twice +convicted of buying or selling paper money at less than its nominal +value, and death upon investors in foreign securities, were powerless. +The National Convention, fighting a world in arms and with an armed +revolt on its own soil, showed titanic power, but in its struggle to +circumvent one simple law of nature its weakness was pitiable. The +<i>louis d'or</i> stood in the market as a monitor, noting each day, with +unerring fidelity, the decline in value of the <i>assignat</i>; a monitor not +to be bribed, not to be scared. As well might the National Convention +try to bribe or scare away the polarity of the mariner's compass. On +August 1, 1795, this gold <i>louis</i> of 25 <i>francs</i> was worth in paper, +920 <i>francs</i>; on September 1st, 1,200 <i>francs</i>; on November 1st, 2,600 +<i>francs</i>; on December 1st, 3,050 <i>francs</i>. In February, 1796, it was +worth 7,200 <i>francs</i> or one franc in gold was worth 288 <i>francs</i> in +paper. Prices of all commodities went up nearly in proportion. <a href="#note-65" name="noteref-65"><small>65</small></a> +The writings of this period give curious details. Thibaudeau, in his +Memoirs, speaks of sugar as 500 <i>francs</i> a pound, soap, 230 <i>francs</i>, +candles, 140 <i>francs</i>. Mercier, in his lifelike pictures of the French +metropolis at that period, mentions 600 <i>francs</i> as carriage hire for a +single drive, and 6,000 for an entire day. Examples from other sources +are such as the following:—a measure of flour advanced from two +<i>francs</i> in 1790, to 225 <i>francs</i> in 1795; a pair of shoes, from +five <i>francs</i> to 200; a hat, from 14 <i>francs</i> to 500; butter, to, +560 <i>francs</i> a pound; a turkey, to 900 <i>francs</i>. <a href="#note-66" name="noteref-66"><small>66</small></a> Everything +was enormously inflated in price <i>except the wages of labor</i>. As +manufacturers had closed, wages had fallen, until all that kept them up +seemed to be the fact that so many laborers were drafted off into the +army. From this state of things came grievous wrong and gross fraud. +Men who had foreseen these results and had gone into debt were of course +jubilant. He who in 1790 had borrowed 10,000 <i>francs</i> could pay his +debts in 1796 for about 35 <i>francs</i>. Laws were made to meet these +abuses. As far back as 1794 a plan was devised for publishing official +"tables of depreciation" to be used in making equitable settlements of +debts, but all such machinery proved futile. On the 18th of May, 1796, a +young man complained to the National Convention that his elder brother, +who had been acting as administrator of his deceased father's estate, +had paid the heirs in <i>assignats</i>, and that he had received scarcely one +three-hundredth part of the real value of his share. <a href="#note-67" name="noteref-67"><small>67</small></a> To meet cases +like this, a law was passed establishing a "scale of proportion." Taking +as a standard the value of the <i>assignat</i> when there were two billions +in circulation, this law declared that, in payment of debts, one-quarter +should be added to the amount originally borrowed for every five hundred +millions added to the circulation. In obedience to this law a man +who borrowed two thousand <i>francs</i> when there were two billions in +circulation would have to pay his creditors twenty-five hundred +<i>francs</i> when half a billion more were added to the currency, and over +thirty-five thousand <i>francs</i> before the emissions of paper reached +their final amount. This brought new evils, worse, if possible, than the +old. <a href="#note-68" name="noteref-68"><small>68</small></a> +</p> +<p> +The question will naturally be asked, <i>On whom did this vast +depreciation mainly fall at last</i>? When this currency had sunk to +about one three-hundredth part of its nominal value and, after that, +to nothing, in whose hands was the bulk of it? The answer is simple. I +shall give it in the exact words of that thoughtful historian from whom +I have already quoted: "Before the end of the year 1795 the paper money +was almost exclusively in the hands of the working classes, employees +and men of small means, whose property was not large enough to invest in +stores of goods or national lands. <a href="#note-69" name="noteref-69"><small>69</small></a> Financiers and men of large means +were shrewd enough to put as much of their property as possible into +objects of permanent value. The working classes had no such foresight +or skill or means. On them finally came the great crushing weight of the +loss. After the first collapse came up the cries of the starving. Roads +and bridges were neglected; many manufactures were given up in utter +helplessness." To continue, in the words of the historian already cited: +"None felt any confidence in the future in any respect; few dared to +make a business investment for any length of time and it was accounted a +folly to curtail the pleasures of the moment, to accumulate or save for +so uncertain a future." <a href="#note-70" name="noteref-70"><small>70</small></a> +</p> +<p> +This system in finance was accompanied by a system in politics no less +startling, and each system tended to aggravate the other. The wild +radicals, having sent to the guillotine first all the Royalists and +next all the leading Republicans they could entrap, the various +factions began sending each other to the same destination:—Hébertists, +Dantonists, with various other factions and groups, and, finally, the +Robespierrists, followed each other in rapid succession. After these +declaimers and phrase-mongers had thus disappeared there came to power, +in October, 1795, a new government,—mainly a survival of the more +scoundrelly,—the Directory. It found the country utterly impoverished +and its only resource at first was to print more paper and to issue even +while wet from the press. These new issues were made at last by the two +great committees, with or without warrant of law, and in greater sums +than ever. Complaints were made that the array of engravers and printers +at the mint could not meet the demand for <i>assignats</i>—that they +could produce only from sixty to seventy millions per day and that +the government was spending daily from eighty to ninety millions. Four +thousand millions of <i>francs</i> were issued during one month, a little +later three thousand millions, a little later four thousand millions, +until there had been put forth over thirty-five thousand millions. The +purchasing power of this paper having now become almost nothing, it was +decreed, on the 22nd of December, 1795, that the whole amount issued +should be limited to forty thousand millions, including all that had +previously been put forth and that when this had been done the copper +plates should be broken. Even in spite of this, additional issues +were made amounting to about ten thousand millions. But on the 18th of +February, 1796, at nine o'clock in the morning, in the presence of a +great crowd, the machinery, plates and paper for printing <i>assignats</i> +were brought to the Place Vendome and there, on the spot where the +Napoleon Column now stands, these were solemnly broken and burned. +</p> +<p> +Shortly afterward a report by Camus was made to the Assembly that +the entire amount of paper money issued in less than six years by the +Revolutionary Government of France had been over forty-five thousand +millions of <i>francs</i>—that over six thousand millions had been annulled +and burned and that at the final catastrophe there were in circulation +close upon forty thousand millions. It will be readily seen that it +was fully time to put an end to the system, for the gold "<i>louis</i>" of +twenty-five <i>francs</i> in specie had, in February, 1796, as we have seen, +become worth 7,200 <i>francs</i>, and, at the latest quotation of all, no +less than 15,000 <i>francs</i> in paper money—that is, one franc in gold was +nominally worth 600 <i>francs</i> in paper. +</p> +<p> +Such were the results of allowing dreamers, schemers, phrase-mongers, +declaimers and strong men subservient to these to control a +government. <a href="#note-71" name="noteref-71"><small>71</small></a> +</p> +<a name="2H_4_0006"><!-- H2 anchor --></a> + +<div style="height: 4em;"><br><br><br><br></div> + +<h2> + III. +</h2> +<p> +The first new expedient of the Directory was to secure a forced loan of +six hundred million <i>francs</i> from the wealthier classes; but this was +found fruitless. Ominous it was when persons compelled to take this +loan found for an <i>assignat</i> of one hundred <i>francs</i> only one franc was +allowed. Next a National Bank was proposed; but capitalists were loath +to embark in banking while the howls of the mob against all who had +anything especially to do with money resounded in every city. At last +the Directory bethought themselves of another expedient. This was by no +means new. It had been fully tried on our continent twice before that +time: and once, since—first, in our colonial period; next, during +our Confederation; lastly, by the "Southern Confederacy" and here, +as elsewhere, always in vain. But experience yielded to theory—plain +business sense to financial metaphysics. It was determined to issue a +new paper which should be "fully secured" and "as good as gold." +</p> +<p> +Pursuant to this decision it was decreed that a new paper money "fully +secured and as good as gold" be issued under the name of "<i>mandats</i>." In +order that these new notes should be "fully secured," choice public real +estate was set apart to an amount fully equal to the nominal value of +the issue, and any one offering any amount of the <i>mandats</i> could at +once take possession of government lands; the price of the lands to be +determined by two experts, one named by the government and one by the +buyer, and without the formalities and delays previously established in +regard to the purchase of lands with <i>assignats</i>. +</p> +<p> +Perhaps the most whimsical thing in the whole situation was the +fact that the government, pressed as it was by demands of all sorts, +continued to issue the old <i>assignats</i> at the same time that it was +discrediting them by issuing the new <i>mandats</i>. And yet in order to make +the <i>mandats</i> "as good as gold" it was planned by forced loans and other +means to reduce the quantity of <i>assignats</i> in circulation, so that the +value of each <i>assignat</i> should be raised to one-thirtieth of the value +of gold, then to make <i>mandats</i> legal tender and to substitute them for +<i>assignats</i> at the rate of one for thirty. Never were great expectations +more cruelly disappointed. Even before the <i>mandats</i> could be issued +from the press they fell to thirty-five per cent of their nominal value; +from this they speedily fell to fifteen, and soon after to five per +cent, and finally, in August, 1796, six months from their first issue, +to three per cent. This plan failed—just as it failed in New England in +1737; just as it failed under our own Confederation in 1781; just as it +failed under the Southern Confederacy during our Civil War. <a href="#note-72" name="noteref-72"><small>72</small></a> +</p> +<p> +To sustain this new currency the government resorted to every method +that ingenuity could devise. Pamphlets suited to people of every +capacity were published explaining its advantages. Never was there more +skillful puffing. A pamphlet signed "Marchant" and dedicated to "People +of Good Faith" was widely circulated, in which Marchant took pains +to show the great advantage of the <i>mandats</i> as compared with +<i>assignats</i>,—how land could be more easily acquired with them; how +their security was better than with <i>assignats</i>; how they could not, by +any possibility, sink in values as the <i>assignats</i> had done. But even +before the pamphlet was dry from the press the depreciation of the +<i>mandats</i> had refuted his entire argument. <a href="#note-73" name="noteref-73"><small>73</small></a> +</p> +<p> +The old plan of penal measures was again pressed. Monot led off by +proposing penalties against those who shall speak publicly against +the <i>mandats</i>; Talot thought the penalties ought to be made especially +severe; and finally it was enacted that any persons "who by their +discourse or writing shall decry the <i>mandats</i> shall be condemned to a +fine of not less than one thousand <i>francs</i> or more than ten thousand; +and in case of a repetition of the offence, to four years in irons." It +was also decreed that those who refused to receive the <i>mandats</i> should +be fined,—the first time, the exact sum which they refuse; the second +time, ten times as much; and the third time, punished with two years in +prison. But here, too, came in the action of those natural laws which +are alike inexorable in all countries. This attempt proved futile in +France just as it had proved futile less than twenty years before in +America. No enactments could stop the downward tendency of this new +paper "fully secured," "as good as gold"; the laws that finally govern +finance are not made in conventions or congresses. <a href="#note-74" name="noteref-74"><small>74</small></a> +</p> +<p> +From time to time various new financial juggles were tried, some of them +ingenious, most of them drastic. It was decreed that all <i>assignats</i> +above the value of one hundred <i>francs</i> should cease to circulate after +the beginning of June, 1796. But this only served to destroy the +last vestige of, confidence in government notes of any kind. Another +expedient was seen in the decree that paper money should be made to +accord with a natural and immutable standard of value and that one franc +in paper should thenceforth be worth ten pounds of wheat. This also +failed. On July 16th another decree seemed to show that the authorities +despaired of regulating the existing currency and it was decreed that +all paper, whether <i>mandats</i> or <i>assignats</i>, should be taken at its +real value, and that bargains might be made in whatever currency people +chose. The real value of the <i>mandats</i> speedily sank to about two per +cent of their nominal value and the only effect of this legislation +seemed to be that both <i>assignats</i> and <i>mandats</i> went still lower. Then +from February 4 to February 14, 1797, came decrees and orders that the +engraving apparatus for the <i>mandats</i> should be destroyed as that for +the <i>assignats</i> had been, that neither <i>assignats</i> nor <i>mandats</i> should +longer be a legal tender and that old debts to the state might be paid +for a time with government paper at the rate of one per cent of their +face value. <a href="#note-75" name="noteref-75"><small>75</small></a> Then, less than three months later, it was decreed that +the twenty-one billions of <i>assignats</i> still in circulation should be +annulled. Finally, on September 30, 1797, as the culmination of these +and various other experiments and expedients, came an order of the +Directory that the national debts should be paid two-thirds in bonds +which might be used in purchasing confiscated real estate, and the +remaining "Consolidated Third," as it was called, was to be placed on +the "Great Book" of the national debt to be paid thenceforth as the +government should think best. +</p> +<p> +As to the bonds which the creditors of the nation were thus forced to +take, they sank rapidly, as the <i>assignats</i> and <i>mandats</i> had done, even +to three per cent of their value. As to the "Consolidated Third," that +was largely paid, until the coming of Bonaparte, in paper money which +sank gradually to about six per cent of its face value. Since May, 1797, +both <i>assignats</i> and <i>mandats</i> had been virtually worth nothing. +</p> +<p> +So ended the reign of paper money in France. The twenty-five hundred +millions of <i>mandats</i> went into the common heap of refuse with the +previous forty-five thousand millions of <i>assignats</i>: the nation in +general, rich and poor alike, was plunged into financial ruin from one +end to the other. +</p> +<p> +On the prices charged for articles of ordinary use light is thrown by +extracts from a table published in 1795, reduced to American coinage. +</p> +<pre> + 1790 1795 + For a bushel of flour 40 cents 45 dollars + For a bushel of oats 18 cents 10 dollars + For a cartload of wood 4 dollars 500 dollars + For a bushel of coal 7 cents 2 dollars + For a pound of sugar 18 cents 12 1/2 dollars + For a pound of soap 18 cents 8 dollars + For a pound of candles 18 cents 8 dollars + For one cabbage 8 cents 5 1/2 dollars + For a pair of shoes 1 dollar 40 dollars + For twenty-five eggs 24 cents 5 dollars +</pre> +<p> +But these prices about the middle of 1795 were moderate compared with +those which were reached before the close of that year and during the +year following. Perfectly authentic examples were such as the following: +</p> +<pre> + A pound of bread 9 dollars + A bushel of potatoes 40 dollars + A pound of candles 40 dollars + A cartload of wood 250 dollars +</pre> +<p> +So much for the poorer people. Typical of those esteemed wealthy may be +mentioned a manufacturer of hardware who, having retired from business +in 1790 with 321,000 <i>livres</i>, found his property in 1796 worth 14,000 +<i>francs</i>. <a href="#note-76" name="noteref-76"><small>76</small></a> +</p> +<p> +For this general distress arising from the development and collapse of +"fiat" money in France, there was, indeed, one exception. In Paris and +a few of the other great cities, men like Tallien, of the heartless, +debauched, luxurious, speculator, contractor and stock-gambler class, +had risen above the ruins of the multitudes of smaller fortunes. +Tallien, one of the worst demagogue "reformers," and a certain number +of men like him, had been skillful enough to become millionaires, while +their dupes, who had clamored for issues of paper money, had become +paupers. +</p> +<p> +The luxury and extravagance of the currency gamblers and their families +form one of the most significant features in any picture of the social +condition of that period. <a href="#note-77" name="noteref-77"><small>77</small></a> +</p> +<p> +A few years before this the leading women in French society showed a +nobility of character and a simplicity in dress worthy of Roman matrons. +Of these were Madame Boland and Madame Desmoulins; but now all was +changed. At the head of society stood Madame Tallien and others like +her, wild in extravagance, daily seeking new refinements in luxury, and +demanding of their husbands and lovers vast sums to array them and to +feed their whims. If such sums could not be obtained honestly they must +be had dishonestly. The more closely one examines that period, the more +clearly he sees that the pictures, given by Thibaudeau and Challamel and +De Goncourt are not at all exaggerated. <a href="#note-78" name="noteref-78"><small>78</small></a> +</p> +<p> +The contrast between these gay creatures of the Directory period and the +people at large was striking. Indeed much as the vast majority of the +wealthy classes suffered from impoverishment, the laboring classes, +salaried employees of all sorts, and people of fixed income and of small +means, especially in the cities, underwent yet greater distress. These +were found, as a rule, to subsist mainly on daily government rations of +bread at the rate of one pound per person. This was frequently unfit +for food and was distributed to long lines of people, men, women and +children, who were at times obliged to wait their turn even from dawn +to dusk. The very rich could, by various means, especially by bribery, +obtain better bread, but only at enormous cost. In May, 1796, the market +price of good bread was, in paper, 80 <i>francs</i> (16 dollars) per pound +and a little later provisions could not be bought for paper money at any +price. <a href="#note-79" name="noteref-79"><small>79</small></a> +</p> +<p> +And here it may be worth mentioning that there was another financial +trouble especially vexatious. While, as we have seen, such enormous +sums, rising from twenty to forty thousand millions of <i>francs</i> in +paper, were put in circulation by the successive governments of the +Revolution, enormous sums had been set afloat in counterfeits by +criminals and by the enemies of France. These came not only from +various parts of the French Republic but from nearly all the surrounding +nations, the main source being London. Thence it was that Count Joseph +de Puisaye sent off cargoes of false paper, excellently engraved and +printed, through ports in Brittany and other disaffected parts of +France. One seizure by General Hoche was declared by him to exceed in +nominal value ten thousand millions of <i>francs</i>. With the exception of +a few of these issues, detection was exceedingly difficult, even for +experts; for the vast majority of the people it was impossible. +</p> +<p> +Nor was this all. At various times the insurgent royalists in La Vendee +and elsewhere put <i>their</i> presses also in operation, issuing notes +bearing the Bourbon arms,—the <i>fleur-de-lis</i>, the portrait of the +Dauphin (as Louis XVII) with the magic legend "<i>De Par le Roi</i>," and +large bodies of the population in the insurgent districts were <i>forced</i> +to take these. Even as late as 1799 these notes continued to appear. <a href="#note-80" name="noteref-80"><small>80</small></a> +</p> +<p> +The financial agony was prolonged somewhat by attempts to secure funds +by still another "forced loan," and other discredited measures, but +when all was over with paper money, specie began to reappear—first in +sufficient sums to do the small amount of business which remained after +the collapse. Then as the business demand increased, the amount of +specie flowed in from the world at large to meet it and the nation +gradually recovered from that long paper-money debauch. +</p> +<p> +Thibaudeau, a very thoughtful observer, tells us in his Memoirs that +great fears were felt as to a want of circulating medium between the +time when paper should go out and coin should come in; but that no +such want was severely felt—that coin came in gradually as it was +wanted. <a href="#note-81" name="noteref-81"><small>81</small></a> +</p> +<p> +Nothing could better exemplify the saying of one of the most shrewd of +modern statesmen that "There will always be money." <a href="#note-82" name="noteref-82"><small>82</small></a> +</p> +<p> +But though there soon came a degree of prosperity—as compared with the +distress during the paper-money orgy, convalescence was slow. The acute +suffering from the wreck and rain brought by <i>assignats</i>, <i>mandats</i> and +other paper currency in process of repudiation lasted nearly ten years, +but the period of recovery lasted longer than the generation which +followed. It required fully forty years to bring capital, industry, +commerce and credit up to their condition when the Revolution began, and +demanded a "man on horseback," who established monarchy on the ruins of +the Republic and thew away millions of lives for the Empire, to be added +to the millions which had been sacrificed by the Revolution. <a href="#note-83" name="noteref-83"><small>83</small></a> +</p> +<p> +Such, briefly sketched in its leading features, is the history of the +most skillful, vigorous and persistent attempt ever made to substitute +for natural laws in finance the ability of legislative bodies, and, for +a standard of value recognized throughout the world, a national standard +devised by theorists and manipulated by schemers. Every other attempt +of the same kind in human history, under whatever circumstances, has +reached similar results in kind if not in degree; all of them show the +existence of financial laws as real in their operation as those which +hold the planets in their courses. <a href="#note-84" name="noteref-84"><small>84</small></a> +</p> +<p> +I have now presented this history in its chronological order—the order +of events: let me, in conclusion, sum it up, briefly, in its <i>logical</i> +order,—the order of cause and effect. +</p> +<p> +And, first, in the economic department. From the early reluctant and +careful issues of paper we saw, as an immediate result, improvement and +activity in business. Then arose the clamor for more paper money. At +first, new issues were made with great difficulty; but, the dyke once +broken, the current of irredeemable currency poured through; and, the +breach thus enlarging, this currency was soon swollen beyond control. +It was urged on by speculators for a rise in values; by demagogues who +persuaded the mob that a nation, by its simple fiat, could stamp real +value to any amount upon valueless objects. As a natural consequence a +great debtor class grew rapidly, and this class gave its influence to +depreciate more and more the currency in which its debts were to be +paid. <a href="#note-85" name="noteref-85"><small>85</small></a> +</p> +<p> +The government now began, and continued by spasms to grind out still +more paper; commerce was at first stimulated by the difference in +exchange; but this cause soon ceased to operate, and commerce, having +been stimulated unhealthfully, wasted away. +</p> +<p> +Manufactures at first received a great impulse; but, ere long, this +overproduction and overstimulus proved as fatal to them as to commerce. +From time to time there was a revival of hope caused by an apparent +revival of business; but this revival of business was at last seen to +be caused more and more by the desire of far-seeing and cunning men of +affairs to exchange paper money for objects of permanent value. As +to the people at large, the classes living on fixed incomes and small +salaries felt the pressure first, as soon as the purchasing power of +their fixed incomes was reduced. Soon the great class living on wages +felt it even more sadly. +</p> +<p> +Prices of the necessities of life increased: merchants were obliged to +increase them, not only to cover depreciation of their merchandise, but +also to cover their risk of loss from fluctuation; and, while the prices +of products thus rose, wages, which had at first gone up, under +the general stimulus, lagged behind. Under the universal doubt and +discouragement, commerce and manufactures were checked or destroyed. +As a consequence the demand for labor was diminished; laboring men were +thrown out of employment, and, under the operation of the simplest +law of supply and demand, the price of labor—the daily wages of the +laboring class—went down until, at a time when prices of food, clothing +and various articles of consumption were enormous, wages were nearly as +low as at the time preceding the first issue of irredeemable currency. +</p> +<p> +The mercantile classes at first thought themselves exempt from the +general misfortune. They were delighted at the apparent advance in the +value of the goods upon their shelves. But they soon found that, as they +increased prices to cover the inflation of currency and the risk +from fluctuation and uncertainty, purchases became less in amount +and payments less sure; a feeling of insecurity spread throughout the +country; enterprise was deadened and stagnation followed. +</p> +<p> +New issues of paper were then clamored for as more drams are demanded by +a drunkard. New issues only increased the evil; capitalists were all the +more reluctant to embark their money on such a sea of doubt. Workmen of +all sorts were more and more thrown out of employment. Issue after issue +of currency came; but no relief resulted save a momentary stimulus, +which aggravated the disease. The most ingenious evasions of natural +laws in finance which the most subtle theorists could contrive were +tried—all in vain; the most brilliant substitutes for those laws were +tried; "self-regulating" schemes, "interconverting" schemes—all +equally vain. <a href="#note-86" name="noteref-86"><small>86</small></a> All thoughtful men had lost confidence. All men were +<i>waiting</i>; stagnation became worse and worse. At last came the collapse +and then a return, by a fearful shock, to a state of things which +presented something like certainty of remuneration to capital and labor. +Then, and not till then, came the beginning of a new era of prosperity. +</p> +<p> +Just as dependent on the law of cause and effect was the <i>moral</i> +development. Out of the inflation of prices grew a speculating class; +and, in the complete uncertainty as to the future, all business became +a game of chance, and all business men, gamblers. In city centers came a +quick growth of stock-jobbers and speculators; and these set a debasing +fashion in business which spread to the remotest parts of the country. +Instead of satisfaction with legitimate profits, came a passion for +inordinate gains. Then, too, as values became more and more uncertain, +there was no longer any motive for care or economy, but every motive for +immediate expenditure and present enjoyment. So came upon the nation +the <i>obliteration of thrift</i>. In this mania for yielding to present +enjoyment rather than providing for future comfort were the seeds of +new growths of wretchedness: luxury, senseless and extravagant, set in: +this, too, spread as a fashion. To feed it, there came cheatery in +the nation at large and corruption among officials and persons holding +trusts. While men set such fashions in private and official business, +women set fashions of extravagance in dress and living that added to the +incentives to corruption. Faith in moral considerations, or even in +good impulses, yielded to general distrust. National honor was thought +a fiction cherished only by hypocrites. Patriotism was eaten out by +cynicism. +</p> +<p> +Thus was the history of France logically developed in obedience to +natural laws; such has, to a greater or less degree, always been the +result of irredeemable paper, created according to the whim or interest +of legislative assemblies rather than based upon standards of value +permanent in their nature and agreed upon throughout the entire world. +Such, we may fairly expect, will always be the result of them until +the fiat of the Almighty shall evolve laws in the universe radically +different from those which at present obtain. <a href="#note-87" name="noteref-87"><small>87</small></a> +</p> +<p> +And, finally, as to the general development of the theory and practice +which all this history records: my subject has been Fiat Money in +France; How it came; What it brought; and How it ended. +</p> +<p> +It came by seeking a remedy for a comparatively small evil in an evil +infinitely more dangerous. To cure a disease temporary in its character, +a corrosive poison was administered, which ate out the vitals of French +prosperity. +</p> +<p> +It progressed according to a law in social physics which we may call +the "<i>law of accelerating issue and depreciation.</i>" It was comparatively +easy to refrain from the first issue; it was exceedingly difficult to +refrain from the second; to refrain from the third and those following +was practically impossible. +</p> +<p> +It brought, as we have seen, commerce and manufactures, the mercantile +interest, the agricultural interest, to ruin. It brought on these the +same destruction which would come to a Hollander opening the dykes of +the sea to irrigate his garden in a dry summer. +</p> +<p> +It ended in the complete financial, moral and political prostration of +France-a prostration from which only a Napoleon could raise it. +</p> +<p> +But this history would be incomplete without a brief sequel, showing how +that great genius profited by all his experience. When Bonaparte took +the consulship the condition of fiscal affairs was appalling. The +government was bankrupt; an immense debt was unpaid. The further +collection of taxes seemed impossible; the assessments were in hopeless +confusion. War was going on in the East, on the Rhine, and in Italy, and +civil war, in La Vendée. All the armies had long been unpaid, and the +largest loan that could for the moment be effected was for a sum hardly +meeting the expenses of the government for a single day. At the first +cabinet council Bonaparte was asked what he intended to do. He replied, +"I will pay cash or pay nothing." From this time he conducted all his +operations on this basis. He arranged the assessments, funded the debt, +and made payments in cash; and from this time—during all the campaigns +of Marengo, Austerlitz, Jena, Eylau, Friedland, down to the Peace of +Tilsit in 1807—there was but one suspension of specie payment, and this +only for a few days. When the first great European coalition was formed +against the Empire, Napoleon was hard pressed financially, and it was +proposed to resort to paper money; but he wrote to his minister, "While +I live I will never resort to irredeemable paper." He never did, and +France, under this determination, commanded all the gold she needed. +When Waterloo came, with the invasion of the Allies, with war on her +own soil, with a change of dynasty, and with heavy expenses for war and +indemnities, France, on a specie basis, experienced no severe financial +distress. +</p> +<p> +If we glance at the financial history of France during the +Franco-Prussian War and the Communist struggle, in which a far more +serious pressure was brought upon French finances than our own recent +Civil War put upon American finance, and yet with no national stagnation +or distress, but with a steady progress in prosperity, we shall see +still more clearly the advantage of meeting a financial crisis in an +honest and straightforward way, and by methods sanctioned by the world's +most costly experience, rather than by yielding to dreamers, theorists, +phrase-mongers, declaimers, schemers, speculators or to that sort of, +"Reform" which is "the last refuge of a scoundrel." <a href="#note-88" name="noteref-88"><small>88</small></a> +</p> +<p> +There is a lesson in all this which it behooves every thinking man to +ponder. +</p> +<a name="2H_NOTE"><!-- H2 anchor --></a> + +<div style="height: 4em;"><br><br><br><br></div> + +<h2> + NOTES +</h2> +<p> +Note: The White Collection at the Cornell University library mentioned +in many of the following notes is described here: +</p> +<p> +http://rmc.library.cornell.edu/collections/subjects/frrev.html +</p> +<p> +THE BANK OF NEW YORK, established in 1784, was the only Bank in +existence in the city of New York at the time of the French experiment +with fiat money. +</p> +<p> +THE BANK OF NEW YORK AND TRUST COMPANY, which celebrates its one-hundred +and fiftieth anniversary in March, 1934, considers it a privilege to +be able to distribute some copies of this scholarly article of the late +Andrew D. White. The article emphasizes the fact that the use of fiat +money in France was in its beginning a sincere effort on the part of +intelligent members of the National Assembly to stem the tide of misery +and wretchedness which had brought about the Revolution in 1789. But the +article also shows clearly that once started on a small scale, it became +utterly impossible to control the currency inflation and that after some +slight indications of improvement in conditions, the situation went from +bad to worse. In the long run, those most injured were the people whom +it was most desired to help—the laborer, the wage earner and those +whose incomes from previous savings were smallest. +</p> +<p> +ANDREW D. WHITE had a long and distinguished career as educator, +historian, economist and diplomat; his description of the events +in France that followed the experiment with fiat money is intensely +interesting and well Worth the attention of every thinking person in the +United States of 1933. +</p> +<a name="2H_FOOT"><!-- H2 anchor --></a> + +<div style="height: 4em;"><br><br><br><br></div> + +<h2> + FOOTNOTES: +</h2> +<a name="note-1"><!--Note--></a> +<p class="foot"> +<u>1</u> (<a href="#noteref-1">return</a>)<br> +[ A paper read before a meeting of Senators and Members of +the House of Representatives of both political parties, at Washington, +April 12th, and before the Union League Club, at New York, April 13th, +1876, and now (1914) revised and extended.] +</p> +<a name="note-2"><!--Note--></a> +<p class="foot"> +<u>2</u> (<a href="#noteref-2">return</a>)<br> +[ For proof that the financial situation of France at that +time was by no means hopeless, see Storch, "Economie Politique," vol. +iv, p. 159.] +</p> +<a name="note-3"><!--Note--></a> +<p class="foot"> +<u>3</u> (<a href="#noteref-3">return</a>)<br> +[ See Moniteur, sitting of April 10, 1790.] +</p> +<a name="note-4"><!--Note--></a> +<p class="foot"> +<u>4</u> (<a href="#noteref-4">return</a>)<br> +[ Ibid., sitting of April 15, 1790.] +</p> +<a name="note-5"><!--Note--></a> +<p class="foot"> +<u>5</u> (<a href="#noteref-5">return</a>)<br> +[ For details of this struggle, see Buchez and Roux, +"Histoire Parlementaire de la Révolution Française," vol. iii, pp. +364, 365, 404. For the wild utterances of Marat throughout this whole +history, see the full set of his "L'ami du peuple" in the President +White Collection of the Cornell University. For Bergasse's pamphlet and +a mass of similar publications, see the same collection. For the effect +produced by them, see Challamel, "Les Français sous la Révolution"; +also De Goncourt, "La Société Française pendant la Révolution," &c.] +</p> +<p class="foot"> +For the Report referred to, see Levasseur, "Histoire des classes +ouvriès et de l'industrie en France de 1789 à 1870," Paris, 1903, vol. +i., chap. 6. Levasseur (vol. 1, p. 120), a very strong conservative in +such estimates, sets the total value of church property at two thousand +millions; other authorities put it as high as twice that sum. See +especially Taine, liv. ii, ch. I., who gives the valuation as "about +four milliards." Sybel, "Gesch. der Revolutionszeit," gives it as two +milliards and Briand, "La séparation" &c., agrees with him. See also De +Nerve, "Finances Françaises," vol. ii, pp. 236-240; also Alison, +"History of Europe," vol. i.] +</p> +<a name="note-6"><!--Note--></a> +<p class="foot"> +<u>6</u> (<a href="#noteref-6">return</a>)<br> +[ For striking pictures of this feeling among the younger +generation of Frenchmen, see Challamel, "Sur la Révolution," p. 305. +For general history of John Law's paper money, see Henri Martin, +"Histoire de France"; also Blanqui, "Histoire de l'économie politique," +vol. ii, pp. 65-87; also Senior on "Paper Money," sec. iii, Pt. I, also +Thiers, "Histoire de Law"; also Levasseur, op. cit. Liv. i., chap. VI. +Several specimens of John Law's paper currency are to be found in the +White Collection in the Library of Cornell University,—some, numbered +with enormous figures.] +</p> +<a name="note-7"><!--Note--></a> +<p class="foot"> +<u>7</u> (<a href="#noteref-7">return</a>)<br> +[ See Buchez and Roux, "Histoire Parlementaire," vol. v, p. +321, et seq. For an argument to prove that the <i>assignats</i> were, after +all, not so well secured as John Law's money, see Storch, "Economie +Politique," vol. iv, p. 160.] +</p> +<a name="note-8"><!--Note--></a> +<p class="foot"> +<u>8</u> (<a href="#noteref-8">return</a>)<br> +[ For specimens of this first issue and of nearly every other +issue during the French Revolution, see the extensive collection of +originals in the Cornell University Library. For a virtually complete +collection of photographic copies, see Dewamin, "Cent ans de +numismatique française," vol. i, passim.] +</p> +<a name="note-9"><!--Note--></a> +<p class="foot"> +<u>9</u> (<a href="#noteref-9">return</a>)<br> +[ See "Addresse de l'Assemblée nationals sur lea emissions +<i>d'assignats</i> monnaies," p. 5.] +</p> +<a name="note-10"><!--Note--></a> +<p class="foot"> +<u>10</u> (<a href="#noteref-10">return</a>)<br> +[ Ibid., p. 10.] +</p> +<a name="note-11"><!--Note--></a> +<p class="foot"> +<u>11</u> (<a href="#noteref-11">return</a>)<br> +[ For Sarot, see "Lettre de M. Sarot," Paris, April 19, +1790. As to the sermon referred to see Levasseur as above, vol. i, p. +136.] +</p> +<a name="note-12"><!--Note--></a> +<p class="foot"> +<u>12</u> (<a href="#noteref-12">return</a>)<br> +[ Von Sybel, "History of the French Revolution," vol. i, p. +252; also Levasseur, as above, pp. 137 and following.] +</p> +<a name="note-13"><!--Note--></a> +<p class="foot"> +<u>13</u> (<a href="#noteref-13">return</a>)<br> +[ For Mirabeau's real opinion on irredeemable paper, see his +letter to Cerutti, in a leading article of the "Moniteur"; also +"Mèmoires do Mirabeau," vol. vii, pp. 23, 24 and elsewhere. For his +pungent remarks above quoted, see Levasseur, ibid., vol. i, p. 118.] +</p> +<a name="note-14"><!--Note--></a> +<p class="foot"> +<u>14</u> (<a href="#noteref-14">return</a>)<br> +[ See "Moniteur," August 27, 1790.] +</p> +<a name="note-15"><!--Note--></a> +<p class="foot"> +<u>15</u> (<a href="#noteref-15">return</a>)<br> +[ "Moniteur," August 28, 1790; also Levasseur, as above, pp. +139 <i>et seq</i>.] +</p> +<a name="note-16"><!--Note--></a> +<p class="foot"> +<u>16</u> (<a href="#noteref-16">return</a>)<br> +[ "Par une seule opération, grande, simple, magnifique." +See "Moniteur." The whole sounds curiously like the proposals of the +"Greenbackers," regarding the American debt, some years since.] +</p> +<a name="note-17"><!--Note--></a> +<p class="foot"> +<u>17</u> (<a href="#noteref-17">return</a>)<br> +[ "Moniteur," August 29, 1790.] +</p> +<a name="note-18"><!--Note--></a> +<p class="foot"> +<u>18</u> (<a href="#noteref-18">return</a>)<br> +[ See Lacretelle, "18me Siécle," vol. viii, pp. 84-87; also +Thiers and Mignet.] +</p> +<a name="note-19"><!--Note--></a> +<p class="foot"> +<u>19</u> (<a href="#noteref-19">return</a>)<br> +[ See Hatin, Histoire de la Presse en France, vols. v and +vi.] +</p> +<a name="note-20"><!--Note--></a> +<p class="foot"> +<u>20</u> (<a href="#noteref-20">return</a>)<br> +[ See "Moniteur," Sept. 5, 6 and 20, 1790.] +</p> +<a name="note-21"><!--Note--></a> +<p class="foot"> +<u>21</u> (<a href="#noteref-21">return</a>)<br> +[ See Levasseur, vol. i, p. 142.] +</p> +<a name="note-22"><!--Note--></a> +<p class="foot"> +<u>22</u> (<a href="#noteref-22">return</a>)<br> +[ See speech in "Moniteur"; also in Appendix to Thiers' +"History of the French Revolution."] +</p> +<a name="note-23"><!--Note--></a> +<p class="foot"> +<u>23</u> (<a href="#noteref-23">return</a>)<br> +[ See Levassear, "Classes ouvrières," etc., vol. i, p. +149.] +</p> +<a name="note-24"><!--Note--></a> +<p class="foot"> +<u>24</u> (<a href="#noteref-24">return</a>)<br> +[ See Levasseur, pp. 151 et seq. Various examples of these +"confidence bills" are to be seen in the Library of Cornell University.] +</p> +<a name="note-25"><!--Note--></a> +<p class="foot"> +<u>25</u> (<a href="#noteref-25">return</a>)<br> +[ See Levasseur, vol. i, pp. 155-156.] +</p> +<a name="note-26"><!--Note--></a> +<p class="foot"> +<u>26</u> (<a href="#noteref-26">return</a>)<br> +[ See Von Sybel, "History of the Revolution," vol. i, p. +265; also Levasseur, as above, vol. i, pp. 152-160.] +</p> +<a name="note-27"><!--Note--></a> +<p class="foot"> +<u>27</u> (<a href="#noteref-27">return</a>)<br> +[ For Turgot's argument against "fiat money" theory, see A. +D. White, "Seven Great Statesmen in the Warfare of Humanity with +Unreason," article on Turgot, pp. 169, et seq.] +</p> +<a name="note-28"><!--Note--></a> +<p class="foot"> +<u>28</u> (<a href="#noteref-28">return</a>)<br> +[ See De Goncourt, "Société française," for other +explanations; "Les Révolutions de Paris," vol. ii, p. 216; Challamel, +"Les Français sous la Révolution"; Senior, "On Some Effects of Paper +Money," p. 82; Buchez and Roux, "Histoire Parlementaire," etc., vol. x, +p. 216; Aulard, "Paris pendant la Révolution thermidorienne," <i>passim</i>, +and especially "Rapport du bureau de surveillance," vol. ii, pp. 562, et +seq. (Dec. 4-24, 1795.)] +</p> +<a name="note-29"><!--Note--></a> +<p class="foot"> +<u>29</u> (<a href="#noteref-29">return</a>)<br> +[ For statements and illustration of the general action of +this law, see Sumner, "History of American Currency," pp. 157, 158; also +Jevons, on "Money," p. 80.] +</p> +<a name="note-30"><!--Note--></a> +<p class="foot"> +<u>30</u> (<a href="#noteref-30">return</a>)<br> +[ See De Goncourt, "Société Française," p. 214.] +</p> +<a name="note-31"><!--Note--></a> +<p class="foot"> +<u>31</u> (<a href="#noteref-31">return</a>)<br> +[ See Von Sybel, History of the French Revolution, vol. 1, +pp. 281, 283.] +</p> +<a name="note-32"><!--Note--></a> +<p class="foot"> +<u>32</u> (<a href="#noteref-32">return</a>)<br> +[ For proofs that issues of irredeemable paper at first +stimulated manufactures and commerce in Austria and afterward ruined +them, see Storch's "Economie politique," vol. iv, p. 223, note; and for +the same effect produced by the same causes in Russia, see ibid., end of +vol. iv. For the same effects in America, see Sumner's "History of +American Currency." For general statement of effect of inconvertible +issues on foreign exchanges see McLeod on "Banking," p. 186.] +</p> +<a name="note-33"><!--Note--></a> +<p class="foot"> +<u>33</u> (<a href="#noteref-33">return</a>)<br> +[ See Louis Blanc, "Histoire de la Révolution," tome xii, +p. 113.] +</p> +<a name="note-34"><!--Note--></a> +<p class="foot"> +<u>34</u> (<a href="#noteref-34">return</a>)<br> +[ See "Extrait du registre des délibérations de la section +de la bibliothèque," May 3, 1791, pp. 4, 5.] +</p> +<a name="note-35"><!--Note--></a> +<p class="foot"> +<u>35</u> (<a href="#noteref-35">return</a>)<br> +[ Von Sybel, vol. i, p. 273.] +</p> +<a name="note-36"><!--Note--></a> +<p class="foot"> +<u>36</u> (<a href="#noteref-36">return</a>)<br> +[ For general account, see Thiers' "Révolution," chap. xiv; +also Lacretelle, vol. viii, p. 109; also "Memoirs of Mallet du Pan." For +a good account of the intrigues between the court and Mirabeau and of +the prices paid him, see Reeve, "Democracy and Monarchy in France," vol. +i, pp. 213-220. For a very striking caricature published after the iron +chest in the Tuileries was opened and the evidences of bribery of +Mirabeau fully revealed, see Challamel, "Musée," etc. Vol. i, p. 341, +is represented as a skeleton sitting on a pile of letters, holding the +French crown in one hand and a purse of gold in the other.] +</p> +<a name="note-37"><!--Note--></a> +<p class="foot"> +<u>37</u> (<a href="#noteref-37">return</a>)<br> +[ Thiers, chap. ix.] +</p> +<a name="note-38"><!--Note--></a> +<p class="foot"> +<u>38</u> (<a href="#noteref-38">return</a>)<br> +[ For this and other evidences of steady decline in the +purchasing power of the <i>assignats</i>, see Caron, "Tableaux de +Dépréciation du papier-monnaie," Paris, 1909, p. 386.] +</p> +<a name="note-39"><!--Note--></a> +<p class="foot"> +<u>39</u> (<a href="#noteref-39">return</a>)<br> +[ See especially "Discours de Fabre d'Eglantine," in +"Moniteur" for August 11, 1793; also debate in "Moniteur" of September +15, 1793; also Prudhomme's "Révolutions de Paris." For arguments of +much the same tenor, see vast numbers of pamphlets, newspaper articles +and speeches during the "Greenback Craze,"—and the craze for unlimited +coinage of silver,—in the United States.] +</p> +<a name="note-40"><!--Note--></a> +<p class="foot"> +<u>40</u> (<a href="#noteref-40">return</a>)<br> +[ See Caron, "Tableaux de Dépréciation," as above, p. +386.] +</p> +<a name="note-41"><!--Note--></a> +<p class="foot"> +<u>41</u> (<a href="#noteref-41">return</a>)<br> +[ Von Sybel, vol. i, pp. 509, 510, 515; also Villeneuve +Bargemont, "Histoire de l'Economie Politique," vol. ii, p. 213.] +</p> +<a name="note-42"><!--Note--></a> +<p class="foot"> +<u>42</u> (<a href="#noteref-42">return</a>)<br> +[ As to the purchasing power of money at that time, see +Arthur Young, "Travels in France during the Years 1787, 1788 and 1789." +For notices of the small currency with examples of satirical verses +written regarding it, see Challamel, "Les français sous la +Révolution," pp. 307, 308. See also Mercier, "Le Nouveau Paris," +edition of 1800, chapter ccv., entitled "Parchemin Monnaie." A series of +these petty notes will be found in the White collection of the Cornell +University Library. They are very dirty and much worn, but being printed +on parchment, remain perfectly legible. For issue of quarter-"<i>sou</i>" +pieces see Levasseur, p. 180.] +</p> +<a name="note-43"><!--Note--></a> +<p class="foot"> +<u>43</u> (<a href="#noteref-43">return</a>)<br> +[ See Levasseur, vol. i, p. 176.] +</p> +<a name="note-44"><!--Note--></a> +<p class="foot"> +<u>44</u> (<a href="#noteref-44">return</a>)<br> +[ For Chaumette's brilliant display of fictitious reasons +for the decline see Thiers, Shoberl's translation, published by Bentley, +vol. iii, p. 248.] +</p> +<a name="note-45"><!--Note--></a> +<p class="foot"> +<u>45</u> (<a href="#noteref-45">return</a>)<br> +[ For these fluctuations, see Caron, as above, p. 387.] +</p> +<a name="note-46"><!--Note--></a> +<p class="foot"> +<u>46</u> (<a href="#noteref-46">return</a>)<br> +[ One of the Forced Loan certificates will be found in the +White Collection in the Library of Cornell University.] +</p> +<a name="note-47"><!--Note--></a> +<p class="foot"> +<u>47</u> (<a href="#noteref-47">return</a>)<br> +[ For details of these transactions, see Levasseur, as +above, vol. i, chap. 6, pp. 181, et seq. Original specimens of these +notes, bearing the portrait of Louis XVI will be found in the Cornell +University Library (White Collection) and for the whole series perfectly +photographed in the same collection, Dewarmin, "Cent ans de numismatique +française," vol. i, pp. 143-165.] +</p> +<a name="note-48"><!--Note--></a> +<p class="foot"> +<u>48</u> (<a href="#noteref-48">return</a>)<br> +[ For statements showing the distress and disorder that +forced the Convention to establish the "<i>Maximum</i>" see Levasseur, vol. +i, pp. 188-193.] +</p> +<a name="note-49"><!--Note--></a> +<p class="foot"> +<u>49</u> (<a href="#noteref-49">return</a>)<br> +[ See Levasseur, as above, vol. i, pp. 195-225.] +</p> +<a name="note-50"><!--Note--></a> +<p class="foot"> +<u>50</u> (<a href="#noteref-50">return</a>)<br> +[ See specimens of these tickets in the White Collection in +the Cornell Library.] +</p> +<a name="note-51"><!--Note--></a> +<p class="foot"> +<u>51</u> (<a href="#noteref-51">return</a>)<br> +[ For these condemnations to the guillotine see the +officially published trials and also the lists of the condemned, in the +White Collection, also the lists given daily in the "Moniteur." For the +spy system, see Levasseur, vol. i, p. 194.] +</p> +<a name="note-52"><!--Note--></a> +<p class="foot"> +<u>52</u> (<a href="#noteref-52">return</a>)<br> +[ See Levasseur, as above, vol. i, p. 186. For an argument +to show that the Convention was led into this Draconian legislation, not +by necessity, but by its despotic tendencies, see Von Sybel's "History +of the French Revolution," vol. iii, pp. 11, 12. For general statements +of theories underlying the "<i>Maximum</i>," see Thiers; for a very +interesting picture, by an eye-witness, of the absurdities and miseries +it caused, see Mercier, "Nouveau Paris," edition of 1800, chapter XLIV.] +</p> +<a name="note-53"><!--Note--></a> +<p class="foot"> +<u>53</u> (<a href="#noteref-53">return</a>)<br> +[ For a summary of the report of the Committee, with list of +articles embraced under it, and for various interesting details, see +Villeneuve Bargemont, "Histoire de l'Economie Politique," vol. ii, pp. +213-239; also Levasseur, as above. For curious examples of severe +penalties for very slight infringements on the law on the subject, see +Louis Blanc, "Histoire de la Révolution française," tome x, p. 144. +For Louis XIVth's claim see "Memoirs of Louis XIV for the Instruction of +the Dauphin."] +</p> +<p class="foot"> +For a simple exposition of the way in which the exercise of this power +became simply confiscation of all private property in France, see Mallet +Du Pan's "Memoirs," London, 1852, vol. ii, p. 14.] +</p> +<a name="note-54"><!--Note--></a> +<p class="foot"> +<u>54</u> (<a href="#noteref-54">return</a>)<br> +[ See Du Pont's arguments, as given by Levasseur.] +</p> +<a name="note-55"><!--Note--></a> +<p class="foot"> +<u>55</u> (<a href="#noteref-55">return</a>)<br> +[ Louis Blanc calls attention to this very fact in showing +the superiority of the French <i>assignats</i> to the old American +Continental currency, See his "Histoire de la Révolution française," +tome xii, p. 98.] +</p> +<a name="note-56"><!--Note--></a> +<p class="foot"> +<u>56</u> (<a href="#noteref-56">return</a>)<br> +[ See Sumner, as above, p. 220.] +</p> +<a name="note-57"><!--Note--></a> +<p class="foot"> +<u>57</u> (<a href="#noteref-57">return</a>)<br> +[ See Levasseur, as above, vol. i, p. 178.] +</p> +<a name="note-58"><!--Note--></a> +<p class="foot"> +<u>58</u> (<a href="#noteref-58">return</a>)<br> +[ See Cambon's "Report," Aug. 15, 1793, pp. 49-60; also, +"Decree of Aug. 24, 1793," sec. 31, chapters XCVI-CIII. Also, "Tableaux +de la dépréciation de papier monnaie dans le department de la Seine."] +</p> +<a name="note-59"><!--Note--></a> +<p class="foot"> +<u>59</u> (<a href="#noteref-59">return</a>)<br> +[ For the example of Metz and other authorities, see +Levasseur, as above, vol. i, p. 180.] +</p> +<a name="note-60"><!--Note--></a> +<p class="foot"> +<u>60</u> (<a href="#noteref-60">return</a>)<br> +[ See Von Sybel, vol. iii, p. 173.] +</p> +<a name="note-61"><!--Note--></a> +<p class="foot"> +<u>61</u> (<a href="#noteref-61">return</a>)<br> +[ See Thiers; also, for curious details of measures taken to +compel farmers and merchants, see Senior, Lectures on "Results of Paper +Money," pp. 86, 87.] +</p> +<a name="note-62"><!--Note--></a> +<p class="foot"> +<u>62</u> (<a href="#noteref-62">return</a>)<br> +[ See Von Sybel, vol. iv, p. 231.] +</p> +<a name="note-63"><!--Note--></a> +<p class="foot"> +<u>63</u> (<a href="#noteref-63">return</a>)<br> +[ See Von Sybel, vol. iv, p. 330; also tables of +depreciation in "Moniteur"; also official reports in the White +Collection; also Caron's "Tables," etc.] +</p> +<a name="note-64"><!--Note--></a> +<p class="foot"> +<u>64</u> (<a href="#noteref-64">return</a>)<br> +[ For a lifelike sketch of the way in which these exchanges +of <i>assignats</i> for valuable property went on at periods of the rapid +depreciation of paper, see Challamel, "Les français sous la +Révolution," p. 309; also Say, "Economic Politique."] +</p> +<a name="note-65"><!--Note--></a> +<p class="foot"> +<u>65</u> (<a href="#noteref-65">return</a>)<br> +[ For a very complete table of the depreciation from day to +day, see "Supplement to the Moniteur" of October 2, 1797; also Caron, as +above. For the market prices of the <i>louis d'or</i> at the first of every +month, as the collapse approached, see Montgaillard. See also "Official +Lists" in the White Collection. For a table showing the steady rise of +the franc in gold during a single week, from 251 to 280 <i>francs</i>, see +Dewarmin, as above, vol. i, p. 136.] +</p> +<a name="note-66"><!--Note--></a> +<p class="foot"> +<u>66</u> (<a href="#noteref-66">return</a>)<br> +[ See "Mèmoires de Thibaudeau," vol. ii, p. 26, also +Mercier, "Lo Nouveau Paris," vol. ii, p. 90; for curious example of the +scales of depreciation see the White Collection. See also extended table +of comparative values in 1790 and 1795. See Levasseur, as above, vol. i, +pp. 223-4.] +</p> +<a name="note-67"><!--Note--></a> +<p class="foot"> +<u>67</u> (<a href="#noteref-67">return</a>)<br> +[ For a striking similar case in our own country, see +Sumner, "History of American Currency," p. 47.] +</p> +<a name="note-68"><!--Note--></a> +<p class="foot"> +<u>68</u> (<a href="#noteref-68">return</a>)<br> +[ See Villeneuve Bargemont, "Histoire de l'économie +politique," vol. ii, p. 229.] +</p> +<a name="note-69"><!--Note--></a> +<p class="foot"> +<u>69</u> (<a href="#noteref-69">return</a>)<br> +[ See Von Sybel, vol. iv, pp. 337, 338. See also for +confirmation Challamel, "Histoire Musée," vol. ii, p. 179. For a +thoughtful statement of the reasons why such paper was not invested in +lands by men of moderate means, and workingmen, see Mill, "Political +Economy," vol. ii, pp. 81, 82.] +</p> +<a name="note-70"><!--Note--></a> +<p class="foot"> +<u>70</u> (<a href="#noteref-70">return</a>)<br> +[ See Von Sybel, vol. iv, p. 222.] +</p> +<a name="note-71"><!--Note--></a> +<p class="foot"> +<u>71</u> (<a href="#noteref-71">return</a>)<br> +[ See especially Levasseur, "Histoire des classes +ouvrières," etc. vol. i, pp. 219, 230 and elsewhere; also De Nervo, +"Finance française," p. 280; also Stourm, as already cited. The exact +amount of <i>assignats</i> in circulation at the final suppression is given +by Dowarmin, (vol. i, p. 189), as 39,999,945,428 <i>livres</i> or <i>francs</i>.] +</p> +<a name="note-72"><!--Note--></a> +<p class="foot"> +<u>72</u> (<a href="#noteref-72">return</a>)<br> +[ For details of the mandat system very thoroughly given, +see Thiers' "History of the French Revolution," Bentley's edition, vol. +iv, pp. 410-412. For the issue of <i>assignats</i> and <i>mandats</i> at the same +time, see Dewarmin, vol. i, p. 136; also Levasseur, vol. i, pp. 230-257. +For an account of "new tenor bills" in America and their failure in +1737, see Summer, pp. 27-31; for their failure in 1781, see Morse, "Life +of Alexander Hamilton," vol. i, pp. 86, 87. For similar failure in +Austria, see Summer, p. 314.] +</p> +<a name="note-73"><!--Note--></a> +<p class="foot"> +<u>73</u> (<a href="#noteref-73">return</a>)<br> +[ See Marchant, "Lettre aux gens de bonne foi."] +</p> +<a name="note-74"><!--Note--></a> +<p class="foot"> +<u>74</u> (<a href="#noteref-74">return</a>)<br> +[ See Summer, p. 44; also De Nervo, "Finances françaises," +p. 282.] +</p> +<a name="note-75"><!--Note--></a> +<p class="foot"> +<u>75</u> (<a href="#noteref-75">return</a>)<br> +[ See De Nervo, "Finances françaises," p. 282; also +Levasseur, vol. i, p. 236 et seq.] +</p> +<a name="note-76"><!--Note--></a> +<p class="foot"> +<u>76</u> (<a href="#noteref-76">return</a>)<br> +[ See Table from "Gazette de France" and extracts from other +sources in Levasseur, vol. i, pp. 223-4.] +</p> +<a name="note-77"><!--Note--></a> +<p class="foot"> +<u>77</u> (<a href="#noteref-77">return</a>)<br> +[ Among the many striking accounts of the debasing effects +of "inflation" upon France under the Directory perhaps the best is that +of Lacretelle, vol. xiii, pp. 32-36. For similar effect, produced by the +same cause in our own country in 1819, see statement from Niles' +"Register," in Sumner, p. 80. For the jumble of families reduced to +beggary with families lifted into sudden wealth and for the mass of +folly and misery thus mingled, see Levassour, vol. i, p. 237.] +</p> +<a name="note-78"><!--Note--></a> +<p class="foot"> +<u>78</u> (<a href="#noteref-78">return</a>)<br> +[ For Madame Tallien and luxury of the stock-gambler +classes, see Challamel, "Les français sous la Révolution," pp. 30, 33; +also De Goncourt, "Les français sous le Directoire." Regarding the +outburst of vice in Paris and the demoralization of the police, see +Levasseur, as above.] +</p> +<a name="note-79"><!--Note--></a> +<p class="foot"> +<u>79</u> (<a href="#noteref-79">return</a>)<br> +[ See Levasseur, Vol. i, p. 237, et seq.] +</p> +<a name="note-80"><!--Note--></a> +<p class="foot"> +<u>80</u> (<a href="#noteref-80">return</a>)<br> +[ For specimens of counterfeit <i>assignats</i>, see the White +Collection in the Cornell University Library, but for the great series +of various issues of them in fac-simile, also for detective warnings and +attempted descriptions of many varieties of them, and for the history of +their Issue, see especially Dewarmin, vol. i, pp. 152-161. For +photographic copies of Royalist <i>assignats</i>, etc., see also Dewarmin, +ibid., pp. 192-197, etc. For a photograph of probably the last of the +Royalist notes ever issued, bearing the words "Pro Deo, pro Rege, pro +Patria" and "Armée Catholique et Royale" with the date 1799, and for +the sum of 100 <i>livres</i>, see Dewarmin, vol. i, p. 204.] +</p> +<a name="note-81"><!--Note--></a> +<p class="foot"> +<u>81</u> (<a href="#noteref-81">return</a>)<br> +[ For similar expectation of a "shock," which did not occur, +at the resumption of specie payments in Massachusetts, see Sumner, +"History of American Currency," p. 34.] +</p> +<a name="note-82"><!--Note--></a> +<p class="foot"> +<u>82</u> (<a href="#noteref-82">return</a>)<br> +[ See Thiers.] +</p> +<a name="note-83"><!--Note--></a> +<p class="foot"> +<u>83</u> (<a href="#noteref-83">return</a>)<br> +[ See Levasseur, vol. i, p. 246.] +</p> +<a name="note-84"><!--Note--></a> +<p class="foot"> +<u>84</u> (<a href="#noteref-84">return</a>)<br> +[ For examples of similar effects in Russia, Austria and +Denmark, see Storch, "Economie Politique," vol. iv; for similar effects +in the United States, see Gouge, "Paper Money and Banking in the United +States," also Summer, "History of American Currency." For working out of +the same principles in England, depicted in a masterly way, see +Macaulay, "History of England," chap. xxi; and for curious exhibition of +the same causes producing same results in ancient Greece, see a curious +quotation by Macaulay in same chapter.] +</p> +<a name="note-85"><!--Note--></a> +<p class="foot"> +<u>85</u> (<a href="#noteref-85">return</a>)<br> +[ For parallel cases in the early history of our own +country, see Sumner, p. 21, and elsewhere.] +</p> +<a name="note-86"><!--Note--></a> +<p class="foot"> +<u>86</u> (<a href="#noteref-86">return</a>)<br> +[ For a review of some of these attempts, with eloquent +statement of their evil results, see "Mémoires de Durand de Maillane," +pp. 166-169.] +</p> +<a name="note-87"><!--Note--></a> +<p class="foot"> +<u>87</u> (<a href="#noteref-87">return</a>)<br> +[ For similar effect of inflated currency in enervating and +undermining trade, husbandry, manufactures and morals in our own +country, see Daniel Webster, cited in Sumner, pp. 45-50. For similar +effects in other countries, see Senior, Storch, Macaulay and others +already cited.] +</p> +<a name="note-88"><!--Note--></a> +<p class="foot"> +<u>88</u> (<a href="#noteref-88">return</a>)<br> +[ For facts regarding French finance under Napoleon I am +indebted to Hon. David A. Wells. For more recent triumphs of financial +commonsense in France, see Bonnet's articles, translated by the late +George Walker, Esq. For general subject, see Levasseur.] +</p> + + +<br> +<br> +<hr> +<br> +<br> + + + + + + + + + + +<pre> + + + + + +End of the Project Gutenberg EBook of Fiat Money Inflation in France, by +Andrew Dickson White + +*** END OF THIS PROJECT GUTENBERG EBOOK FIAT MONEY INFLATION IN FRANCE *** + +***** This file should be named 6949-h.htm or 6949-h.zip ***** +This and all associated files of various formats will be found in: + http://www.gutenberg.org/6/9/4/6949/ + +Produced by Gordon Keener, and David Widger + + +Updated editions will replace the previous one--the old editions +will be renamed. + +Creating the works from public domain print editions means that no +one owns a United States copyright in these works, so the Foundation +(and you!) can copy and distribute it in the United States without +permission and without paying copyright royalties. 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You may copy it, give it away or +re-use it under the terms of the Project Gutenberg License included +with this eBook or online at www.gutenberg.org + + +Title: Fiat Money Inflation in France + How It Came, What It Brought, and How It Ended + +Author: Andrew Dickson White + +Release Date: November, 2004 [EBook #6949] +Posting Date: March 28, 2009 + +Language: English + +Character set encoding: ASCII + +*** START OF THIS PROJECT GUTENBERG EBOOK FIAT MONEY INFLATION IN FRANCE *** + + + + +Produced by Gordon Keener + + + + + + + + + +FIAT MONEY INFLATION IN FRANCE + +How It Came, What It Brought, and How It Ended + +by Andrew Dickson White, LL.D., Ph.D., D.C.L. + + +Late President and Professor of History at Cornell University; Sometime +United States Minister to Russia and Ambassador to Germany; Author of "A +History of the Warfare of Science with Theology," etc. + + + + +INTRODUCTION + +As far back as just before our Civil War I made, in France and +elsewhere, a large collection of documents which had appeared during the +French Revolution, including newspapers, reports, speeches, pamphlets, +illustrative material of every sort, and, especially, specimens of +nearly all the Revolutionary issues of paper money,--from notes of ten +thousand _livres_ to those of one _sou_. + +Upon this material, mainly, was based a course of lectures then given +to my students, first at the University of Michigan and later at Cornell +University, and among these lectures, one on "Paper Money Inflation in +France." + +This was given simply because it showed one important line of facts in +that great struggle; and I recall, as if it were yesterday, my feeling +of regret at being obliged to bestow so much care and labor upon a +subject to all appearance so utterly devoid of practical value. I +am sure that it never occurred, either to my Michigan students or to +myself, that it could ever have any bearing on our own country. It +certainly never entered into our minds that any such folly as that +exhibited in those French documents of the eighteenth century could ever +find supporters in the United States of the nineteenth. + +Some years later, when there began to be demands for large issues of +paper money in the United States, I wrought some of the facts thus +collected into a speech in the Senate of the State of New York, showing +the need of especial care in such dealings with financial necessities. + +In 1876, during the "greenback craze," General Garfield and Mr. S. B. +Crittenden, both members of the House of Representatives at that time, +asked me to read a paper on the same general subject before an audience +of Senators and Representatives of both parties in Washington. This I +did, and also gave it later before an assemblage of men of business at +the Union League Club in New York. + +Various editions of the paper were afterward published, among them, two +or three for campaign purposes, in the hope that they might be of use +in showing to what folly, cruelty, wrong and rain the passion for "fiat +money" may lead. + +Other editions were issued at a later period, in view of the principle +involved in the proposed unlimited coinage of silver in the United +States, which was, at bottom, the idea which led to that fearful wreck +of public and private prosperity in France. + +For these editions there was an added reason in the fact that the +utterances of sundry politicians at that time pointed clearly to issues +of paper money practically unlimited. These men were logical enough +to see that it would be inconsistent to stop at the unlimited issue +of silver dollars which cost really something when they could issue +unlimited paper dollars which virtually cost nothing. + +In thus exhibiting facts which Bishop Butler would have recognized as +confirming his theory of "The Possible Insanity of States," it is but +just to acknowledge that the French proposal was vastly more sane than +that made in our own country. Those French issues of paper rested not +merely "on the will of a free people," but on one-third of the entire +landed property of France; on the very choicest of real property in city +and country--the confiscated estates of the Church and of the fugitive +aristocracy--and on the power to use the paper thus issued in purchasing +this real property at very low prices. + +I have taken all pains to be exact, revising the whole paper in the +light of the most recent publications and giving my authority for every +important statement, and now leave the whole matter with my readers. + +At the request of a Canadian friend, who has expressed a strong wish +that this work be brought down to date, I have again restudied the +subject in the light of various works which have appeared since +my earlier research,--especially Levasseur's "Histoire des classes +ouvrieres et de l'industrie en France,"--one of the really great books +of the twentieth century;--Dewarmin's superb "Cent Ans de numismatique +Francaise" and sundry special treatises. The result has been that +large additions have been made regarding some important topics, and +that various other parts of my earlier work have been made more clear by +better arrangement and supplementary information. + +ANDREW D. WHITE. Cornell University, September, 1912. + + + + +FOREWORD BY MR. JOHN MACKAY + +I am greatly indebted to the generosity of Mr. Andrew D. White, the +distinguished American scholar, author and diplomatist, for permission +to print and to circulate privately a small edition of his exceedingly +valuable account of the great currency-making experiment of the French +Revolutionary Government. The work has been revised and considerably +enlarged by Mr. White for the purpose of the present issue. + +The story of "Fiat Money Inflation in France" is one of great interest +to legislators, to economic students, and to all business and thinking +men. It records the most gigantic attempt ever made in the history of +the world by a government to create an inconvertible paper currency, and +to maintain its circulation at various levels of value. It also records +what is perhaps the greatest of all governmental efforts--with the +possible exception of Diocletian's--to enact and enforce a legal limit +of commodity prices. Every fetter that could hinder the will or thwart +the wisdom of democracy had been shattered, and in consequence every +device and expedient that untrammelled power and unrepressed optimism +could conceive were brought to bear. But the attempts failed. They left +behind them a legacy of moral and material desolation and woe, from +which one of the most intellectual and spirited races of Europe has +suffered for a century and a quarter, and will continue to suffer until +the end of time. There are limitations to the powers of governments and +of peoples that inhere in the constitution of things, and that neither +despotisms nor democracies can overcome. + +Legislatures are as powerless to abrogate moral and economic laws as +they are to abrogate physical laws. They cannot convert wrong into right +nor divorce effect from cause, either by parliamentary majorities, or +by unity of supporting public opinion. The penalties of such +legislative folly will always be exacted by inexorable time. While these +propositions may be regarded as mere commonplaces, and while they are +acknowledged in a general way, they are in effect denied by many of +the legislative experiments and the tendencies of public opinion of the +present day. The story, therefore, of the colossal folly of France in +the closing part Of the eighteenth century and its terrible fruits, is +full of instruction for all men who think upon the problems of our own +time. + +From among an almost infinite variety, there are four great and +fundamental facts that clearly emerge, namely,-- + +(1) Notwithstanding the fact that the paper currency issued was the +direct obligation of the State, that much of it was interest bearing, +and that all of it was secured upon the finest real estate in France, +and that penalties in the way of fines, imprisonments and death were +enacted from time to time to maintain its circulation at fixed values, +there was a steady depreciation in value until it reached zero point and +culminated in repudiation. The aggregate of the issues amounted to no +less than the enormous and unthinkable sum of $9,500,000,000, and in +the middle of 1797 when public repudiation took place, there was no +less than $4,200,000,000 in face value of _assignats_ and _mandats_ +outstanding; the loss, as always, falling mostly upon the poor and the +ignorant. + +(2) In the attempt to maintain fixed values for the paper currency the +Government became involved in an equally futile attempt to maintain a +tariff of legal prices for commodities. Here again penalties of fines, +of imprisonments and of death were powerless to accomplish the end in +view. + +(3) An wholesale demoralisation of society took place under which +thrift, integrity, humanity, and every principle of morality were thrown +into the welter of seething chaos and cruelty. + +(4) The real estate upon which the paper currency was secured +represented confiscations by the State of the lands of the Church and +of the Emigrant Noblemen. These lands were appraised, according to Mr. +White's narrative and other authorities, at $1,000,000,000. Here was +a straight addition to the State's resources of $1,000,000,000. It is +ominously significant that within one hundred years under the "Peace of +Frankfort" signed on the 10th May, 1871, the French nation agreed to pay +a war indemnity to victorious Germany of exactly the same sum, namely, +$1,000,000,000 in addition to the surrender of the province of Alsace +and a considerable part of Lorraine. The great addition to the national +wealth, therefore, effected by the immoral confiscation of the lands in +question disappeared with compound territorial interest added under the +visitation of relentless retribution. + +Public opinion in our own country is so far sound on the question +of currency, but signs are not lacking in some lay quarters of +an inclination to sanction dangerous experiments. The doctrine of +governmental regulation of prices, has, however, made its appearance in +embryo. Class dissatisfaction is also on the increase. The confiscation +of property rights under legal forms and processes is apt to be condoned +when directed against unpopular interests and when limited to amounts +that do not revolt the conscience. The wild and terrible expression +given to these insidious principles in the havoc of the Revolution +should be remembered by all. Nor should the fact be overlooked that, as +Mr. White points out on Page 6, the National Assembly of France which +originated and supported these measures contained in its membership the +ablest Frenchmen of the day. + +JOHN MACKAY. Toronto General Trusts Building, Toronto, 31st March, 1914. + + + + +FIAT MONEY INFLATION IN FRANCE + +How It Came, What It Brought, and How It Ended [1] + + + + +I. + +Early in the year 1789 the French nation found itself in deep financial +embarrassment: there was a heavy debt and a serious deficit. + +The vast reforms of that period, though a lasting blessing politically, +were a temporary evil financially. There was a general want of +confidence in business circles; capital had shown its proverbial +timidity by retiring out of sight as far as possible; throughout the +land was stagnation. + +Statesmanlike measures, careful watching and wise management would, +doubtless, have ere long led to a return of confidence, a reappearance +of money and a resumption of business; but these involved patience +and self-denial, and, thus far in human history, these are the rarest +products of political wisdom. Few nations have ever been able to +exercise these virtues; and France was not then one of these few. [2] + +There was a general search for some short road to prosperity: ere long +the idea was set afloat that the great want of the country was more of +the circulating medium; and this was speedily followed by calls for an +issue of paper money. The Minister of Finance at this period was Necker. +In financial ability he was acknowledged as among the great bankers of +Europe, but his was something more than financial ability: he had a +deep feeling of patriotism and a high sense of personal honor. The +difficulties in his way were great, but he steadily endeavored to +keep France faithful to those principles in monetary affairs which the +general experience of modern times had found the only path to national +safety. As difficulties arose the National Assembly drew away from him, +and soon came among the members renewed suggestions of paper money: +orators in public meetings, at the clubs and in the Assembly, proclaimed +it a panacea--a way of "securing resources without paying interest." +Journalists caught it up and displayed its beauties, among these men, +Marat, who, in his newspaper, "The Friend of the People," also joined +the cries against Necker, picturing him--a man of sterling honesty, who +gave up health and fortune for the sake of France--as a wretch seeking +only to enrich himself from the public purse. + +Against this tendency toward the issue of irredeemable paper Necker +contended as best he might. He knew well to what it always had led, +even when surrounded by the most skillful guarantees. Among those who +struggled to support ideas similar to his was Bergasse, a deputy from +Lyons, whose pamphlets, then and later, against such issues exerted a +wider influence, perhaps, than any others: parts of them seem fairly +inspired. Any one to-day reading his prophecies of the evils sure to +follow such a currency would certainly ascribe to him a miraculous +foresight, were it not so clear that his prophetic power was due simply +to a knowledge of natural laws revealed by history. But this current in +favor of paper money became so strong that an effort was made to breast +it by a compromise: and during the last months of 1789 and the first +months of 1790 came discussions in the National Assembly looking to +issues of notes based upon the landed property of the Church,--which was +to be confiscated for that purpose. But care was to be taken; the issue +was to be largely in the shape of notes of 1,000, 300 and 200 _livres_, +too large to be used as ordinary currency, but of convenient size to +be used in purchasing the Church lands; besides this, they were to bear +interest and this would tempt holders to hoard them. The Assembly thus +held back from issuing smaller obligations. + +Remembrances of the ruin which had come from the great issues of smaller +currency at an earlier day were still vivid. Yet the pressure toward +a popular currency for universal use grew stronger and stronger. The +finance committee of the Assembly reported that "the people demand a new +circulating medium"; that "the circulation of paper money is the best of +operations"; that "it is the most free because it reposes on the will +of the people"; that "it will bind the interest of the citizens to the +public good." + +The report appealed to the patriotism of the French people with the +following exhortation: "Let us show to Europe that we understand our +own resources; let us immediately take the broad road to our liberation +instead of dragging ourselves along the tortuous and obscure paths of +fragmentary loans." It concluded by recommending an issue of paper money +carefully guarded, to the full amount of four hundred million _livres_, +and the argument was pursued until the objection to smaller notes faded +from view. Typical in the debate on the whole subject, in its various +phases, were the declarations of M. Matrineau. He was loud and long for +paper money, his only fear being that the Committee had not authorized +enough of it; he declared that business was stagnant, and that the sole +cause was a want of more of the circulating medium; that paper money +ought to be made a legal tender; that the Assembly should rise above +prejudices which the failures of John Law's paper money had caused, +several decades before. Like every supporter of irredeemable paper money +then or since, he seemed to think that the laws of Nature had changed +since previous disastrous issues. He said: "Paper money under +a despotism is dangerous; it favors corruption; but in a nation +constitutionally governed, which itself takes care in the emission of +its notes, which determines their number and use, that danger no longer +exists." He insisted that John Law's notes at first restored prosperity, +but that the wretchedness and ruin they caused resulted from their +overissue, and that such an overissue is possible only under a +despotism. [3] + +M. de la Rochefoucauld gave his opinion that "the _assignats_ will draw +specie out of the coffers where it is now hoarded. [4] + +On the other hand Cazales and Maury showed that the result could only +be disastrous. Never, perhaps, did a political prophecy meet with more +exact fulfillment in every line than the terrible picture drawn in one +of Cazales' speeches in this debate. Still the current ran stronger and +stronger; Petion made a brilliant oration in favor of the report, and +Necker's influence and experience were gradually worn away. + +Mingled with the financial argument was a strong political plea. The +National Assembly had determined to confiscate the vast real property +of the French Church,--the pious accumulations of fifteen hundred +years. There were princely estates in the country, bishops' palaces and +conventual buildings in the towns; these formed between one-fourth and +one-third of the entire real property of France, and amounted in value +to at least two thousand million _livres_. By a few sweeping strokes +all this became the property of the nation. Never, apparently, did a +government secure a more solid basis for a great financial future. [5] + +There were two special reasons why French statesmen desired speedily to +sell these lands. First, a financial reason,--to obtain money to +relieve the government. Secondly, a political reason,--to get this land +distributed among the thrifty middle-classes, and so commit them to the +Revolution and to the government which gave their title. + +It was urged, then, that the issue of four hundred millions of paper, +(not in the shape of interest-bearing bonds, as had at first been +proposed, but in notes small as well as large), would give the treasury +something to pay out immediately, and relieve the national necessities; +that, having been put into circulation, this paper money would stimulate +business; that it would give to all capitalists, large or small, the +means for buying from the nation the ecclesiastical real estate, and +that from the proceeds of this real estate the nation would pay its +debts and also obtain new funds for new necessities: never was theory +more seductive both to financiers and statesmen. + +It would be a great mistake to suppose that the statesmen of France, or +the French people, were ignorant of the dangers in issuing irredeemable +paper money. No matter how skillfully the bright side of such a currency +was exhibited, all thoughtful men in France remembered its dark side. +They knew too well, from that ruinous experience, seventy years before, +in John Law's time, the difficulties and dangers of a currency not well +based and controlled. They had then learned how easy it is to issue it; +how difficult it is to check its overissue; how seductively it leads to +the absorption of the means of the workingmen and men of small fortunes; +how heavily it falls on all those living on fixed incomes, salaries or +wages; how securely it creates on the ruins of the prosperity of all +men of meagre means a class of debauched speculators, the most +injurious class that a nation can harbor,--more injurious, indeed, than +professional criminals whom the law recognizes and can throttle; how +it stimulates overproduction at first and leaves every industry flaccid +afterward; how it breaks down thrift and develops political and social +immorality. All this France had been thoroughly taught by experience. +Many then living had felt the result of such an experiment--the issues +of paper money under John Law, a man who to this day is acknowledged +one of the most ingenious financiers the world has ever known; and there +were then sitting in the National Assembly of France many who owed the +poverty of their families to those issues of paper. Hardly a man in the +country who had not heard those who issued it cursed as the authors of +the most frightful catastrophe France had then experienced. [6] + +It was no mere attempt at theatrical display, but a natural impulse, +which led a thoughtful statesman, during the debate, to hold up a piece +of that old paper money and to declare that it was stained with the +blood and tears of their fathers. + +And it would also be a mistake to suppose that the National Assembly, +which discussed this matter, was composed of mere wild revolutionists; +no inference could be more wide of the fact. Whatever may have been the +character of the men who legislated for France afterward, no thoughtful +student of history can deny, despite all the arguments and sneers +of reactionary statesmen and historians, that few more keen-sighted +legislative bodies have ever met than this first French Constitutional +Assembly. In it were such men as Sieyes, Bailly, Necker, Mirabeau, +Talleyrand, DuPont de Nemours and a multitude of others who, in various +sciences and in the political world, had already shown and were destined +afterward to show themselves among the strongest and shrewdest men that +Europe has yet seen. + +But the current toward paper money had become irresistible. It was +constantly urged, and with a great show of force, that if any nation +could safely issue it, France was now that nation; that she was fully +warned by her severe experience under John Law; that she was now a +constitutional government, controlled by an enlightened, patriotic +people,--not, as in the days of the former issues of paper money, an +absolute monarchy controlled by politicians and adventurers; that +she was able to secure every _livre_ of her paper money by a virtual +mortgage on a landed domain vastly greater in value than the entire +issue; that, with men like Bailly, Mirabeau and Necker at her head, she +could not commit the financial mistakes and crimes from which France had +suffered under John Law, the Regent Duke of Orleans and Cardinal Dubois. + +Oratory prevailed over science and experience. In April, 1790, came the +final decree to issue four hundred millions of _livres_ in paper money, +based upon confiscated property of the Church for its security. The +deliberations on this first decree and on the bill carrying it into +effect were most interesting; prominent in the debate being Necker, Du +Pont de Nemours, Maury, Cazales, Petion, Bailly and many others hardly +inferior. The discussions were certainly very able; no person can read +them at length in the "Moniteur," nor even in the summaries of the +parliamentary history, without feeling that various modern historians +have done wretched injustice to those men who were then endeavoring to +stand between France and ruin. + +This sum--four hundred millions, so vast in those days, was issued in +_assignats_, which were notes secured by a pledge of productive +real estate and bearing interest to the holder at three per cent. No +irredeemable currency has ever claimed a more scientific and practical +guarantee for its goodness and for its proper action on public finances. +On the one hand, it had what the world recognized as a most practical +security,--a mortgage an productive real estate of vastly greater value +than the issue. On the other hand, as the notes bore interest, there +seemed cogent reason for their being withdrawn from circulation whenever +they became redundant. [7] + +As speedily as possible the notes were put into circulation. Unlike +those issued in John Law's time, they were engraved in the best style +of the art. To stimulate loyalty, the portrait of the king was placed +in the center; to arouse public spirit, patriotic legends and emblems +surrounded it; to stimulate public cupidity, the amount of interest +which the note would yield each day to the holder was printed in the +margin; and the whole was duly garnished with stamps and signatures to +show that it was carefully registered and controlled. [8] + +To crown its work the National Assembly, to explain the advantages +of this new currency, issued an address to the French people. In this +address it spoke of the nation as "delivered by this grand means from +all uncertainty and from all ruinous results of the credit system." It +foretold that this issue "would bring back into the public treasury, +into commerce and into all branches of industry strength, abundance and +prosperity." [9] + +Some of the arguments in this address are worth recalling, and, among +them, the following:--"Paper money is without inherent value unless +it represents some special property. Without representing some special +property it is inadmissible in trade to compete with a metallic +currency, which has a value real and independent of the public action; +therefore it is that the paper money which has only the public authority +as its basis has always caused ruin where it has been established; that +is the reason why the bank notes of 1720, issued by John Law, after +having caused terrible evils, have left only frightful memories. +Therefore it is that the National Assembly has not wished to expose +you to this danger, but has given this new paper money not only a value +derived from the national authority but a value real and immutable, a +value which permits it to sustain advantageously a competition with the +precious metals themselves." [10] + +But the final declaration was, perhaps, the most interesting. It was as +follows:-- + +"These _assignats_, bearing interest as they do, will soon be considered +better than the coin now hoarded, and will bring it out again into +circulation." The king was also induced to issue a proclamation +recommending that his people receive this new money without objection. + +All this caused great joy. Among the various utterances of this feeling +was the letter of M. Sarot, directed to the editor of the Journal of the +National Assembly, and scattered through France. M. Sarot is hardly able +to contain himself as he anticipates the prosperity and glory that this +issue of paper is to bring to his country. One thing only vexes him, and +that is the pamphlet of M. Bergasse against the _assignats_; therefore +it is after a long series of arguments and protestations, in order to +give a final proof of his confidence in the paper money and his entire +skepticism as to the evils predicted by Bergasse and others, M. Sarot +solemnly lays his house, garden and furniture upon the altar of his +country and offers to sell them for paper money alone. + +There were, indeed, some gainsayers. These especially appeared among the +clergy, who, naturally, abhorred the confiscation of Church property. +Various ecclesiastics made speeches, some of them full of pithy and +weighty arguments, against the proposed issue of paper, and there is +preserved a sermon from one priest threatening all persons handling the +new money with eternal damnation. But the great majority of the French +people, who had suffered ecclesiastical oppression so long, regarded +these utterances as the wriggling of a fish on the hook, and enjoyed the +sport all the better. [11] + +The first result of this issue was apparently all that the most sanguine +could desire: the treasury was at once greatly relieved; a portion of +the public debt was paid; creditors were encouraged; credit revived; +ordinary expenses were met, and, a considerable part of this paper +money having thus been passed from the government into the hands of +the people, trade increased and all difficulties seemed to vanish. The +anxieties of Necker, the prophecies of Maury and Cazales seemed proven +utterly futile. And, indeed, it is quite possible that, if the national +authorities had stopped with this issue, few of the financial evils +which afterwards arose would have been severely felt; the four hundred +millions of paper money then issued would have simply discharged the +function of a similar amount of specie. But soon there came another +result: times grew less easy; by the end of September, within five +months after the issue of the four hundred millions in _assignats_, the +government had spent them and was again in distress. [12] + +The old remedy immediately and naturally recurred to the minds of +men. Throughout the country began a cry for another issue of paper; +thoughtful men then began to recall what their fathers had told them +about the seductive path of paper-money issues in John Law's time, and +to remember the prophecies that they themselves had heard in the debate +on the first issue of _assignats_ less than six months before. + +At that time the opponents of paper had prophesied that, once on the +downward path of inflation, the nation could not be restrained and that +more issues would follow. The supporters of the first issue had asserted +that this was a calumny; that the people were now in control and that +they could and would check these issues whenever they desired. + +The condition of opinion in the Assembly was, therefore, chaotic: a few +schemers and dreamers were loud and outspoken for paper money; many +of the more shallow and easy-going were inclined to yield; the more +thoughtful endeavored to breast the current. + +One man there was who could have withstood the pressure: Mirabeau. He +was the popular idol,--the great orator of the Assembly and much more +than a great orator,--he had carried the nation through some of its +worst dangers by a boldness almost godlike; in the various conflicts he +had shown not only oratorical boldness, but amazing foresight. As to his +real opinion on an irredeemable currency there can be no doubt. It was +the opinion which all true statesmen have held, before his time and +since,--in his own country, in England, in America, in every modern +civilized nation. In his letter to Cerutti, written in January, 1789, +hardly six months before, he had spoken of paper money as "A nursery of +tyranny, corruption and delusion; a veritable debauch of authority in +delirium." In one of his early speeches in the National Assembly he had +called such money, when Anson covertly suggested its issue, "a loan +to an armed robber," and said of it: "that infamous word, paper money, +ought to be banished from our language." In his private letters written +at this very time, which were revealed at a later period, he showed that +he was fully aware of the dangers of inflation. But he yielded to the +pressure: partly because he thought it important to sell the government +lands rapidly to the people, and so develop speedily a large class of +small landholders pledged to stand by the government which gave them +their titles; partly, doubtless, from a love of immediate rather than +of remote applause; and, generally, in a vague hope that the severe, +inexorable laws of finance which had brought heavy punishments upon +governments emitting an irredeemable currency in other lands, at other +times, might in some way at this time, be warded off from France. [13] + +The question was brought up by Montesquieu's report on the 27th +of August, 1790. This report favored, with evident reluctance, an +additional issue of paper. It went on to declare that the original issue +of four hundred millions, though opposed at the beginning, had proved +successful; that _assignats_ were economical, though they had dangers; +and, as a climax, came the declaration: "We must save the country." [14] + +Upon this report Mirabeau then made one of his most powerful speeches. +He confessed that he had at first feared the issue of _assignats_, but +that he now dared urge it; that experience had shown the issue of +paper money most serviceable; that the report proved the first issue +of _assignats_ a success; that public affairs had come out of distress; +that ruin had been averted and credit established. He then argued that +there was a difference between paper money of the recent issue and +that from which the nation had suffered so much in John Law's time; he +declared that the French nation had now become enlightened and he added, +"Deceptive subtleties can no longer mislead patriots and men of sense in +this matter." He then went on to say: "We must accomplish that which +we have begun," and declared that there must be one more large issue +of paper, guaranteed by the national lands and by the good faith of the +French nation. To show how practical the system was he insisted that +just as soon as paper money should become too abundant it would be +absorbed in rapid purchases of national lands; and he made a very +striking comparison between this self-adjusting, self-converting system +and the rains descending in showers upon the earth, then in swelling +rivers discharged into the sea, then drawn up in vapor and finally +scattered over the earth again in rapidly fertilizing showers. He +predicted that the members would be surprised at the astonishing success +of this paper money and that there would be none too much of it. + +His theory grew by what it fed upon,--as the paper-money theory has +generally done. Toward the close, in a burst of eloquence, he suggested +that _assignats_ be created to an amount sufficient to cover the +national debt, and that all the national lands be exposed for sale +immediately, predicting that thus prosperity would return to the nation +and that an classes would find this additional issue of paper money a +blessing. [15] + +This speech was frequently interrupted by applause; a unanimous vote +ordered it printed, and copies were spread throughout France. The +impulse given by it permeated all subsequent discussion; Gouy arose +and proposed to liquidate the national debt of twenty-four hundred +millions,--to use his own words--"by one single operation, grand, +simple, magnificent." [16] This "operation" was to be the emission of +twenty-four hundred millions in legal tender notes, and a law that +specie should not be accepted in purchasing national lands. His demagogy +bloomed forth magnificently. He advocated an appeal to the people, who, +to use his flattering expression, "ought alone to give the law in a +matter so interesting." The newspapers of the period, in reporting his +speech, noted it with the very significant remark, "This discourse was +loudly applauded." + +To him replied Brillat-Savarin. He called attention to the depreciation +of _assignats_ already felt. He tried to make the Assembly see that +natural laws work as inexorably in France as elsewhere; he predicted +that if this new issue were made there would come a depreciation of +thirty per cent. Singular, that the man who so fearlessly stood against +this tide of unreason has left to the world simply a reputation as +the most brilliant cook that ever existed! He was followed by the Abbe +Goutes, who declared,--what seems grotesque to those who have read +the history of an irredeemable paper currency in any country--that +new issues of paper money "will supply a circulating medium which will +protect public morals from corruption." [17] + +Into this debate was brought a report by Necker. He was not, indeed, +the great statesman whom France especially needed at this time, of all +times. He did not recognize the fact that the nation was entering a +great revolution, but he could and did see that, come what might, +there were simple principles of finance which must be adhered to. Most +earnestly, therefore, he endeavored to dissuade the Assembly from +the proposed issue; suggesting that other means could be found for +accomplishing the result, and he predicted terrible evils. But the +current was running too fast. The only result was that Necker was +spurned as a man of the past; he sent in his resignation and left +France forever. [18] The paper-money demagogues shouted for joy at his +departure; their chorus rang through the journalism of the time. No +words could express their contempt for a man who was unable to see the +advantages of filling the treasury with the issues of a printing press. +Marat, Hebert, Camille Desmoulins and the whole mass of demagogues so +soon to follow them to the guillotine were especially jubilant. [19] + +Continuing the debate, Rewbell attacked Necker, saying that the +_assignats_ were not at par because there were not yet enough of them; +he insisted that payments for public lands be received in _assignats_ +alone; and suggested that the church bells of the kingdom be melted down +into small money. Le Brun attacked the whole scheme in the Assembly, as +he had done in the Committee, declaring that the proposal, instead +of relieving the nation, would wreck it. The papers of the time very +significantly say that at this there arose many murmurs. Chabroud came +to the rescue. He said that the issue of _assignats_ would relieve the +distress of the people and he presented very neatly the new theory of +paper money and its basis in the following words: "The earth is the +source of value; you cannot distribute the earth in a circulating value, +but this paper becomes representative of that value and it is evident +that the creditors of the nation will not be injured by taking it." On +the other hand, appeared in the leading paper, the "Moniteur," a very +thoughtful article against paper money, which sums up all by saying, +"It is, then, evident that all paper which cannot, at the will of the +bearer, be converted into specie cannot discharge the functions of +money." This article goes on to cite Mirabeau's former opinion in his +letter to Cerutti, published in 1789,--the famous opinion of paper money +as "a nursery of tyranny, corruption and delusion; a veritable debauch +of authority in delirium." Lablache, in the Assembly, quoted a saying +that "paper money is the emetic of great states." [20] + +Boutidoux, resorting to phrasemaking, called the _assignats_ _"un papier +terre,"_ or "land converted into paper." Boislandry answered vigorously +and foretold evil results. Pamphlets continued to be issued,--among +them, one so pungent that it was brought into the Assembly and read +there,--the truth which it presented with great clearness being simply +that doubling the quantity of money or substitutes for money in a nation +simply increases prices, disturbs values, alarms capital, diminishes +legitimate enterprise, and so decreases the demand both for products +and for labor; that the only persons to be helped by it are the rich +who have large debts to pay. This pamphlet was signed "A Friend of the +People," and was received with great applause by the thoughtful minority +in the Assembly. Du Pont de Nemours, who had stood by Necker in the +debate on the first issue of _assignats_, arose, avowed the pamphlet to +be his, and said sturdily that he had always voted against the emission +of irredeemable paper and always would. [21] + +Far more important than any other argument against inflation was the +speech of Talleyrand. He had been among the boldest and most radical +French statesmen. He it was,--a former bishop,--who, more than any +other, had carried the extreme measure of taking into the possession of +the nation the great landed estates of the Church, and he had supported +the first issue of four hundred millions. But he now adopted a judicial +tone--attempted to show to the Assembly the very simple truth that the +effect of a second issue of _assignats_ may be different from that of +the first; that the first was evidently needed; that the second may be +as injurious as the first was useful. He exhibited various weak points +in the inflation fallacies and presented forcibly the trite truth that +no laws and no decrees can keep large issues of irredeemable paper at +par with specie. + +In his speech occur these words: "You can, indeed, arrange it so that +the people shall be forced to take a thousand _livres_ in paper for a +thousand _livres_ in specie; but you can never arrange it so that a man +shall be obliged to give a thousand _livres_ in specie for a thousand +_livres_ in paper,--in that fact is embedded the entire question; and on +account of that fact the whole system fails." [22] + +The nation at large now began to take part in the debate; thoughtful +men saw that here was the turning Point between good and evil, that the +nation stood at the parting of the ways. Most of the great commercial +cities bestirred themselves and sent up remonstrances against the new +emission,--twenty-five being opposed and seven in favor of it. + +But eloquent theorists arose to glorify paper and among these, Royer, +who on September 14, 1790, put forth a pamphlet entitled "Reflections of +a patriotic Citizen on the issue of _Assignats_," in which he gave many +specious reasons of the why the _assignats_ could not be depressed, and +spoke of the argument against them as "vile clamors of people bribed +to affect public opinion." He said to the National Assembly, "If it +is necessary to create five thousand millions, and more, of the paper, +decree such a creation gladly." He, too, predicted, as many others had +done, a time when gold was to lose all its value, since all exchanges +would be made with this admirable, guaranteed paper, and therefore that +coin would come out from the places where it was hoarded. He foretold +prosperous times to France in case these great issues of paper were +continued and declared these "the only means to insure happiness, glory +and liberty to the French nation." Speeches like this gave courage to +a new swarm of theorists,--it began to be especially noted that men who +had never shown any ability to make or increase fortunes for themselves +abounded in brilliant plans for creating and increasing wealth for the +country at large. + +Greatest force of all, on September 27, 1790, came Mirabeau's final +speech. The most sober and conservative of his modern opponents speaks +of its eloquence as "prodigious." In this the great orator dwelt first +on the political necessity involved, declaring that the most pressing +need was to get the government lands into the hands of the people, and +so to commit to the nation and against the old privileged classes the +class of landholders thus created. + +Through the whole course of his arguments there is one leading point +enforced with all his eloquence and ingenuity--the excellence of the +proposed currency, its stability and its security. He declares that, +being based on the pledge of public lands and convertible into them, the +notes are better secured than if redeemable in specie; that the precious +metals are only employed in the secondary arts, while the French paper +money represents the first and most real of all property, the source of +all production, the land; that while other nations have been obliged to +emit paper money, none have ever been so fortunate as the French nation, +for the reason that none had ever before been able to give this landed +security; that whoever takes French paper money has practically a +mortgage to secure it,--and on landed property which can easily be sold +to satisfy his claims, while other nations have been able only to give a +vague claim on the entire nation. "And," he ones, "I would rather have a +mortgage on a garden than on a kingdom!" + +Other arguments of his are more demagogical. He declares that the only +interests affected will be those of bankers and capitalists, but +that manufacturers will see prosperity restored to them. Some of his +arguments seem almost puerile, as when he says, "If gold has been +hoarded through timidity or malignity, the issue of paper will show that +gold is not necessary, and it will then come forth." But, as a whole, +the speech was brilliant; it was often interrupted by applause; it +settled the question. People did not stop to consider that it was the +dashing speech of an orator and not the matured judgment of a financial +expert; they did not see that calling Mirabeau or Talleyrand to advise +upon a monetary policy, because they had shown boldness in danger and +strength in conflict, was like summoning a prize-fighter to mend a +watch. + +In vain did Maury show that, while the first issues of John Law's paper +had brought prosperity, those that followed brought misery; in vain did +he quote from a book published in John Law's time, showing that Law was +at first considered a patriot and friend of humanity; in vain did he +hold up to the Assembly one of Law's bills and appeal to their memories +of the wretchedness brought upon France by them; in vain did Du Pont +present a simple and really wise plan of substituting notes in the +payment of the floating debt which should not form a part of the +ordinary circulating medium; nothing could resist the eloquence of +Mirabeau. Barnave, following, insisted that "Law's paper was based +upon the phantoms of the Mississippi; ours, upon the solid basis of +ecclesiastical lands," and he proved that the _assignats_ could not +depreciate further. Prudhomme's newspaper poured contempt over gold as +security for the currency, extolled real estate as the only true basis +and was fervent in praise of the convertibility and self-adjusting +features of the proposed scheme. In spite of all this plausibility and +eloquence, a large minority stood firm to their earlier principles; but +on the 29th of September, 1790, by a vote of 508 to 423, the deed was +done; a bill was passed authorizing the issue of eight hundred millions +of new _assignats_, but solemnly declaring that in no case should the +entire amount put in circulation exceed twelve hundred millions. To make +assurance doubly sure, it also provided that as fast as the _assignats_ +were paid into the treasury for land they should be burned, and thus a +healthful contraction be constantly maintained. Unlike the first issue, +these new notes were to bear no interest. [23] + +Great were the plaudits of the nation at this relief. Among the +multitudes of pamphlets expressing this joy which have come down to us +the "Friend of the Revolution" is the most interesting. It begins as +follows: "Citizens, the deed is done. The _assignats_ are the keystone +of the arch. It has just been happily put in position. Now I can +announce to you that the Revolution is finished and there only remain +one or two important questions. All the rest is but a matter of detail +which cannot deprive us any longer of the pleasure of admiring this +important work in its entirety. The provinces and the commercial cities +which were at first alarmed at the proposal to issue so much paper money +now send expressions of their thanks; specie is coming out to be joined +with paper money. Foreigners come to us from all parts of Europe to seek +their happiness under laws which they admire; and soon France, enriched +by her new property and by the national industry which is preparing for +fruitfulness, will demand still another creation of paper money." + +France was now fully committed to a policy of inflation; and, if there +had been any question of this before, all doubts were removed now by +various acts very significant as showing the exceeding difficulty of +stopping a nation once in the full tide of a depreciating currency. The +National Assembly had from the first shown an amazing liberality to all +sorts of enterprises, wise or foolish, which were urged "for the good of +the people." As a result of these and other largesses the old cry of the +"lack of a circulating medium" broke forth again; and especially loud +were the clamors for more small bills. The cheaper currency had largely +driven out the dearer; paper had caused small silver and copper money +mainly to disappear; all sorts of notes of hand, circulating under the +name of "confidence bills," flooded France--sixty-three kinds in Paris +alone. This unguaranteed currency caused endless confusion and fraud. +Different districts of France began to issue their own _assignats_ in +small denominations, and this action stirred the National Assembly to +evade the solemn pledge that the circulation should not go above twelve +hundred millions and that all _assignats_ returned to the treasury for +lands should immediately be burned. [24] Within a short time there had +been received into the treasury for lands one hundred and sixty million +_livres_ in paper. By the terms of the previous acts this amount of +paper ought to have been retired. Instead of this, under the plea of +necessity, the greater part of it was reissued in the form of small +notes. + +There was, indeed, much excuse for new issues of small notes, for, under +the theory that an issue of smaller notes would drive silver out of +circulation, the smallest authorized _assignat_ was for fifty _livres_. +To supply silver and copper and hold it in circulation everything was +tried. Citizens had been spurred on by law to send their silverware and +jewels to the mint. Even the king sent his silver and gold plate, and +the churches and convents were required by law to send to the government +melting pot all silver and gold vessels not absolutely necessary for +public worship. For copper money the church bells were melted down. But +silver and even copper continued to become more and more scarce. In the +midst of all this, various juggleries were tried, and in November, 1790, +the Assembly decreed a single standard of coinage, the chosen metal +being silver, and the ratio between the two precious metals was +changed from 15 1/2 to 1, to 14 1/2 to 1--but all in vain. It was found +necessary to issue the dreaded small paper, and a beginning was made by +issuing one hundred millions in notes of five _francs_, and, ere long, +obedient to the universal clamor, there were issued parchment notes for +various small amounts down to a single _sou_. [25] + +Yet each of these issues, great or small, was but as a drop of cold +water to a parched throat. Although there was already a rise in prices +which showed that the amount needed for circulation had been exceeded, +the cry for "more circulating medium" was continued. The pressure for +new issues became stronger and stronger. The Parisian populace and the +Jacobin Club were especially loud in their demands for them; and, a few +months later, on June 19, 1791, with few speeches, in a silence very +ominous, a new issue was made of six hundred millions more;--less than +nine months after the former great issue, with its solemn pledges +to keep down the amount in circulation. With the exception of a few +thoughtful men, the whole nation again sang paeans. [26] + +In this comparative ease of new issues is seen the action of a law +in finance as certain as the working of a similar law in natural +philosophy. If a material body fall from a height its velocity is +accelerated, by a well-known law, in a constantly increasing ratio: so +in issues of irredeemable currency, in obedience to the theories of a +legislative body or of the people at large, there is a natural law of +rapidly increasing emission and depreciation. The first inflation bills +were passed with great difficulty, after very sturdy resistance and by +a majority of a few score out of nearly a thousand votes; but we observe +now that new inflation measures were passed more and more easily and +we shall have occasion to see the working of this same law in a more +striking degree as this history develops itself. + +During the various stages of this debate there cropped up a doctrine +old and ominous. It was the same which appeared toward the end of the +nineteenth century in the United States during what became known as the +"greenback craze" and the free "silver craze." In France it had +been refuted, a generation before the Revolution, by Turgot, just as +brilliantly as it was met a hundred years later in the United States +by James A. Garfield and his compeers. This was the doctrine that all +currency, whether gold, paper, leather or any other material, derives +its efficiency from the official stamp it bears, and that, this being +the case, a government may relieve itself of its debts and make itself +rich and prosperous simply by means of a printing press:--fundamentally +the theory which underlay the later American doctrine of "fiat money." + +There came mutterings and finally speeches in the Jacobin Club, in the +Assembly and in newspaper articles and pamphlets throughout the country, +taking this doctrine for granted. These could hardly affect thinking +men who bore in mind the calamities brought upon the whole people, +and especially upon the poorer classes, by this same theory as put in +practice by John Law, or as refuted by Turgot, but it served to swell +the popular chorus in favor of the issue of more _assignats_ and plenty +of them. [27] + +The great majority of Frenchmen now became desperate optimists, +declaring that inflation is prosperity. Throughout France there came +temporary good feeling. The nation was becoming inebriated with paper +money. The good feeling was that of a drunkard just after his draught; +and it is to be noted as a simple historical fact, corresponding to a +physiological fact, that, as draughts of paper money came faster the +successive periods of good feeling grew shorter. + +Various bad signs began to appear. Immediately after each new issue came +a marked depreciation; curious it is to note the general reluctance to +assign the right reason. The decline in the purchasing power of paper +money was in obedience to the simplest laws in economics, but France had +now gone beyond her thoughtful statesmen and taken refuge in unwavering +optimism, giving any explanation of the new difficulties rather than the +right one. A leading member of the Assembly insisted, in an elaborate +speech, that the cause of depreciation was simply the want of knowledge +and of confidence among the rural population and he suggested means of +enlightening them. La Rochefoucauld proposed to issue an address to +the people showing the goodness of the currency and the absurdity of +preferring coin. The address was unanimously voted. As well might they +have attempted to show that a beverage made by mixing a quart of wine +and two quarts of water would possess all the exhilarating quality of +the original, undiluted liquid. + +Attention was aroused by another menacing fact;--specie disappeared +more and more. The explanations of this fact also displayed wonderful +ingenuity in finding false reasons and in evading the true one. A +very common explanation was indicated in Prudhomme's newspaper, "Les +Revolutions de Paris," of January 17, 1791, which declared that coin +"will keep rising until the people shall have hanged a broker." Another +popular theory was that the Bourbon family were, in some mysterious way, +drawing off all solid money to the chief centers of their intrigues in +Germany. Comic and, at the same time, pathetic, were evidences of the +wide-spread idea that if only a goodly number of people engaged in trade +were hanged, the par value of the _assignats_ would be restored. + +Still another favorite idea was that British emissaries were in the +midst of the people, instilling notions hostile to paper. Great efforts +were made to find these emissaries and more than one innocent person +experienced the popular wrath under the supposition that he was engaged +in raising gold and depressing paper. Even Talleyrand, shrewd as he was, +insisted that the cause was simply that the imports were too great and +the exports too little. [28] As well might he explain that fact that, +when oil is mingled with water, water sinks to the bottom, by saying +that this is because the oil rises to the top. This disappearance of +specie was the result of a natural law as simple and as sure in its +action as gravitation; the superior currency had been withdrawn because +an inferior currency could be used. [29] Some efforts were made to remedy +this. In the municipality of Quilleboeuf a considerable amount in specie +having been found in the possession of a citizen, the money was seized +and sent to the Assembly. The people of that town treated this hoarded +gold as the result of unpatriotic wickedness or madness, instead of +seeing that it was but the sure result of a law working in every land +and time, when certain causes are present. Marat followed out this +theory by asserting that death was the proper penalty for persons who +thus hid their money. + +Still another troublesome fact began now to appear. Though paper money +had increased in amount, prosperity had steadily diminished. In spite of +all the paper issues, commercial activity grew more and more spasmodic. +Enterprise was chilled and business became more and more stagnant. +Mirabeau, in his speech which decided the second great issue of paper, +had insisted that, though bankers might suffer, this issue would be of +great service to manufacturers and restore prosperity to them and their +workmen. The latter were for a time deluded, but were at last rudely +awakened from this delusion. The plenty of currency had at first +stimulated production and created a great activity in manufactures, but +soon the markets were glutted and the demand was diminished. In spite of +the wretched financial policy of years gone by, and especially in spite +of the Revocation of the Edict of Nantes, by which religious bigotry +had driven out of the kingdom thousands of its most skillful Protestant +workmen, the manufactures of France had before the Revolution come into +full bloom. In the finer woolen goods, in silk and satin fabrics of all +sorts, in choice pottery and porcelain, in manufactures of iron, steel, +and copper, they had again taken their old leading place upon the +Continent. All the previous changes had, at the worst, done no more +than to inflict a momentary check on this highly developed system of +manufactures. But what the bigotry of Louis XIV and the shiftlessness +of Louis XV could not do in nearly a century, was accomplished by this +tampering with the currency in a few months. One manufactory after +another stopped. At one town, Lodeve, five thousand workmen were +discharged from the cloth manufactories. Every cause except the right +one was assigned for this. Heavy duties were put upon foreign goods; +everything that tariffs and custom-houses could do was done. Still the +great manufactories of Normandy were closed, those of the rest of the +kingdom speedily followed, and vast numbers of workmen in all parts of +the country were thrown out of employment. [30] Nor was this the case +with the home demand alone. The foreign demand, which at first had been +stimulated, soon fell off. In no way can this be better stated than by +one of the most thoughtful historians of modern times, who says, "It is +true that at first the _assignats_ gave the same impulse to business +in the city as in the country, but the apparent improvement had no firm +foundation, even in the towns. Whenever a great quantity of paper money +is suddenly issued we invariably see a rapid increase of trade. The +great quantity of the circulating medium sets in motion all the energies +of commerce and manufactures; capital for investment is more easily +found than usual and trade perpetually receives fresh nutriment. If this +paper represents real credit, founded upon order and legal security, +from which it can derive a firm and lasting value, such a movement may +be the starting point of a great and widely-extended prosperity, as, for +instance, a splendid improvement in English agriculture was undoubtedly +owing to the emancipation of the country bankers. If on the contrary, +the new paper is of precarious value, as was clearly seen to be the case +with the French _assignats_ as early as February, 1791, it can confer no +lasting benefits. For the moment, perhaps, business receives an impulse, +all the more violent because every one endeavors to invest his doubtful +paper in buildings, machines and goods, which, under all circumstances, +retain some intrinsic value. Such a movement was witnessed in France +in 1791, and from every quarter there came satisfactory reports of the +activity of manufactures." + +"But, for the moment, the French manufacturers derived great advantage +from this state of things. As their products could be so cheaply paid +for, orders poured in from foreign countries to such a degree that it +was often difficult for the manufacturers to satisfy their customers. +It is easy to see that prosperity of this kind must very soon find +its limit.... When a further fall in the _assignats_ took place this +prosperity would necessarily collapse, and be succeeded by a crisis +all the more destructive the more deeply men had engaged in speculation +under the influence of the first favorable prospects." [31] + +Thus came a collapse in manufacturing and commerce, just as it had come +previously in France: just as it came at various periods in Austria, +Russia, America, and in all countries where men have tried to build up +prosperity on irredeemable paper. [32] + +All this breaking down of the manufactures and commerce of the nation +made fearful inroads on the greater fortunes; but upon the lesser, and +upon the little properties of the masses of the nation who relied upon +their labor, it pressed with intense severity. The capitalist could put +his surplus paper money into the government lands and await results; but +the men who needed their money from day to day suffered the worst of +the misery. Still another difficulty appeared. There had come a complete +uncertainty as to the future. Long before the close of 1791 no one knew +whether a piece of paper money representing a hundred _livres_ would, +a month later, have a purchasing power of ninety or eighty or sixty +_livres_. The result was that capitalists feared to embark their means +in business. Enterprise received a mortal blow. Demand for labor was +still further diminished; and here came a new cause of calamity: for +this uncertainty withered all far-reaching undertakings. The business +of France dwindled into a mere living from hand to mouth. This state of +things, too, while it bore heavily upon the moneyed classes, was +still more ruinous to those in moderate and, most of all, to those in +straitened circumstances. With the masses of the people, the purchase of +every article of supply became a speculation--a speculation in which +the professional speculator had an immense advantage over the ordinary +buyer. Says the most brilliant of apologists for French revolutionary +statesmanship, "Commerce was dead; betting took its place." [33] + +Nor was there any compensating advantage to the mercantile classes. The +merchant was forced to add to his ordinary profit a sum sufficient to +cover probable or possible fluctuations in value, and while prices of +products thus went higher, the wages of labor, owing to the number of +workmen who were thrown out of employment, went lower. + +But these evils, though great, were small compared to those far more +deep-seated signs of disease which now showed themselves throughout the +country. One of these was the _obliteration of thrift_ from the minds +of the French people. The French are naturally thrifty; but, with such +masses of money and with such uncertainty as to its future value, the +ordinary motives for saving and care diminished, And a loose luxury +spread throughout the country. A still worse outgrowth was the increase +of speculation and gambling. With the plethora of paper currency in +1791 appeared the first evidences of that cancerous disease which +always follows large issues of irredeemable currency,--a disease more +permanently injurious to a nation than war, pestilence or famine. For +at the great metropolitan centers grew a luxurious, speculative, +stock-gambling body, which, like a malignant tumor, absorbed into itself +the strength of the nation and sent out its cancerous fibres to the +remotest hamlets. At these city centers abundant wealth seemed to be +piled up: in the country at, large there grew a dislike of steady labor +and a contempt for moderate gains and simple living. In a pamphlet +published in May, 1791, we see how, in regard to this also, public +opinion was blinded. The author calls attention to the increase of +gambling in values of all sorts in these words: "What shall I say of the +stock-jobbing, as frightful as it is scandalous, which goes on in Paris +under the very eyes of our legislators,--a most terrible evil, yet, +under the present circumstances,--necessary?" The author also speaks +of these stock-gamblers as using the most insidious means to influence +public opinion in favor of their measures; and then proposes, seriously, +a change in various matters of detail, thinking that this would prove a +sufficient remedy for an evil which had its roots far down in the whole +system of irredeemable currency. As well might a physician prescribe a +pimple wash for a diseased liver. [34] + +Now began to be seen more plainly some of the many ways in which an +inflation policy robs the working class. As these knots of plotting +schemers at the city centers were becoming bloated with sudden wealth, +the producing classes of the country, though having in their possession +more and more currency, grew lean. In the schemes and speculations put +forth by stock-jobbers and stimulated by the printing of more currency, +multitudes of small fortunes were absorbed and lost while a few swollen +fortunes were rapidly aggregated in the larger cities. This crippled a +large class in the country districts, which had employed a great number +of workmen. + +In the leading French cities now arose a luxury and license which was +a greater evil even than the plundering which ministered to it. In +the country the gambling spirit spread more and more. Says the same +thoughtful historian whom I have already quoted: "What a prospect for +a country when its rural population was changed into a great band of +gamblers!" [35] + +Nor was this reckless and corrupt spirit confined to business men; it +began to break out in official circles, and public men who, a few +years before, had been thought above all possibility of taint, became +luxurious, reckless, cynical and finally corrupt. Mirabeau, himself, +who, not many months previous, had risked imprisonment and even death +to establish constitutional government, was now--at this very +time--secretly receiving heavy bribes. When, at the downfall of the +monarchy a few years later, the famous iron chest of the Tuileries was +opened, there were found evidences that, in this carnival of inflation +and corruption, he had been a regularly paid servant of the Royal +court. [36] The artful plundering of the people at large was bad enough, +but worse still was this growing corruption in official and legislative +circles. Out of the speculating and gambling of the inflation period +grew luxury, and, out of this, corruption. It grew as naturally as a +fungus on a muck heap. It was first felt in business operations, +but soon began to be seen in the legislative body and in journalism. +Mirabeau was, by no means, the only example. Such members of the +legislative body as Jullien of Toulouse, Delaunay of Angers, Fabre +d'Eglantine and their disciples, were among the most noxious of those +conspiring by legislative action to raise and depress securities for +stock-jobbing purposes. Bribery of legislators followed as a matter of +course, Delaunay, Jullien and Chabot accepted a bribe of five hundred +thousand _livres_ for aiding legislation calculated to promote the +purposes of certain stock-jobbers. It is some comfort to know that +nearly all concerned were guillotined for it. [37] + +It is true that the number of these corrupt legislators was small, far +less than alarmists led the nation to suppose, but there were enough to +cause wide-spread distrust, cynicism and want of faith in any patriotism +or any virtue. + + + + +II. + +Even worse than this was the breaking down of the morals of the country +at large, resulting from the sudden building up of ostentatious wealth +in a few large cities, and from the gambling, speculative spirit +spreading from these to the small towns and rural districts. From this +was developed an even more disgraceful result,--the decay of a true +sense of national good faith. The patriotism which the fear of the +absolute monarchy, the machinations of the court party, the menaces of +the army and the threats of all monarchical Europe had been unable +to shake was gradually disintegrated by this same speculative, +stock-jobbing habit fostered by the superabundant currency. At the +outset, in the discussions preliminary to the first issue of paper +money, Mirabeau and others who had favored it had insisted that +patriotism as well as an enlightened self-interest, would lead the +people to keep up the value of paper money. The very opposite of this +was now revealed, for there appeared, as another outgrowth of this +disease, what has always been seen under similar circumstances. It is +a result of previous, and a cause of future evils. This outgrowth was a +vast debtor class in the nation, directly interested in the depreciation +of the currency in which they were to pay their debts. The nucleus of +this class was formed by those who had purchased the church lands from +the government. Only small payments down had been required and the +remainder was to be paid in deferred installments: an indebtedness of a +multitude of people had thus been created to the amount of hundreds of +millions. This body of debtors soon saw, of course, that their interest +was to depreciate the currency in which their debts were to be paid; +and these were speedily joined by a far more influential class;--by that +class whose speculative tendencies had been stimulated by the abundance +of paper money, and who had gone largely into debt, looking for a rise +in nominal values. Soon demagogues of the viler sort in the political +clubs began to pander to it; a little later important persons in this +debtor class were to be found intriguing in the Assembly--first in its +seats and later in more conspicuous places of public trust. Before long, +the debtor class became a powerful body extending through all ranks of +society. From the stock-gambler who sat in the Assembly to the small +land speculator in the rural districts; from the sleek inventor of +_canards_ on the Paris Exchange to the lying stock-jobber in the +market town, all pressed vigorously for new issues of paper; all were +apparently able to demonstrate to the people that in new issues of paper +lay the only chance for national prosperity. + +This great debtor class, relying on the multitude who could be +approached by superficial arguments, soon gained control. Strange as it +might seem to those who have not watched the same causes at work at a +previous period in France and at various times in other countries, while +every issue of paper money really made matters worse, a superstition +gained ground among the people at large that, if only _enough_ paper +money were issued and were more cunningly handled the poor would be made +rich. Henceforth, all opposition was futile. In December, 1791, a report +was made in the Legislative Assembly in favor of yet another great issue +of three hundred millions more of paper money. In regard to this report +Cambon said that more money was needed but asked, "Will you, in a moment +when stock-jobbing is carried on with such fury, give it new power by +adding so much more to the circulation?" But such high considerations +were now little regarded. Dorisy declared, "There is not enough money +yet in circulation; if there were more the sales of national lands would +be more rapid." And the official report of his speech states that these +words were applauded. + +Dorisy then went on to insist that the government lands were worth at +least thirty-five hundred million _livres_ and said: "Why should members +ascend the tribunal and disquiet France? Fear nothing; your currency +reposes upon a sound mortgage." Then followed a glorification of the +patriotism of the French people, which, he asserted, would carry the +nation through all its difficulties. + +Becquet, speaking next, declared that "The circulation is becoming more +rare every day." + +On December 17, 1791, a new issue was ordered, making in all twenty-one +hundred millions authorized. Coupled with this was the declaration that +the total amount in actual circulation should never reach more than +sixteen hundred millions. Before this issue the value of the 100 +_livres_ note had fallen at Paris to about 80 _livres_; [38] immediately +afterward it fell to about 68 _livres_. What limitations of the currency +were worth may be judged from the fact that not only had the declaration +made hardly a year before, limiting the amount in circulation to twelve +hundred millions, been violated, but the declaration, made hardly a +month previous, in which the Assembly had as solemnly limited the amount +of circulation to fourteen hundred millions, had also been repudiated. + +The evils which we have already seen arising from the earlier issues +were now aggravated; but the most curious thing evolved out of all this +chaos was a _new system of political economy_. In speeches, newspapers +and pamphlets about this time, we begin to find it declared that, after +all, a depreciated currency is a blessing; that gold and silver form an +unsatisfactory standard for measuring values: that it is a good thing to +have a currency that will not go out of the kingdom and which separates +France from other nations: that thus shall manufacturers be encouraged; +that commerce with other nations may be a curse, and hindrance thereto +may be a blessing; that the laws of political economy however applicable +in other times, are not applicable to this particular period, and, +however operative in other nations, are not now so in France; that the +ordinary rules of political economy are perhaps suited to the minions of +despotism but not to the free and enlightened inhabitants of France at +the close of the eighteenth century; that the whole state of present +things, so far from being an evil is a blessing. All these ideas, and +others quite as striking, were brought to the surface in the debates on +the various new issues. [39] + +Within four months came another report to the Assembly as ingenious as +those preceding. It declared: "Your committee are thoroughly persuaded +that the amount of the circulating medium before the Revolution was +greater than that of the _assignats_ today: but at that time the money +circulated slowly and now it passes rapidly so that one thousand million +_assignats_ do the work of two thousand millions of specie." The report +foretells further increase in prices, but by some curious jugglery +reaches a conclusion favorable to further inflation. Despite these +encouragements the _assignats_ nominally worth 100 _livres_ had fallen, +at the beginning of February, 1792, to about 60 _livres_, and during +that month fell to 53 _livres_. [40] + +In March, Claviere became minister of finance. He was especially proud +of his share in the invention and advocacy of the _assignats_, and now +pressed their creation more vigorously than ever, and on April 30th, of +the same year, came the fifth great issue of paper money, amounting to +three hundred millions: at about the same time Cambon sneered ominously +at public creditors as "rich people, old financiers and bankers." +Soon payment was suspended on dues to public creditors for all amounts +exceeding ten thousand _francs_. + +This was hailed by many as a measure in the interests of the poorer +classes of people, but the result was that it injured them most of all. +Henceforward, until the end of this history, capital was quietly taken +from labor and locked up in all the ways that financial ingenuity could +devise. All that saved thousands of laborers in France from starvation +was that they were drafted off into the army and sent to be killed on +foreign battlefields. + +On the last day of July, 1792, came another brilliant report from +Fouquet, showing that the total amount of currency already issued was +about twenty-four hundred millions, but claiming that the national lands +were worth a little more than this sum. A decree was now passed issuing +three hundred millions more. By this the prices of everything were again +enhanced save one thing, and that one thing was labor. Strange as it may +at first appear, while the depreciation of the currency had raised all +products enormously in price, the stoppage of so many manufactories and +the withdrawal of capital caused wages in the summer of 1792, after all +the inflation, to be as small as they had been four years before--viz., +fifteen _sous_ per day. No more striking example can be seen of the +truth uttered by Daniel Webster, that "of all the contrivances for +cheating the laboring classes of mankind, none has been more effective +than that which deludes them with paper-money." [41] + +Issue after issue followed at intervals of a few months, until, on +December 14, 1792, we have an official statement to the effect that +thirty-five hundred millions had been put forth, of which six hundred +millions had been burned, leaving in circulation twenty-eight hundred +millions. + +When it is remembered that there was little business to do and that +the purchasing power of the _livre_ or franc, when judged by the staple +products of the country, was equal to about half the present purchasing +power of our own dollar, it will be seen into what evils France had +drifted. As the mania for paper money ran its course, even the _sous_, +obtained by melting down the church bells, were more and more driven out +of circulation and more and more parchment notes from twenty _four_ to +five were issued, and at last pieces of one _sou_, of half a _sou_ and +even of one-quarter of a _sou_ were put in circulation. [42] + +But now another source of wealth was opened to the nation. There came a +confiscation of the large estates of landed proprietors who had fled +the country. An estimate in 1793 made the value of these estates three +billions of _francs_. As a consequence, the issues of paper money +were continued in increased amounts, on the old theory that they were +guaranteed by the solemn pledge of these lands belonging to the state. +Under the Legislative Assembly through the year 1792 new issues were +made virtually every month, so that at the end of January, 1793, it +was more and more realized that the paper money actually in circulation +amounted close upon three thousand millions of _francs_. All this had +been issued publicly, in open sessions of the National and Legislative +Assemblies; but now under the National Convention, the two Committees +of Public Safety and of Finance began to decree new issues privately, in +secret session. + +As a result, the issues became larger still, and four hundred workmen +were added to those previously engaged in furnishing this paper money, +and these were so pressed with work from six o'clock in the morning +until eight in the evening that they struck for higher wages and were +successful. [43] + +The consequences of these overissues now began to be more painfully +evident to the people at large. Articles of common consumption became +enormously dear and prices were constantly rising. Orators in the +Legislative Assembly, clubs, local meetings and elsewhere now endeavored +to enlighten people by assigning every reason for this depreciation save +the true one. They declaimed against the corruption of the ministry, the +want of patriotism among the Moderates, the intrigues of the emigrant +nobles, the hard-heartedness of the rich, the monopolizing spirit of the +merchants, the perversity of the shopkeepers,---each and all of these as +causes of the difficulty. [44] + +This decline in the government paper was at first somewhat masked by +fluctuations. For at various times the value of the currency _rose_. The +victory of Jemappes and the general success of the French army against +the invaders, with the additional security offered by new confiscations +of land, caused, in November, 1792, an appreciation in the value of the +currency; the franc had stood at 57 and it rose to about 69; but +the downward tendency was soon resumed and in September, 1793, +the _assignats_ had sunk below 30. Then sundry new victories and +coruscations of oratory gave momentary confidence so that in December, +1793, they rose above 50. But despite these fluctuations the downward +tendency soon became more rapid than ever. [45] + +The washerwomen of Paris, finding soap so dear that they could hardly +purchase it, insisted that all the merchants who were endeavoring to +save something of their little property by refusing to sell their goods +for the wretched currency with which France was flooded, should be +punished with death; the women of the markets and the hangers-on of the +Jacobin Club called loudly for a law "to equalize the value of paper +money and silver coin." It was also demanded that a tax be laid +especially on the rich, to the amount of four hundred million _francs_, +to buy bread. Marat declared loudly that the people, by hanging +shopkeepers and plundering stores, could easily remove the trouble. The +result was that on the 28th of February, 1793, at eight o'clock in the +evening, a mob of men and women in disguise began plundering the +stores and shops of Paris. At first they demanded only bread; soon they +insisted on coffee and rice and sugar; at last they seized everything +on which they could lay their hands--cloth, clothing, groceries and +luxuries of every kind. Two hundred such places were plundered. This was +endured for six hours and finally order was restored only by a grant of +seven million _francs_ to buy off the mob. The new political economy was +beginning to bear, its fruits luxuriantly. A gaudy growth of it appeared +at the City Hall of Paris when, in response to the complaints of the +plundered merchants, Roux declared, in the midst of great applause, that +"shopkeepers were only giving back to the people what they had hitherto +robbed them of." + +The mob having thus been bought off by concessions and appeased by +oratory, the government gained time to think, and now came a series of +amazing expedients,--and yet all perfectly logical. + +Three of these have gained in French history an evil pre-eminence, and +first of the three was the Forced Loan. + +In view of the fact that the well-to-do citizens were thought to be +lukewarm in their support of the politicians controlling the country, +various demagogues in the National Convention, which had now succeeded +the National, Constituent and Legislative Assemblies, found ample matter +for denunciations long and loud. The result outside the Convention +was increased activity of the guillotine; the results inside were new +measures against all who had money, and on June 22, 1793, the +Convention determined that there should be a Forced Loan, secured on the +confiscated lands of the emigrants and levied upon all married men +with incomes of ten thousand _francs_, and upon all unmarried men with +incomes of six thousand _francs_. It was calculated that these +would bring into the treasury a thousand millions of _francs_. But a +difficulty was found. So many of the rich had lied or had concealed +their wealth that only a fifth of the sum required could be raised, and +therefore a law was soon passed which levied forced loans upon incomes +as low as one thousand, _francs_,--or, say, two hundred dollars +of American money. This tax was made progressive. On the smaller +proprietors it was fixed at one-tenth and on the larger, that is, on all +incomes above nine thousand _francs_, it was made one-half of the entire +income. Little if any provision was made for the repayment of this loan +but the certificates might be used for purchasing the confiscated real +estate of the church and of the nobility. [46] + +But if this first expedient shows how naturally a "fiat" money system +runs into despotism, the next is no less instructive in showing how +easily it becomes repudiation and dishonor. + +As we have seen, the first issue of the _assignats_,--made by the +National Assembly, bore a portrait of the king; but on the various +issues after the establishment of a republic this emblem had been +discarded. This change led to a difference in value between the earlier +and the later paper money. The wild follies of fanatics and demagogues +had led to an increasing belief that the existing state of things could +not last; that the Bourbons must ere long return; that in such case, +while a new monarch would repudiate all the vast mass of the later paper +issued by the Republic, he would recognize that first issue bearing the +face and therefore the guarantee of the king. So it was that this first +issue came to bear a higher value than those of later date. To meet this +condition of things it was now proposed to repudiate an that earlier +issue. In vain did sundry more thoughtful members of the Convention +plead that this paper money, amounting to five hundred and fifty-eight +millions of _francs_, bore the solemn guarantee of the nation, as well +as of the king; the current was irresistible. All that Cambon, the great +leader of finance at that time, could secure was a clause claiming to +protect the poor, to the effect that this demonetization should not +extend to notes below a hundred _francs_ in value; and it was also +agreed that any of the notes, large or small, might be received in +payment of taxes and for the confiscated property of the clergy and +nobility. To all the arguments advanced against this breach of the +national faith Danton, then at the height of his power, simply declared +that only aristocrats could favor notes bearing the royal portrait, and +gave forth his famous utterance: "Imitate Nature, which watches over the +preservation of the race but has no regard for individuals." The decree +was passed on the 31st of July, 1793, yet its futility was apparent in +less than two months, when the Convention decreed that there should be +issued two thousand millions of _francs_ more in _assignats_ between the +values of ten _sous_ and four hundred _francs_, and when, before the end +of the year, five hundred millions more were authorized. [47] + +The third outgrowth of the vast issue of fiat money was the _Maximum_. +As far back as November, 1792, the Terrorist associate of Robespierre, +St. Just, in view of the steady rise in prices of the necessaries of +life, had proposed a scheme by which these prices should be established +by law, at a rate proportionate to the wages of the working classes. +This plan lingered in men's minds, taking shape in various resolutions +and decrees until the whole culminated on September 29, 1793, in the Law +of the _Maximum_. + +While all this legislation was high-handed, it was not careless. Even +statesmen of the greatest strength, having once been drawn into this +flood, were borne on into excesses which, a little earlier, would have +appalled them. Committees of experts were appointed to study the whole +subject of prices, and at last there were adopted the great "four rules" +which seemed to statesmen of that time a masterly solution of the whole +difficulty. [48] + +_First_, the price of each article of necessity was to be fixed at one +and one-third its price in 1790. _Secondly_, all transportation was to +be added at a fixed rate per league. _Thirdly_, five per cent was to be +added for the profit of the wholesaler. _Fourthly_, ten per cent was +to be added for the profit of the retailer. Nothing could look more +reasonable. Great was the jubilation. The report was presented and +supported by Barrere,--"the tiger monkey,"--then in all the glory +of his great orations: now best known from his portrait by Macaulay. +Nothing could withstand Barrere's eloquence. He insisted that France +had been suffering from a "_Monarchical_ commerce which only sought +wealth," while what she needed and what she was now to receive was a +"_Republican_ commerce--a commerce of moderate profits and virtuous." He +exulted in the fact that "France alone enjoys such a commerce,--that it +exists in no other nation." He poured contempt over political economy as +"that science which quacks have corrupted, which pedants have obscured +and which academicians have depreciated." France, he said, has something +better, and he declared in conclusion, "The needs of the people will +no longer be spied upon in order that the commercial classes may +arbitrarily take advantage." [49] + +The first result of the _Maximum_ was that every means was taken to +evade the fixed price imposed, and the farmers brought in as little +produce as they possibly could. This increased the scarcity, and the +people of the large cities were put on an allowance. Tickets were issued +authorizing the bearer to obtain at the official prices a certain +amount of bread or sugar or soap or wood or coal to cover immediate +necessities. [50] + +But it was found that the _Maximum_, with its divinely revealed four +rules, could not be made to work well--even by the shrewdest devices. In +the greater part of France it could not be enforced. As to merchandise +of foreign origin or merchandise into which any foreign product entered, +the war had raised it far above the price allowed under the first rule, +namely, the price of 1790, with an addition of one-third. Shopkeepers +therefore could not sell such goods without ruin. The result was that +very many went out of business and the remainder forced buyers to pay +enormous charges under the very natural excuse that the seller risked +his life in trading at all. That this excuse was valid is easily seen +by the daily lists of those condemned to the guillotine, in which +not infrequently figure the names of men charged with violating the +_Maximum_ laws. Manufactures were very generally crippled and frequently +destroyed, and agriculture was fearfully depressed. To detect goods +concealed by farmers and shopkeepers, a spy system was established +with a reward to the informer of one-third of the value of the goods +discovered. To spread terror, the Criminal Tribunal at Strassburg was +ordered to destroy the dwelling of any one found guilty of selling goods +above the price set by law. The farmer often found that he could not +raise his products at anything like the price required by the new law, +and when he tried to hold back his crops or cattle, alleging that he +could not afford to sell them at the prices fixed by law, they were +frequently taken from him by force and he was fortunate if paid even +in the depreciated fiat money--fortunate, indeed, if he finally escaped +with his life. [51] + +Involved in all these perplexities, the Convention tried to cut the +Gordian knot. It decreed that any person selling gold or silver coin, +or making any difference in any transaction between paper and specie, +should be imprisoned in irons for six years:--that any one who refused +to accept a payment in _assignats_, or accepted _assignats_ at a +discount, should pay a fine of three thousand _francs_; and that any one +committing this crime a second time should pay a fine of six thousand +_francs_ and suffer imprisonment twenty years in irons. Later, on the +8th of September, 1793, the penalty for such offences was made death, +with confiscation of the criminal's property, and so reward was offered +to any person informing the authorities regarding any such criminal +transaction. To reach the climax of ferocity, the Convention decreed, +in May, 1794, that the death penalty should be inflicted on any person +convicted of "having asked, before a bargain was concluded, in what +money payment was to be made." Nor was this all. The great finance +minister, Cambon, soon saw that the worst enemies of his policy were +gold and silver. Therefore it was that, under his lead, the Convention +closed the Exchange and finally, on November 13, 1793, under terrifying +penalties, suppressed all commerce in the precious metals. About a year +later came the abolition of the Maximum itself. [52] + +It is easily seen that these _Maximum_ laws were perfectly logical. +Whenever any nation intrusts to its legislators the issue of a currency +not based on the idea of redemption in standard coin recognized in the +commerce of civilized nations, it intrusts to them the power to raise or +depress the value of every article in the possession of every citizen. +Louis XIV had claimed that all property in Prance was his own, and that +what private persons held was as much his as if it were in his coffers. +But even this assumption is exceeded by the confiscating power exercised +in a country, where, instead of leaving values to be measured by a +standard common to the whole world, they are left to be depressed or +raised at the whim, caprice or interest of a body of legislators. When +this power is given, the power of prices is inevitably included in +it. [53] + +It may be said that these measures were made necessary by the war then +going on. Nothing could be more baseless than such an objection. In this +war the French soon became generally successful. It was quickly pushed +mainly upon foreign soil. Numerous contributions were levied upon the +subjugated countries to support the French armies. The war was one of +those in which the loss, falling apparently on future generations, first +stimulates, in a sad way, trade and production. The main cause of these +evils was tampering with the circulating medium of an entire nation; +keeping all values in fluctuation; discouraging enterprise; paralyzing +energy; undermining sobriety; obliterating thrift; promoting +extravagance and exciting riot by the issue of an irredeemable currency. +The true business way of meeting the enormous demands on France during +the first years of the Revolution had been stated by a true statesman +and sound financier, Du Pont de Nemours, at the very beginning. He had +shown that using the same paper as a circulating medium and as a means +for selling the national real estate was like using the same implement +for an oyster knife and a razor. [54] + +It has been argued that the _assignats_ sank in value because they were +not well secured,--that securing them on government real estate was as +futile as if the United States had, in the financial troubles of its +early days, secured notes on its real estate. This objection is utterly +fallacious. The government lands of our country were remote from the +centers of capital and difficult to examine; the French national real +estate was near these centers--even _in_ them--and easy to examine. +Our national real estate was unimproved and unproductive; theirs +was improved and productive--its average productiveness in market in +ordinary times being from four to five per cent. [55] + +It has also been objected that the attempt to secure the _assignats_ on +government real estate failed because of the general want of confidence +in the title derived by the purchasers from the new government. Every +thorough student of that period must know that this is a misleading +statement. Everything shows that the vast majority of the French people +had a fanatical confidence in the stability of the new government during +the greater part of the Revolution. There were disbelievers in the +security of the _assignats_ just as there were disbelievers in the +paper money of the United States throughout our Civil War; but they were +usually a small minority. Even granting that there was a doubt as to +investment in French lands, the French people certainly had as much +confidence in the secure possession of government lands as any people +can ever have in large issues of government bonds: indeed, it is certain +that they had far more confidence in their lands as a security than +modern nations can usually have in large issues of bonds obtained by +payments of irredeemable paper. One simple fact, as stated by John +Stuart Mill, which made _assignats_ difficult to convert into real +estate was that the vast majority of people could not afford to make +investments outside their business; and this fact is no less fatal +to any attempt to contract large issues of irredeemable paper--save, +perhaps, a bold, statesmanlike attempt, which seizes the best time and +presses every advantage, eschewing all juggling devices and sacrificing +everything to maintain a sound currency based on standards common to the +entire financial world. + +And now was seen, taking possession of the nation, that idea which +developed so easily out of the fiat money system;--the idea that the +ordinary needs of government may be legitimately met wholly by the means +of paper currency;--that taxes may be dispensed with. As a result, it +was found that the _assignat_ printing press was the one resource left +to the government, and the increase in the volume of paper money became +every day more appalling. + +It will doubtless surprise many to learn that, in spite of these evident +results of too much currency, the old cry of a "scarcity of circulating +medium" was not stilled; it appeared not long after each issue, no +matter how large. + +But every thoughtful student of financial history knows that this cry +always comes after such issues--nay, that it _must_ come,--because +in obedience to a natural law, the former scarcity, or rather +_insufficiency_ of currency recurs just as soon as prices become +adjusted to the new volume, and there comes some little revival of +business with the usual increase of credit. [56] + +In August, 1793, appeared a new report by Cambon. No one can read it +without being struck by its mingled ability and folly. His final plan +of dealing with the public debt has outlasted all revolutions since, +but his disposition of the inflated currency came to a wretched failure. +Against Du Pont, who showed conclusively that the wild increase of paper +money was leading straight to, ruin, Cambon carried the majority in +the great assemblies and clubs by sheer audacity--the audacity of +desperation. Zeal in supporting the _assignats_ became his religion. The +National Convention which succeeded the Legislative Assembly, issued in +1793 over three thousand millions of _assignats_, and, of these, over +twelve hundred millions were poured into the circulation. And yet Cambon +steadily insisted that the security for the _assignat_ currency was +perfect. The climax of his zeal was reached when he counted as assets +in the national treasury the indemnities which, he declared, France +was sure to receive after future victories over the allied nations +with which she was then waging a desperate war. As patriotism, it was +sublime; as finance it was deadly. [57] + +Everything was tried. Very elaborately he devised a funding scheme +which, taken in connection with his system of issues, was in effect +what in these days would be called an "_interconvertibility scheme_" By +various degrees of persuasion or force,--the guillotine looming up in +the background,--holders of _assignats_ were urged to convert them into +evidence of national debt, bearing interest at five per cent, with the +understanding that if more paper were afterward needed more would be +issued. All in vain. The official tables of depreciation show that the +_assignats_ continued to fall. A forced loan, calling in a billion +of these, checked this fall, but only for a moment. The +"_interconvertibility scheme_" between currency and bonds failed as +dismally as the "_interconvertibility scheme_" between currency and land +had failed. [58] + +A more effective expedient was a law confiscating the property of all +Frenchmen who left France after July 14, 1789, and who had not returned. +This gave new land to be mortgaged for the security of paper money. + +All this vast chapter in financial folly is sometimes referred to as if +it resulted from the direct action of men utterly unskilled in finance. +This is a grave error. That wild schemers and dreamers took a leading +part in setting the fiat money system going is true; that speculation +and interested financiers made it worse is also true: but the men who +had charge of French finance during the Reign of Terror and who made +these experiments, which seem to us so monstrous, in order to rescue +themselves and their country from the flood which was sweeping +everything to financial ruin were universally recognized as among the +most skillful and honest financiers in Europe. Cambon, especially, +ranked then and ranks now as among the most expert in any period. The +disastrous results of all his courage and ability in the attempt to +stand against the deluge of paper money show how powerless are the most +skillful masters of finance to stem the tide of fiat money calamity +when once it is fairly under headway; and how useless are all enactments +which they can devise against the underlying laws of nature. + +Month after month, year after year new issues went on. Meanwhile +everything possible was done to keep up the value of paper. The city +authorities of Metz took a solemn oath that the _assignats_ should bear +the same price whether in paper or specie,--and whether in buying +or selling, and various other official bodies throughout the nation +followed this example. In obedience to those who believed with the +market women of Paris, as stated in their famous petition, that "laws +should be passed making paper money as good as gold," Couthon, in +August, 1793, had proposed and carried a law punishing any person +who should sell _assignats_ at less than their nominal value with +imprisonment for twenty years in chains, and later carried a law making +investments in foreign countries by Frenchmen punishable with death. [59] + +But to the surprise of the great majority of the French people, the +value of the _assignats_ was found, after the momentary spasm of fear +had passed, not to have been permanently increased by these measures: on +the contrary, this "fiat" paper persisted in obeying the natural laws of +finance and, as new issues increased, their value decreased. Nor did the +most lavish aid of nature avail. The paper money of the nation seemed to +possess a magic power to transmute prosperity into adversity and plenty +into famine. The year 1794 was exceptionally fruitful: and yet with the +autumn came scarcity of provisions and with the winter came distress. +The reason is perfectly simple. The sequences in that whole history are +absolutely logical. First, the Assembly had inflated the currency and +raised prices enormously. Next, it had been forced to establish an +arbitrary maximum price for produce. But this price, large as it +seemed, soon fell below the real value of produce; many of the farmers, +therefore, raised less produce or refrained from bringing what they had +to market. [60] But, as is usual in such cases, the trouble was ascribed +to everything rather than the real cause, and the most severe measures +were established in all parts of the country to force farmers to bring +produce to market, millers to grind and shopkeepers to sell it. [61] The +issues of paper money continued. Toward the end of 1794 seven thousand +millions in _assignats_ were in circulation. [62] By the end of May, +1795, the circulation was increased to ten thousand millions, at the +end of July, to fourteen thousand millions; and the value of one hundred +_francs_ in paper fell steadily, first to four _francs_ in gold, then to +three, then to two and one-half. [63] But, curiously enough, while this +depreciation was rapidly going on, as at various other periods when +depreciation was rapid, there came an apparent revival of business. The +hopes of many were revived by the fact that in spite of the decline of +paper there was an exceedingly brisk trade in all kinds of permanent +property. Whatever articles of permanent value certain needy people were +willing to sell certain cunning people were willing to buy and to pay +good prices for in _assignats_. At this, hope revived for a time in +certain quarters. But ere long it was discovered that this was one of +the most distressing results of a natural law which is sure to come into +play under such circumstances. It was simply a feverish activity caused +by the intense desire of a large number of the shrewder class to convert +their paper money into anything and everything which they could hold and +hoard until the collapse which they foresaw should take place. This very +activity in business simply indicated the disease. It was simply legal +robbery of the more enthusiastic and trusting by the more cold-hearted +and keen. It was, the "unloading" of the _assignats_ upon the mass of +the people. [64] + +Interesting is it to note in the midst of all this the steady action +of another simple law in finance. Prisons, guillotines, enactments +inflicting twenty years' imprisonment in chains upon persons twice +convicted of buying or selling paper money at less than its nominal +value, and death upon investors in foreign securities, were powerless. +The National Convention, fighting a world in arms and with an armed +revolt on its own soil, showed titanic power, but in its struggle to +circumvent one simple law of nature its weakness was pitiable. The +_louis d'or_ stood in the market as a monitor, noting each day, with +unerring fidelity, the decline in value of the _assignat_; a monitor not +to be bribed, not to be scared. As well might the National Convention +try to bribe or scare away the polarity of the mariner's compass. On +August 1, 1795, this gold _louis_ of 25 _francs_ was worth in paper, +920 _francs_; on September 1st, 1,200 _francs_; on November 1st, 2,600 +_francs_; on December 1st, 3,050 _francs_. In February, 1796, it was +worth 7,200 _francs_ or one franc in gold was worth 288 _francs_ in +paper. Prices of all commodities went up nearly in proportion. [65] +The writings of this period give curious details. Thibaudeau, in his +Memoirs, speaks of sugar as 500 _francs_ a pound, soap, 230 _francs_, +candles, 140 _francs_. Mercier, in his lifelike pictures of the French +metropolis at that period, mentions 600 _francs_ as carriage hire for a +single drive, and 6,000 for an entire day. Examples from other sources +are such as the following:--a measure of flour advanced from two +_francs_ in 1790, to 225 _francs_ in 1795; a pair of shoes, from +five _francs_ to 200; a hat, from 14 _francs_ to 500; butter, to, +560 _francs_ a pound; a turkey, to 900 _francs_. [66] Everything +was enormously inflated in price _except the wages of labor_. As +manufacturers had closed, wages had fallen, until all that kept them up +seemed to be the fact that so many laborers were drafted off into the +army. From this state of things came grievous wrong and gross fraud. +Men who had foreseen these results and had gone into debt were of course +jubilant. He who in 1790 had borrowed 10,000 _francs_ could pay his +debts in 1796 for about 35 _francs_. Laws were made to meet these +abuses. As far back as 1794 a plan was devised for publishing official +"tables of depreciation" to be used in making equitable settlements of +debts, but all such machinery proved futile. On the 18th of May, 1796, a +young man complained to the National Convention that his elder brother, +who had been acting as administrator of his deceased father's estate, +had paid the heirs in _assignats_, and that he had received scarcely one +three-hundredth part of the real value of his share. [67] To meet cases +like this, a law was passed establishing a "scale of proportion." Taking +as a standard the value of the _assignat_ when there were two billions +in circulation, this law declared that, in payment of debts, one-quarter +should be added to the amount originally borrowed for every five hundred +millions added to the circulation. In obedience to this law a man +who borrowed two thousand _francs_ when there were two billions in +circulation would have to pay his creditors twenty-five hundred +_francs_ when half a billion more were added to the currency, and over +thirty-five thousand _francs_ before the emissions of paper reached +their final amount. This brought new evils, worse, if possible, than the +old. [68] + +The question will naturally be asked, _On whom did this vast +depreciation mainly fall at last_? When this currency had sunk to +about one three-hundredth part of its nominal value and, after that, +to nothing, in whose hands was the bulk of it? The answer is simple. I +shall give it in the exact words of that thoughtful historian from whom +I have already quoted: "Before the end of the year 1795 the paper money +was almost exclusively in the hands of the working classes, employees +and men of small means, whose property was not large enough to invest in +stores of goods or national lands. [69] Financiers and men of large means +were shrewd enough to put as much of their property as possible into +objects of permanent value. The working classes had no such foresight +or skill or means. On them finally came the great crushing weight of the +loss. After the first collapse came up the cries of the starving. Roads +and bridges were neglected; many manufactures were given up in utter +helplessness." To continue, in the words of the historian already cited: +"None felt any confidence in the future in any respect; few dared to +make a business investment for any length of time and it was accounted a +folly to curtail the pleasures of the moment, to accumulate or save for +so uncertain a future." [70] + +This system in finance was accompanied by a system in politics no less +startling, and each system tended to aggravate the other. The wild +radicals, having sent to the guillotine first all the Royalists and +next all the leading Republicans they could entrap, the various +factions began sending each other to the same destination:--Hebertists, +Dantonists, with various other factions and groups, and, finally, the +Robespierrists, followed each other in rapid succession. After these +declaimers and phrase-mongers had thus disappeared there came to power, +in October, 1795, a new government,--mainly a survival of the more +scoundrelly,--the Directory. It found the country utterly impoverished +and its only resource at first was to print more paper and to issue even +while wet from the press. These new issues were made at last by the two +great committees, with or without warrant of law, and in greater sums +than ever. Complaints were made that the array of engravers and printers +at the mint could not meet the demand for _assignats_--that they +could produce only from sixty to seventy millions per day and that +the government was spending daily from eighty to ninety millions. Four +thousand millions of _francs_ were issued during one month, a little +later three thousand millions, a little later four thousand millions, +until there had been put forth over thirty-five thousand millions. The +purchasing power of this paper having now become almost nothing, it was +decreed, on the 22nd of December, 1795, that the whole amount issued +should be limited to forty thousand millions, including all that had +previously been put forth and that when this had been done the copper +plates should be broken. Even in spite of this, additional issues +were made amounting to about ten thousand millions. But on the 18th of +February, 1796, at nine o'clock in the morning, in the presence of a +great crowd, the machinery, plates and paper for printing _assignats_ +were brought to the Place Vendome and there, on the spot where the +Napoleon Column now stands, these were solemnly broken and burned. + +Shortly afterward a report by Camus was made to the Assembly that +the entire amount of paper money issued in less than six years by the +Revolutionary Government of France had been over forty-five thousand +millions of _francs_--that over six thousand millions had been annulled +and burned and that at the final catastrophe there were in circulation +close upon forty thousand millions. It will be readily seen that it +was fully time to put an end to the system, for the gold "_louis_" of +twenty-five _francs_ in specie had, in February, 1796, as we have seen, +become worth 7,200 _francs_, and, at the latest quotation of all, no +less than 15,000 _francs_ in paper money--that is, one franc in gold was +nominally worth 600 _francs_ in paper. + +Such were the results of allowing dreamers, schemers, phrase-mongers, +declaimers and strong men subservient to these to control a +government. [71] + + + + +III. + +The first new expedient of the Directory was to secure a forced loan of +six hundred million _francs_ from the wealthier classes; but this was +found fruitless. Ominous it was when persons compelled to take this +loan found for an _assignat_ of one hundred _francs_ only one franc was +allowed. Next a National Bank was proposed; but capitalists were loath +to embark in banking while the howls of the mob against all who had +anything especially to do with money resounded in every city. At last +the Directory bethought themselves of another expedient. This was by no +means new. It had been fully tried on our continent twice before that +time: and once, since--first, in our colonial period; next, during +our Confederation; lastly, by the "Southern Confederacy" and here, +as elsewhere, always in vain. But experience yielded to theory--plain +business sense to financial metaphysics. It was determined to issue a +new paper which should be "fully secured" and "as good as gold." + +Pursuant to this decision it was decreed that a new paper money "fully +secured and as good as gold" be issued under the name of "_mandats_." In +order that these new notes should be "fully secured," choice public real +estate was set apart to an amount fully equal to the nominal value of +the issue, and any one offering any amount of the _mandats_ could at +once take possession of government lands; the price of the lands to be +determined by two experts, one named by the government and one by the +buyer, and without the formalities and delays previously established in +regard to the purchase of lands with _assignats_. + +Perhaps the most whimsical thing in the whole situation was the +fact that the government, pressed as it was by demands of all sorts, +continued to issue the old _assignats_ at the same time that it was +discrediting them by issuing the new _mandats_. And yet in order to make +the _mandats_ "as good as gold" it was planned by forced loans and other +means to reduce the quantity of _assignats_ in circulation, so that the +value of each _assignat_ should be raised to one-thirtieth of the value +of gold, then to make _mandats_ legal tender and to substitute them for +_assignats_ at the rate of one for thirty. Never were great expectations +more cruelly disappointed. Even before the _mandats_ could be issued +from the press they fell to thirty-five per cent of their nominal value; +from this they speedily fell to fifteen, and soon after to five per +cent, and finally, in August, 1796, six months from their first issue, +to three per cent. This plan failed--just as it failed in New England in +1737; just as it failed under our own Confederation in 1781; just as it +failed under the Southern Confederacy during our Civil War. [72] + +To sustain this new currency the government resorted to every method +that ingenuity could devise. Pamphlets suited to people of every +capacity were published explaining its advantages. Never was there more +skillful puffing. A pamphlet signed "Marchant" and dedicated to "People +of Good Faith" was widely circulated, in which Marchant took pains +to show the great advantage of the _mandats_ as compared with +_assignats_,--how land could be more easily acquired with them; how +their security was better than with _assignats_; how they could not, by +any possibility, sink in values as the _assignats_ had done. But even +before the pamphlet was dry from the press the depreciation of the +_mandats_ had refuted his entire argument. [73] + +The old plan of penal measures was again pressed. Monot led off by +proposing penalties against those who shall speak publicly against +the _mandats_; Talot thought the penalties ought to be made especially +severe; and finally it was enacted that any persons "who by their +discourse or writing shall decry the _mandats_ shall be condemned to a +fine of not less than one thousand _francs_ or more than ten thousand; +and in case of a repetition of the offence, to four years in irons." It +was also decreed that those who refused to receive the _mandats_ should +be fined,--the first time, the exact sum which they refuse; the second +time, ten times as much; and the third time, punished with two years in +prison. But here, too, came in the action of those natural laws which +are alike inexorable in all countries. This attempt proved futile in +France just as it had proved futile less than twenty years before in +America. No enactments could stop the downward tendency of this new +paper "fully secured," "as good as gold"; the laws that finally govern +finance are not made in conventions or congresses. [74] + +From time to time various new financial juggles were tried, some of them +ingenious, most of them drastic. It was decreed that all _assignats_ +above the value of one hundred _francs_ should cease to circulate after +the beginning of June, 1796. But this only served to destroy the +last vestige of, confidence in government notes of any kind. Another +expedient was seen in the decree that paper money should be made to +accord with a natural and immutable standard of value and that one franc +in paper should thenceforth be worth ten pounds of wheat. This also +failed. On July 16th another decree seemed to show that the authorities +despaired of regulating the existing currency and it was decreed that +all paper, whether _mandats_ or _assignats_, should be taken at its +real value, and that bargains might be made in whatever currency people +chose. The real value of the _mandats_ speedily sank to about two per +cent of their nominal value and the only effect of this legislation +seemed to be that both _assignats_ and _mandats_ went still lower. Then +from February 4 to February 14, 1797, came decrees and orders that the +engraving apparatus for the _mandats_ should be destroyed as that for +the _assignats_ had been, that neither _assignats_ nor _mandats_ should +longer be a legal tender and that old debts to the state might be paid +for a time with government paper at the rate of one per cent of their +face value. [75] Then, less than three months later, it was decreed that +the twenty-one billions of _assignats_ still in circulation should be +annulled. Finally, on September 30, 1797, as the culmination of these +and various other experiments and expedients, came an order of the +Directory that the national debts should be paid two-thirds in bonds +which might be used in purchasing confiscated real estate, and the +remaining "Consolidated Third," as it was called, was to be placed on +the "Great Book" of the national debt to be paid thenceforth as the +government should think best. + +As to the bonds which the creditors of the nation were thus forced to +take, they sank rapidly, as the _assignats_ and _mandats_ had done, even +to three per cent of their value. As to the "Consolidated Third," that +was largely paid, until the coming of Bonaparte, in paper money which +sank gradually to about six per cent of its face value. Since May, 1797, +both _assignats_ and _mandats_ had been virtually worth nothing. + +So ended the reign of paper money in France. The twenty-five hundred +millions of _mandats_ went into the common heap of refuse with the +previous forty-five thousand millions of _assignats_: the nation in +general, rich and poor alike, was plunged into financial ruin from one +end to the other. + +On the prices charged for articles of ordinary use light is thrown by +extracts from a table published in 1795, reduced to American coinage. + + + 1790 1795 + For a bushel of flour 40 cents 45 dollars + For a bushel of oats 18 cents 10 dollars + For a cartload of wood 4 dollars 500 dollars + For a bushel of coal 7 cents 2 dollars + For a pound of sugar 18 cents 12 1/2 dollars + For a pound of soap 18 cents 8 dollars + For a pound of candles 18 cents 8 dollars + For one cabbage 8 cents 5 1/2 dollars + For a pair of shoes 1 dollar 40 dollars + For twenty-five eggs 24 cents 5 dollars + + +But these prices about the middle of 1795 were moderate compared with +those which were reached before the close of that year and during the +year following. Perfectly authentic examples were such as the following: + + A pound of bread 9 dollars + A bushel of potatoes 40 dollars + A pound of candles 40 dollars + A cartload of wood 250 dollars + +So much for the poorer people. Typical of those esteemed wealthy may be +mentioned a manufacturer of hardware who, having retired from business +in 1790 with 321,000 _livres_, found his property in 1796 worth 14,000 +_francs_. [76] + +For this general distress arising from the development and collapse of +"fiat" money in France, there was, indeed, one exception. In Paris and +a few of the other great cities, men like Tallien, of the heartless, +debauched, luxurious, speculator, contractor and stock-gambler class, +had risen above the ruins of the multitudes of smaller fortunes. +Tallien, one of the worst demagogue "reformers," and a certain number +of men like him, had been skillful enough to become millionaires, while +their dupes, who had clamored for issues of paper money, had become +paupers. + +The luxury and extravagance of the currency gamblers and their families +form one of the most significant features in any picture of the social +condition of that period. [77] + +A few years before this the leading women in French society showed a +nobility of character and a simplicity in dress worthy of Roman matrons. +Of these were Madame Boland and Madame Desmoulins; but now all was +changed. At the head of society stood Madame Tallien and others like +her, wild in extravagance, daily seeking new refinements in luxury, and +demanding of their husbands and lovers vast sums to array them and to +feed their whims. If such sums could not be obtained honestly they must +be had dishonestly. The more closely one examines that period, the more +clearly he sees that the pictures, given by Thibaudeau and Challamel and +De Goncourt are not at all exaggerated. [78] + +The contrast between these gay creatures of the Directory period and the +people at large was striking. Indeed much as the vast majority of the +wealthy classes suffered from impoverishment, the laboring classes, +salaried employees of all sorts, and people of fixed income and of small +means, especially in the cities, underwent yet greater distress. These +were found, as a rule, to subsist mainly on daily government rations of +bread at the rate of one pound per person. This was frequently unfit +for food and was distributed to long lines of people, men, women and +children, who were at times obliged to wait their turn even from dawn +to dusk. The very rich could, by various means, especially by bribery, +obtain better bread, but only at enormous cost. In May, 1796, the market +price of good bread was, in paper, 80 _francs_ (16 dollars) per pound +and a little later provisions could not be bought for paper money at any +price. [79] + +And here it may be worth mentioning that there was another financial +trouble especially vexatious. While, as we have seen, such enormous +sums, rising from twenty to forty thousand millions of _francs_ in +paper, were put in circulation by the successive governments of the +Revolution, enormous sums had been set afloat in counterfeits by +criminals and by the enemies of France. These came not only from +various parts of the French Republic but from nearly all the surrounding +nations, the main source being London. Thence it was that Count Joseph +de Puisaye sent off cargoes of false paper, excellently engraved and +printed, through ports in Brittany and other disaffected parts of +France. One seizure by General Hoche was declared by him to exceed in +nominal value ten thousand millions of _francs_. With the exception of +a few of these issues, detection was exceedingly difficult, even for +experts; for the vast majority of the people it was impossible. + +Nor was this all. At various times the insurgent royalists in La Vendee +and elsewhere put _their_ presses also in operation, issuing notes +bearing the Bourbon arms,--the _fleur-de-lis_, the portrait of the +Dauphin (as Louis XVII) with the magic legend "_De Par le Roi_," and +large bodies of the population in the insurgent districts were _forced_ +to take these. Even as late as 1799 these notes continued to appear. [80] + +The financial agony was prolonged somewhat by attempts to secure funds +by still another "forced loan," and other discredited measures, but +when all was over with paper money, specie began to reappear--first in +sufficient sums to do the small amount of business which remained after +the collapse. Then as the business demand increased, the amount of +specie flowed in from the world at large to meet it and the nation +gradually recovered from that long paper-money debauch. + +Thibaudeau, a very thoughtful observer, tells us in his Memoirs that +great fears were felt as to a want of circulating medium between the +time when paper should go out and coin should come in; but that no +such want was severely felt--that coin came in gradually as it was +wanted. [81] + +Nothing could better exemplify the saying of one of the most shrewd of +modern statesmen that "There will always be money." [82] + +But though there soon came a degree of prosperity--as compared with the +distress during the paper-money orgy, convalescence was slow. The acute +suffering from the wreck and rain brought by _assignats_, _mandats_ and +other paper currency in process of repudiation lasted nearly ten years, +but the period of recovery lasted longer than the generation which +followed. It required fully forty years to bring capital, industry, +commerce and credit up to their condition when the Revolution began, and +demanded a "man on horseback," who established monarchy on the ruins of +the Republic and thew away millions of lives for the Empire, to be added +to the millions which had been sacrificed by the Revolution. [83] + +Such, briefly sketched in its leading features, is the history of the +most skillful, vigorous and persistent attempt ever made to substitute +for natural laws in finance the ability of legislative bodies, and, for +a standard of value recognized throughout the world, a national standard +devised by theorists and manipulated by schemers. Every other attempt +of the same kind in human history, under whatever circumstances, has +reached similar results in kind if not in degree; all of them show the +existence of financial laws as real in their operation as those which +hold the planets in their courses. [84] + +I have now presented this history in its chronological order--the order +of events: let me, in conclusion, sum it up, briefly, in its _logical_ +order,--the order of cause and effect. + +And, first, in the economic department. From the early reluctant and +careful issues of paper we saw, as an immediate result, improvement and +activity in business. Then arose the clamor for more paper money. At +first, new issues were made with great difficulty; but, the dyke once +broken, the current of irredeemable currency poured through; and, the +breach thus enlarging, this currency was soon swollen beyond control. +It was urged on by speculators for a rise in values; by demagogues who +persuaded the mob that a nation, by its simple fiat, could stamp real +value to any amount upon valueless objects. As a natural consequence a +great debtor class grew rapidly, and this class gave its influence to +depreciate more and more the currency in which its debts were to be +paid. [85] + +The government now began, and continued by spasms to grind out still +more paper; commerce was at first stimulated by the difference in +exchange; but this cause soon ceased to operate, and commerce, having +been stimulated unhealthfully, wasted away. + +Manufactures at first received a great impulse; but, ere long, this +overproduction and overstimulus proved as fatal to them as to commerce. +From time to time there was a revival of hope caused by an apparent +revival of business; but this revival of business was at last seen to +be caused more and more by the desire of far-seeing and cunning men of +affairs to exchange paper money for objects of permanent value. As +to the people at large, the classes living on fixed incomes and small +salaries felt the pressure first, as soon as the purchasing power of +their fixed incomes was reduced. Soon the great class living on wages +felt it even more sadly. + +Prices of the necessities of life increased: merchants were obliged to +increase them, not only to cover depreciation of their merchandise, but +also to cover their risk of loss from fluctuation; and, while the prices +of products thus rose, wages, which had at first gone up, under +the general stimulus, lagged behind. Under the universal doubt and +discouragement, commerce and manufactures were checked or destroyed. +As a consequence the demand for labor was diminished; laboring men were +thrown out of employment, and, under the operation of the simplest +law of supply and demand, the price of labor--the daily wages of the +laboring class--went down until, at a time when prices of food, clothing +and various articles of consumption were enormous, wages were nearly as +low as at the time preceding the first issue of irredeemable currency. + +The mercantile classes at first thought themselves exempt from the +general misfortune. They were delighted at the apparent advance in the +value of the goods upon their shelves. But they soon found that, as they +increased prices to cover the inflation of currency and the risk +from fluctuation and uncertainty, purchases became less in amount +and payments less sure; a feeling of insecurity spread throughout the +country; enterprise was deadened and stagnation followed. + +New issues of paper were then clamored for as more drams are demanded by +a drunkard. New issues only increased the evil; capitalists were all the +more reluctant to embark their money on such a sea of doubt. Workmen of +all sorts were more and more thrown out of employment. Issue after issue +of currency came; but no relief resulted save a momentary stimulus, +which aggravated the disease. The most ingenious evasions of natural +laws in finance which the most subtle theorists could contrive were +tried--all in vain; the most brilliant substitutes for those laws were +tried; "self-regulating" schemes, "interconverting" schemes--all +equally vain. [86] All thoughtful men had lost confidence. All men were +_waiting_; stagnation became worse and worse. At last came the collapse +and then a return, by a fearful shock, to a state of things which +presented something like certainty of remuneration to capital and labor. +Then, and not till then, came the beginning of a new era of prosperity. + +Just as dependent on the law of cause and effect was the _moral_ +development. Out of the inflation of prices grew a speculating class; +and, in the complete uncertainty as to the future, all business became +a game of chance, and all business men, gamblers. In city centers came a +quick growth of stock-jobbers and speculators; and these set a debasing +fashion in business which spread to the remotest parts of the country. +Instead of satisfaction with legitimate profits, came a passion for +inordinate gains. Then, too, as values became more and more uncertain, +there was no longer any motive for care or economy, but every motive for +immediate expenditure and present enjoyment. So came upon the nation +the _obliteration of thrift_. In this mania for yielding to present +enjoyment rather than providing for future comfort were the seeds of +new growths of wretchedness: luxury, senseless and extravagant, set in: +this, too, spread as a fashion. To feed it, there came cheatery in +the nation at large and corruption among officials and persons holding +trusts. While men set such fashions in private and official business, +women set fashions of extravagance in dress and living that added to the +incentives to corruption. Faith in moral considerations, or even in +good impulses, yielded to general distrust. National honor was thought +a fiction cherished only by hypocrites. Patriotism was eaten out by +cynicism. + +Thus was the history of France logically developed in obedience to +natural laws; such has, to a greater or less degree, always been the +result of irredeemable paper, created according to the whim or interest +of legislative assemblies rather than based upon standards of value +permanent in their nature and agreed upon throughout the entire world. +Such, we may fairly expect, will always be the result of them until +the fiat of the Almighty shall evolve laws in the universe radically +different from those which at present obtain. [87] + +And, finally, as to the general development of the theory and practice +which all this history records: my subject has been Fiat Money in +France; How it came; What it brought; and How it ended. + +It came by seeking a remedy for a comparatively small evil in an evil +infinitely more dangerous. To cure a disease temporary in its character, +a corrosive poison was administered, which ate out the vitals of French +prosperity. + +It progressed according to a law in social physics which we may call +the "_law of accelerating issue and depreciation._" It was comparatively +easy to refrain from the first issue; it was exceedingly difficult to +refrain from the second; to refrain from the third and those following +was practically impossible. + +It brought, as we have seen, commerce and manufactures, the mercantile +interest, the agricultural interest, to ruin. It brought on these the +same destruction which would come to a Hollander opening the dykes of +the sea to irrigate his garden in a dry summer. + +It ended in the complete financial, moral and political prostration of +France-a prostration from which only a Napoleon could raise it. + +But this history would be incomplete without a brief sequel, showing how +that great genius profited by all his experience. When Bonaparte took +the consulship the condition of fiscal affairs was appalling. The +government was bankrupt; an immense debt was unpaid. The further +collection of taxes seemed impossible; the assessments were in hopeless +confusion. War was going on in the East, on the Rhine, and in Italy, and +civil war, in La Vendee. All the armies had long been unpaid, and the +largest loan that could for the moment be effected was for a sum hardly +meeting the expenses of the government for a single day. At the first +cabinet council Bonaparte was asked what he intended to do. He replied, +"I will pay cash or pay nothing." From this time he conducted all his +operations on this basis. He arranged the assessments, funded the debt, +and made payments in cash; and from this time--during all the campaigns +of Marengo, Austerlitz, Jena, Eylau, Friedland, down to the Peace of +Tilsit in 1807--there was but one suspension of specie payment, and this +only for a few days. When the first great European coalition was formed +against the Empire, Napoleon was hard pressed financially, and it was +proposed to resort to paper money; but he wrote to his minister, "While +I live I will never resort to irredeemable paper." He never did, and +France, under this determination, commanded all the gold she needed. +When Waterloo came, with the invasion of the Allies, with war on her +own soil, with a change of dynasty, and with heavy expenses for war and +indemnities, France, on a specie basis, experienced no severe financial +distress. + +If we glance at the financial history of France during the +Franco-Prussian War and the Communist struggle, in which a far more +serious pressure was brought upon French finances than our own recent +Civil War put upon American finance, and yet with no national stagnation +or distress, but with a steady progress in prosperity, we shall see +still more clearly the advantage of meeting a financial crisis in an +honest and straightforward way, and by methods sanctioned by the world's +most costly experience, rather than by yielding to dreamers, theorists, +phrase-mongers, declaimers, schemers, speculators or to that sort of, +"Reform" which is "the last refuge of a scoundrel." [88] + +There is a lesson in all this which it behooves every thinking man to +ponder. + + + + +NOTES + + +Note: The White Collection at the Cornell University library mentioned +in many of the following notes is described here: + +http://rmc.library.cornell.edu/collections/subjects/frrev.html + + + +THE BANK OF NEW YORK, established in 1784, was the only Bank in +existence in the city of New York at the time of the French experiment +with fiat money. + +THE BANK OF NEW YORK AND TRUST COMPANY, which celebrates its one-hundred +and fiftieth anniversary in March, 1934, considers it a privilege to +be able to distribute some copies of this scholarly article of the late +Andrew D. White. The article emphasizes the fact that the use of fiat +money in France was in its beginning a sincere effort on the part of +intelligent members of the National Assembly to stem the tide of misery +and wretchedness which had brought about the Revolution in 1789. But the +article also shows clearly that once started on a small scale, it became +utterly impossible to control the currency inflation and that after some +slight indications of improvement in conditions, the situation went from +bad to worse. In the long run, those most injured were the people whom +it was most desired to help--the laborer, the wage earner and those +whose incomes from previous savings were smallest. + +ANDREW D. WHITE had a long and distinguished career as educator, +historian, economist and diplomat; his description of the events +in France that followed the experiment with fiat money is intensely +interesting and well Worth the attention of every thinking person in the +United States of 1933. + + + + +FOOTNOTES: + + +[Footnote 1: A paper read before a meeting of Senators and Members of +the House of Representatives of both political parties, at Washington, +April 12th, and before the Union League Club, at New York, April 13th, +1876, and now (1914) revised and extended.] + +[Footnote 2: For proof that the financial situation of France at that +time was by no means hopeless, see Storch, "Economie Politique," vol. +iv, p. 159.] + +[Footnote 3: See Moniteur, sitting of April 10, 1790.] + +[Footnote 4: Ibid., sitting of April 15, 1790.] + +[Footnote 5: For details of this struggle, see Buchez and Roux, +"Histoire Parlementaire de la Revolution Francaise," vol. iii, pp. +364, 365, 404. For the wild utterances of Marat throughout this whole +history, see the full set of his "L'ami du peuple" in the President +White Collection of the Cornell University. For Bergasse's pamphlet and +a mass of similar publications, see the same collection. For the effect +produced by them, see Challamel, "Les Francais sous la Revolution"; +also De Goncourt, "La Societe Francaise pendant la Revolution," &c.] + +For the Report referred to, see Levasseur, "Histoire des classes +ouvries et de l'industrie en France de 1789 a 1870," Paris, 1903, vol. +i., chap. 6. Levasseur (vol. 1, p. 120), a very strong conservative in +such estimates, sets the total value of church property at two thousand +millions; other authorities put it as high as twice that sum. See +especially Taine, liv. ii, ch. I., who gives the valuation as "about +four milliards." Sybel, "Gesch. der Revolutionszeit," gives it as two +milliards and Briand, "La separation" &c., agrees with him. See also De +Nerve, "Finances Francaises," vol. ii, pp. 236-240; also Alison, +"History of Europe," vol. i.] + +[Footnote 6: For striking pictures of this feeling among the younger +generation of Frenchmen, see Challamel, "Sur la Revolution," p. 305. +For general history of John Law's paper money, see Henri Martin, +"Histoire de France"; also Blanqui, "Histoire de l'economie politique," +vol. ii, pp. 65-87; also Senior on "Paper Money," sec. iii, Pt. I, also +Thiers, "Histoire de Law"; also Levasseur, op. cit. Liv. i., chap. VI. +Several specimens of John Law's paper currency are to be found in the +White Collection in the Library of Cornell University,--some, numbered +with enormous figures.] + +[Footnote 7: See Buchez and Roux, "Histoire Parlementaire," vol. v, p. +321, et seq. For an argument to prove that the _assignats_ were, after +all, not so well secured as John Law's money, see Storch, "Economie +Politique," vol. iv, p. 160.] + +[Footnote 8: For specimens of this first issue and of nearly every other +issue during the French Revolution, see the extensive collection of +originals in the Cornell University Library. For a virtually complete +collection of photographic copies, see Dewamin, "Cent ans de +numismatique francaise," vol. i, passim.] + +[Footnote 9: See "Addresse de l'Assemblee nationals sur lea emissions +_d'assignats_ monnaies," p. 5.] + +[Footnote 10: Ibid., p. 10.] + +[Footnote 11: For Sarot, see "Lettre de M. Sarot," Paris, April 19, +1790. As to the sermon referred to see Levasseur as above, vol. i, p. +136.] + +[Footnote 12: Von Sybel, "History of the French Revolution," vol. i, p. +252; also Levasseur, as above, pp. 137 and following.] + +[Footnote 13: For Mirabeau's real opinion on irredeemable paper, see his +letter to Cerutti, in a leading article of the "Moniteur"; also +"Memoires do Mirabeau," vol. vii, pp. 23, 24 and elsewhere. For his +pungent remarks above quoted, see Levasseur, ibid., vol. i, p. 118.] + +[Footnote 14: See "Moniteur," August 27, 1790.] + +[Footnote 15: "Moniteur," August 28, 1790; also Levasseur, as above, pp. +139 _et seq_.] + +[Footnote 16: "Par une seule operation, grande, simple, magnifique." +See "Moniteur." The whole sounds curiously like the proposals of the +"Greenbackers," regarding the American debt, some years since.] + +[Footnote 17: "Moniteur," August 29, 1790.] + +[Footnote 18: See Lacretelle, "18me Siecle," vol. viii, pp. 84-87; also +Thiers and Mignet.] + +[Footnote 19: See Hatin, Histoire de la Presse en France, vols. v and +vi.] + +[Footnote 20: See "Moniteur," Sept. 5, 6 and 20, 1790.] + +[Footnote 21: See Levasseur, vol. i, p. 142.] + +[Footnote 22: See speech in "Moniteur"; also in Appendix to Thiers' +"History of the French Revolution."] + +[Footnote 23: See Levassear, "Classes ouvrieres," etc., vol. i, p. +149.] + +[Footnote 24: See Levasseur, pp. 151 et seq. Various examples of these +"confidence bills" are to be seen in the Library of Cornell University.] + +[Footnote 25: See Levasseur, vol. i, pp. 155-156.] + +[Footnote 26: See Von Sybel, "History of the Revolution," vol. i, p. +265; also Levasseur, as above, vol. i, pp. 152-160.] + +[Footnote 27: For Turgot's argument against "fiat money" theory, see A. +D. White, "Seven Great Statesmen in the Warfare of Humanity with +Unreason," article on Turgot, pp. 169, et seq.] + +[Footnote 28: See De Goncourt, "Societe francaise," for other +explanations; "Les Revolutions de Paris," vol. ii, p. 216; Challamel, +"Les Francais sous la Revolution"; Senior, "On Some Effects of Paper +Money," p. 82; Buchez and Roux, "Histoire Parlementaire," etc., vol. x, +p. 216; Aulard, "Paris pendant la Revolution thermidorienne," _passim_, +and especially "Rapport du bureau de surveillance," vol. ii, pp. 562, et +seq. (Dec. 4-24, 1795.)] + +[Footnote 29: For statements and illustration of the general action of +this law, see Sumner, "History of American Currency," pp. 157, 158; also +Jevons, on "Money," p. 80.] + +[Footnote 30: See De Goncourt, "Societe Francaise," p. 214.] + +[Footnote 31: See Von Sybel, History of the French Revolution, vol. 1, +pp. 281, 283.] + +[Footnote 32: For proofs that issues of irredeemable paper at first +stimulated manufactures and commerce in Austria and afterward ruined +them, see Storch's "Economie politique," vol. iv, p. 223, note; and for +the same effect produced by the same causes in Russia, see ibid., end of +vol. iv. For the same effects in America, see Sumner's "History of +American Currency." For general statement of effect of inconvertible +issues on foreign exchanges see McLeod on "Banking," p. 186.] + +[Footnote 33: See Louis Blanc, "Histoire de la Revolution," tome xii, +p. 113.] + +[Footnote 34: See "Extrait du registre des deliberations de la section +de la bibliotheque," May 3, 1791, pp. 4, 5.] + +[Footnote 35: Von Sybel, vol. i, p. 273.] + +[Footnote 36: For general account, see Thiers' "Revolution," chap. xiv; +also Lacretelle, vol. viii, p. 109; also "Memoirs of Mallet du Pan." For +a good account of the intrigues between the court and Mirabeau and of +the prices paid him, see Reeve, "Democracy and Monarchy in France," vol. +i, pp. 213-220. For a very striking caricature published after the iron +chest in the Tuileries was opened and the evidences of bribery of +Mirabeau fully revealed, see Challamel, "Musee," etc. Vol. i, p. 341, +is represented as a skeleton sitting on a pile of letters, holding the +French crown in one hand and a purse of gold in the other.] + +[Footnote 37: Thiers, chap. ix.] + +[Footnote 38: For this and other evidences of steady decline in the +purchasing power of the _assignats_, see Caron, "Tableaux de +Depreciation du papier-monnaie," Paris, 1909, p. 386.] + +[Footnote 39: See especially "Discours de Fabre d'Eglantine," in +"Moniteur" for August 11, 1793; also debate in "Moniteur" of September +15, 1793; also Prudhomme's "Revolutions de Paris." For arguments of +much the same tenor, see vast numbers of pamphlets, newspaper articles +and speeches during the "Greenback Craze,"--and the craze for unlimited +coinage of silver,--in the United States.] + +[Footnote 40: See Caron, "Tableaux de Depreciation," as above, p. +386.] + +[Footnote 41: Von Sybel, vol. i, pp. 509, 510, 515; also Villeneuve +Bargemont, "Histoire de l'Economie Politique," vol. ii, p. 213.] + +[Footnote 42: As to the purchasing power of money at that time, see +Arthur Young, "Travels in France during the Years 1787, 1788 and 1789." +For notices of the small currency with examples of satirical verses +written regarding it, see Challamel, "Les francais sous la +Revolution," pp. 307, 308. See also Mercier, "Le Nouveau Paris," +edition of 1800, chapter ccv., entitled "Parchemin Monnaie." A series of +these petty notes will be found in the White collection of the Cornell +University Library. They are very dirty and much worn, but being printed +on parchment, remain perfectly legible. For issue of quarter-"_sou_" +pieces see Levasseur, p. 180.] + +[Footnote 43: See Levasseur, vol. i, p. 176.] + +[Footnote 44: For Chaumette's brilliant display of fictitious reasons +for the decline see Thiers, Shoberl's translation, published by Bentley, +vol. iii, p. 248.] + +[Footnote 45: For these fluctuations, see Caron, as above, p. 387.] + +[Footnote 46: One of the Forced Loan certificates will be found in the +White Collection in the Library of Cornell University.] + +[Footnote 47: For details of these transactions, see Levasseur, as +above, vol. i, chap. 6, pp. 181, et seq. Original specimens of these +notes, bearing the portrait of Louis XVI will be found in the Cornell +University Library (White Collection) and for the whole series perfectly +photographed in the same collection, Dewarmin, "Cent ans de numismatique +francaise," vol. i, pp. 143-165.] + +[Footnote 48: For statements showing the distress and disorder that +forced the Convention to establish the "_Maximum_" see Levasseur, vol. +i, pp. 188-193.] + +[Footnote 49: See Levasseur, as above, vol. i, pp. 195-225.] + +[Footnote 50: See specimens of these tickets in the White Collection in +the Cornell Library.] + +[Footnote 51: For these condemnations to the guillotine see the +officially published trials and also the lists of the condemned, in the +White Collection, also the lists given daily in the "Moniteur." For the +spy system, see Levasseur, vol. i, p. 194.] + +[Footnote 52: See Levasseur, as above, vol. i, p. 186. For an argument +to show that the Convention was led into this Draconian legislation, not +by necessity, but by its despotic tendencies, see Von Sybel's "History +of the French Revolution," vol. iii, pp. 11, 12. For general statements +of theories underlying the "_Maximum_," see Thiers; for a very +interesting picture, by an eye-witness, of the absurdities and miseries +it caused, see Mercier, "Nouveau Paris," edition of 1800, chapter XLIV.] + +[Footnote 53: For a summary of the report of the Committee, with list of +articles embraced under it, and for various interesting details, see +Villeneuve Bargemont, "Histoire de l'Economie Politique," vol. ii, pp. +213-239; also Levasseur, as above. For curious examples of severe +penalties for very slight infringements on the law on the subject, see +Louis Blanc, "Histoire de la Revolution francaise," tome x, p. 144. +For Louis XIVth's claim see "Memoirs of Louis XIV for the Instruction of +the Dauphin."] + +For a simple exposition of the way in which the exercise of this power +became simply confiscation of all private property in France, see Mallet +Du Pan's "Memoirs," London, 1852, vol. ii, p. 14.] + +[Footnote 54: See Du Pont's arguments, as given by Levasseur.] + +[Footnote 55: Louis Blanc calls attention to this very fact in showing +the superiority of the French _assignats_ to the old American +Continental currency, See his "Histoire de la Revolution francaise," +tome xii, p. 98.] + +[Footnote 56: See Sumner, as above, p. 220.] + +[Footnote 57: See Levasseur, as above, vol. i, p. 178.] + +[Footnote 58: See Cambon's "Report," Aug. 15, 1793, pp. 49-60; also, +"Decree of Aug. 24, 1793," sec. 31, chapters XCVI-CIII. Also, "Tableaux +de la depreciation de papier monnaie dans le department de la Seine."] + +[Footnote 59: For the example of Metz and other authorities, see +Levasseur, as above, vol. i, p. 180.] + +[Footnote 60: See Von Sybel, vol. iii, p. 173.] + +[Footnote 61: See Thiers; also, for curious details of measures taken to +compel farmers and merchants, see Senior, Lectures on "Results of Paper +Money," pp. 86, 87.] + +[Footnote 62: See Von Sybel, vol. iv, p. 231.] + +[Footnote 63: See Von Sybel, vol. iv, p. 330; also tables of +depreciation in "Moniteur"; also official reports in the White +Collection; also Caron's "Tables," etc.] + +[Footnote 64: For a lifelike sketch of the way in which these exchanges +of _assignats_ for valuable property went on at periods of the rapid +depreciation of paper, see Challamel, "Les francais sous la +Revolution," p. 309; also Say, "Economic Politique."] + +[Footnote 65: For a very complete table of the depreciation from day to +day, see "Supplement to the Moniteur" of October 2, 1797; also Caron, as +above. For the market prices of the _louis d'or_ at the first of every +month, as the collapse approached, see Montgaillard. See also "Official +Lists" in the White Collection. For a table showing the steady rise of +the franc in gold during a single week, from 251 to 280 _francs_, see +Dewarmin, as above, vol. i, p. 136.] + +[Footnote 66: See "Memoires de Thibaudeau," vol. ii, p. 26, also +Mercier, "Lo Nouveau Paris," vol. ii, p. 90; for curious example of the +scales of depreciation see the White Collection. See also extended table +of comparative values in 1790 and 1795. See Levasseur, as above, vol. i, +pp. 223-4.] + +[Footnote 67: For a striking similar case in our own country, see +Sumner, "History of American Currency," p. 47.] + +[Footnote 68: See Villeneuve Bargemont, "Histoire de l'economie +politique," vol. ii, p. 229.] + +[Footnote 69: See Von Sybel, vol. iv, pp. 337, 338. See also for +confirmation Challamel, "Histoire Musee," vol. ii, p. 179. For a +thoughtful statement of the reasons why such paper was not invested in +lands by men of moderate means, and workingmen, see Mill, "Political +Economy," vol. ii, pp. 81, 82.] + +[Footnote 70: See Von Sybel, vol. iv, p. 222.] + +[Footnote 71: See especially Levasseur, "Histoire des classes +ouvrieres," etc. vol. i, pp. 219, 230 and elsewhere; also De Nervo, +"Finance francaise," p. 280; also Stourm, as already cited. The exact +amount of _assignats_ in circulation at the final suppression is given +by Dowarmin, (vol. i, p. 189), as 39,999,945,428 _livres_ or _francs_.] + +[Footnote 72: For details of the mandat system very thoroughly given, +see Thiers' "History of the French Revolution," Bentley's edition, vol. +iv, pp. 410-412. For the issue of _assignats_ and _mandats_ at the same +time, see Dewarmin, vol. i, p. 136; also Levasseur, vol. i, pp. 230-257. +For an account of "new tenor bills" in America and their failure in +1737, see Summer, pp. 27-31; for their failure in 1781, see Morse, "Life +of Alexander Hamilton," vol. i, pp. 86, 87. For similar failure in +Austria, see Summer, p. 314.] + +[Footnote 73: See Marchant, "Lettre aux gens de bonne foi."] + +[Footnote 74: See Summer, p. 44; also De Nervo, "Finances francaises," +p. 282.] + +[Footnote 75: See De Nervo, "Finances francaises," p. 282; also +Levasseur, vol. i, p. 236 et seq.] + +[Footnote 76: See Table from "Gazette de France" and extracts from other +sources in Levasseur, vol. i, pp. 223-4.] + +[Footnote 77: Among the many striking accounts of the debasing effects +of "inflation" upon France under the Directory perhaps the best is that +of Lacretelle, vol. xiii, pp. 32-36. For similar effect, produced by the +same cause in our own country in 1819, see statement from Niles' +"Register," in Sumner, p. 80. For the jumble of families reduced to +beggary with families lifted into sudden wealth and for the mass of +folly and misery thus mingled, see Levassour, vol. i, p. 237.] + +[Footnote 78: For Madame Tallien and luxury of the stock-gambler +classes, see Challamel, "Les francais sous la Revolution," pp. 30, 33; +also De Goncourt, "Les francais sous le Directoire." Regarding the +outburst of vice in Paris and the demoralization of the police, see +Levasseur, as above.] + +[Footnote 79: See Levasseur, Vol. i, p. 237, et seq.] + +[Footnote 80: For specimens of counterfeit _assignats_, see the White +Collection in the Cornell University Library, but for the great series +of various issues of them in fac-simile, also for detective warnings and +attempted descriptions of many varieties of them, and for the history of +their Issue, see especially Dewarmin, vol. i, pp. 152-161. For +photographic copies of Royalist _assignats_, etc., see also Dewarmin, +ibid., pp. 192-197, etc. For a photograph of probably the last of the +Royalist notes ever issued, bearing the words "Pro Deo, pro Rege, pro +Patria" and "Armee Catholique et Royale" with the date 1799, and for +the sum of 100 _livres_, see Dewarmin, vol. i, p. 204.] + +[Footnote 81: For similar expectation of a "shock," which did not occur, +at the resumption of specie payments in Massachusetts, see Sumner, +"History of American Currency," p. 34.] + +[Footnote 82: See Thiers.] + +[Footnote 83: See Levasseur, vol. i, p. 246.] + +[Footnote 84: For examples of similar effects in Russia, Austria and +Denmark, see Storch, "Economie Politique," vol. iv; for similar effects +in the United States, see Gouge, "Paper Money and Banking in the United +States," also Summer, "History of American Currency." For working out of +the same principles in England, depicted in a masterly way, see +Macaulay, "History of England," chap. xxi; and for curious exhibition of +the same causes producing same results in ancient Greece, see a curious +quotation by Macaulay in same chapter.] + +[Footnote 85: For parallel cases in the early history of our own +country, see Sumner, p. 21, and elsewhere.] + +[Footnote 86: For a review of some of these attempts, with eloquent +statement of their evil results, see "Memoires de Durand de Maillane," +pp. 166-169.] + +[Footnote 87: For similar effect of inflated currency in enervating and +undermining trade, husbandry, manufactures and morals in our own +country, see Daniel Webster, cited in Sumner, pp. 45-50. For similar +effects in other countries, see Senior, Storch, Macaulay and others +already cited.] + +[Footnote 88: For facts regarding French finance under Napoleon I am +indebted to Hon. David A. Wells. For more recent triumphs of financial +commonsense in France, see Bonnet's articles, translated by the late +George Walker, Esq. For general subject, see Levasseur.] + + + + + + + +End of the Project Gutenberg EBook of Fiat Money Inflation in France, by +Andrew Dickson White + +*** END OF THIS PROJECT GUTENBERG EBOOK FIAT MONEY INFLATION IN FRANCE *** + +***** This file should be named 6949.txt or 6949.zip ***** +This and all associated files of various formats will be found in: + http://www.gutenberg.org/6/9/4/6949/ + +Produced by Gordon Keener + +Updated editions will replace the previous one--the old editions +will be renamed. + +Creating the works from public domain print editions means that no +one owns a United States copyright in these works, so the Foundation +(and you!) can copy and distribute it in the United States without +permission and without paying copyright royalties. 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Do not change or edit the +header without written permission. + +Please read the "legal small print," and other information about the +eBook and Project Gutenberg at the bottom of this file. Included is +important information about your specific rights and restrictions in +how the file may be used. You can also find out about how to make a +donation to Project Gutenberg, and how to get involved. + + +**Welcome To The World of Free Plain Vanilla Electronic Texts** + +**eBooks Readable By Both Humans and By Computers, Since 1971** + +*****These eBooks Were Prepared By Thousands of Volunteers!***** + + +Title: Fiat Money Inflation in France + +Author: Andrew Dickson White + +Release Date: November, 2004 [EBook #6949] +[This file was first posted on February 17, 2003] + +Edition: 10 + +Language: English + +Character set encoding: ASCII + +*** START OF THE PROJECT GUTENBERG EBOOK, FIAT MONEY INFLATION IN FRANCE *** + + + + +This eBook was produced by Gordon Keener. + + + +FIAT MONEY INFLATION IN FRANCE +How It Came, What It Brought, and How It Ended + +by + +Andrew Dickson White, LL.D., Ph.D., D.C.L. + +Late President and Professor of History at Cornell University; +Sometime United States Minister to Russia and Ambassador to Germany; +Author of "A History of the Warfare of Science with Theology," etc. + + +INTRODUCTION + +As far back as just before our Civil War I made, in France and +elsewhere, a large collection of documents which had appeared during +the French Revolution, including newspapers, reports, speeches, +pamphlets, illustrative material of every sort, and, especially, +specimens of nearly all the Revolutionary issues of paper money,--from +notes of ten thousand _livres_ to those of one _sou_. + +Upon this material, mainly, was based a course of lectures then given +to my students, first at the University of Michigan and later at +Cornell University, and among these lectures, one on "Paper Money +Inflation in France." + +This was given simply because it showed one important line of facts in +that great struggle; and I recall, as if it were yesterday, my feeling +of regret at being obliged to bestow so much care and labor upon a +subject to all appearance so utterly devoid of practical value. I am +sure that it never occurred, either to my Michigan students or to +myself, that it could ever have any bearing on our own country. It +certainly never entered into our minds that any such folly as that +exhibited in those French documents of the eighteenth century could +ever find supporters in the United States of the nineteenth. + +Some years later, when there began to be demands for large issues of +paper money in the United States, I wrought some of the facts thus +collected into a speech in the Senate of the State of New York, +showing the need of especial care in such dealings with financial +necessities. + +In 1876, during the "greenback craze," General Garfield and Mr. S. B. +Crittenden, both members of the House of Representatives at that time, +asked me to read a paper on the same general subject before an +audience of Senators and Representatives of both parties in +Washington. This I did, and also gave it later before an assemblage +of men of business at the Union League Club in New York. + +Various editions of the paper were afterward published, among them, +two or three for campaign purposes, in the hope that they might be of +use in showing to what folly, cruelty, wrong and rain the passion for +"fiat money" may lead. + +Other editions were issued at a later period, in view of the principle +involved in the proposed unlimited coinage of silver in the United +States, which was, at bottom, the idea which led to that fearful wreck +of public and private prosperity in France. + +For these editions there was an added reason in the fact that the +utterances of sundry politicians at that time pointed clearly to +issues of paper money practically unlimited. These men were logical +enough to see that it would be inconsistent to stop at the unlimited +issue of silver dollars which cost really something when they could +issue unlimited paper dollars which virtually cost nothing. + +In thus exhibiting facts which Bishop Butler would have recognized as +confirming his theory of "The Possible Insanity of States," it is but +just to acknowledge that the French proposal was vastly more sane than +that made in our own country. Those French issues of paper rested not +merely "on the will of a free people," but on one-third of the entire +landed property of France; on the very choicest of real property in +city and country--the confiscated estates of the Church and of the +fugitive aristocracy--and on the power to use the paper thus issued in +purchasing this real property at very low prices. + +I have taken all pains to be exact, revising the whole paper in the +light of the most recent publications and giving my authority for +every important statement, and now leave the whole matter with my +readers. + +At the request of a Canadian friend, who has expressed a strong wish +that this work be brought down to date, I have again restudied the +subject in the light of various works which have appeared since my +earlier research,--especially Levasseur's "Histoire des classes +ouvrières et de l'industrie en France,"--one of the really great +books of the twentieth century;--Dewarmin's superb "Cent Ans de +numismatique Française" and sundry special treatises. The result has +been that large additions have been made regarding some important +topics, and that various other parts of my earlier work have been made +more clear by better arrangement and supplementary information. + +ANDREW D. WHITE. +Cornell University, +September, 1912. + + +FOREWORD BY MR. JOHN MACKAY + +I am greatly indebted to the generosity of Mr. Andrew D. White, the +distinguished American scholar, author and diplomatist, for permission +to print and to circulate privately a small edition of his exceedingly +valuable account of the great currency-making experiment of the French +Revolutionary Government. The work has been revised and considerably +enlarged by Mr. White for the purpose of the present issue. + +The story of "Fiat Money Inflation in France" is one of great interest +to legislators, to economic students, and to all business and thinking +men. It records the most gigantic attempt ever made in the history of +the world by a government to create an inconvertible paper currency, +and to maintain its circulation at various levels of value. It also +records what is perhaps the greatest of all governmental efforts--with +the possible exception of Diocletian's--to enact and enforce a legal +limit of commodity prices. Every fetter that could hinder the will or +thwart the wisdom of democracy had been shattered, and in consequence +every device and expedient that untrammelled power and unrepressed +optimism could conceive were brought to bear. But the attempts +failed. They left behind them a legacy of moral and material +desolation and woe, from which one of the most intellectual and +spirited races of Europe has suffered for a century and a quarter, and +will continue to suffer until the end of time. There are limitations +to the powers of governments and of peoples that inhere in the +constitution of things, and that neither despotisms nor democracies +can overcome. + +Legislatures are as powerless to abrogate moral and economic laws as +they are to abrogate physical laws. They cannot convert wrong into +right nor divorce effect from cause, either by parliamentary +majorities, or by unity of supporting public opinion. The penalties +of such legislative folly will always be exacted by inexorable time. +While these propositions may be regarded as mere commonplaces, and +while they are acknowledged in a general way, they are in effect +denied by many of the legislative experiments and the tendencies of +public opinion of the present day. The story, therefore, of the +colossal folly of France in the closing part Of the eighteenth century +and its terrible fruits, is full of instruction for all men who think +upon the problems of our own time. + +From among an almost infinite variety, there are four great and +fundamental facts that clearly emerge, namely,-- + +(1) Notwithstanding the fact that the paper currency issued was the +direct obligation of the State, that much of it was interest bearing, +and that all of it was secured upon the finest real estate in France, +and that penalties in the way of fines, imprisonments and death were +enacted from time to time to maintain its circulation at fixed values, +there was a steady depreciation in value until it reached zero point +and culminated in repudiation. The aggregate of the issues amounted +to no less than the enormous and unthinkable sum of $9,500,000,000, +and in the middle of 1797 when public repudiation took place, there +was no less than $4,200,000,000 in face value of _assignats_ and +_mandats_ outstanding; the loss, as always, falling mostly upon the +poor and the ignorant. + +(2) In the attempt to maintain fixed values for the paper currency the +Government became involved in an equally futile attempt to maintain a +tariff of legal prices for commodities. Here again penalties of +fines, of imprisonments and of death were powerless to accomplish the +end in view. + +(3) An wholesale demoralisation of society took place under which +thrift, integrity, humanity, and every principle of morality were +thrown into the welter of seething chaos and cruelty. + +(4) The real estate upon which the paper currency was secured +represented confiscations by the State of the lands of the Church and +of the Emigrant Noblemen. These lands were appraised, according to +Mr. White's narrative and other authorities, at $1,000,000,000. Here +was a straight addition to the State's resources of $1,000,000,000. +It is ominously significant that within one hundred years under the +"Peace of Frankfort" signed on the 10th May, 1871, the French nation +agreed to pay a war indemnity to victorious Germany of exactly the +same sum, namely, $1,000,000,000 in addition to the surrender of the +province of Alsace and a considerable part of Lorraine. The great +addition to the national wealth, therefore, effected by the immoral +confiscation of the lands in question disappeared with compound +territorial interest added under the visitation of relentless +retribution. + +Public opinion in our own country is so far sound on the question of +currency, but signs are not lacking in some lay quarters of an +inclination to sanction dangerous experiments. The doctrine of +governmental regulation of prices, has, however, made its appearance +in embryo. Class dissatisfaction is also on the increase. The +confiscation of property rights under legal forms and processes is apt +to be condoned when directed against unpopular interests and when +limited to amounts that do not revolt the conscience. The wild and +terrible expression given to these insidious principles in the havoc +of the Revolution should be remembered by all. Nor should the fact be +overlooked that, as Mr. White points out on Page 6, the National +Assembly of France which originated and supported these measures +contained in its membership the ablest Frenchmen of the day. + +JOHN MACKAY. +Toronto General Trusts Building, +Toronto, 31st March, 1914. + + +FIAT MONEY INFLATION IN FRANCE +How It Came, What It Brought, and How It Ended[1] + + +I. + +Early in the year 1789 the French nation found itself in deep +financial embarrassment: there was a heavy debt and a serious deficit. + +The vast reforms of that period, though a lasting blessing +politically, were a temporary evil financially. There was a general +want of confidence in business circles; capital had shown its +proverbial timidity by retiring out of sight as far as possible; +throughout the land was stagnation. + +Statesmanlike measures, careful watching and wise management would, +doubtless, have ere long led to a return of confidence, a reappearance +of money and a resumption of business; but these involved patience and +self-denial, and, thus far in human history, these are the rarest +products of political wisdom. Few nations have ever been able to +exercise these virtues; and France was not then one of these few.[2] + +There was a general search for some short road to prosperity: ere long +the idea was set afloat that the great want of the country was more of +the circulating medium; and this was speedily followed by calls for an +issue of paper money. The Minister of Finance at this period was +Necker. In financial ability he was acknowledged as among the great +bankers of Europe, but his was something more than financial ability: +he had a deep feeling of patriotism and a high sense of personal +honor. The difficulties in his way were great, but he steadily +endeavored to keep France faithful to those principles in monetary +affairs which the general experience of modem times had found the only +path to national safety. As difficulties arose the National Assembly +drew away from him, and soon came among the members renewed +suggestions of paper money: orators in public meetings, at the clubs +and in the Assembly, proclaimed it a panacea--a way of "securing +resources without paying interest." Journalists caught it up and +displayed its beauties, among these men, Marat, who, in his newspaper, +"The Friend of the People," also joined the cries against Necker, +picturing him--a man of sterling honesty, who gave up health and +fortune for the sake of France--as a wretch seeking only to enrich +himself from the public purse. + +Against this tendency toward the issue of irredeemable paper Necker +contended as best he might. He knew well to what it always had led, +even when surrounded by the most skillful guarantees. Among those who +struggled to support ideas similar to his was Bergasse, a deputy from +Lyons, whose pamphlets, then and later, against such issues exerted a +wider influence, perhaps, than any others: parts of them seem fairly +inspired. Any one to-day reading his prophecies of the evils sure to +follow such a currency would certainly ascribe to him a miraculous +foresight, were it not so clear that his prophetic power was due +simply to a knowledge of natural laws revealed by history. But this +current in favor of paper money became so strong that an effort was +made to breast it by a compromise: and during the last months of 1789 +and the first months of 1790 came discussions in the National Assembly +looking to issues of notes based upon the landed property of the +Church,--which was to be confiscated for that purpose. But care was +to be taken; the issue was to be largely in the shape of notes of +1,000, 300 and 200 _livres_, too large to be used as ordinary +currency, but of convenient size to be used in purchasing the Church +lands; besides this, they were to bear interest and this would tempt +holders to hoard them. The Assembly thus held back from issuing +smaller obligations. + +Remembrances of the ruin which had come from the great issues of +smaller currency at an earlier day were still vivid. Yet the pressure +toward a popular currency for universal use grew stronger and +stronger. The finance committee of the Assembly reported that "the +people demand a new circulating medium"; that "the circulation of +paper money is the best of operations"; that "it is the most free +because it reposes on the will of the people"; that "it will bind the +interest of the citizens to the public good." + +The report appealed to the patriotism of the French people with the +following exhortation: "Let us show to Europe that we understand our +own resources; let us immediately take the broad road to our +liberation instead of dragging ourselves along the tortuous and +obscure paths of fragmentary loans." It concluded by recommending an +issue of paper money carefully guarded, to the full amount of four +hundred million _livres_, and the argument was pursued until the +objection to smaller notes faded from view. Typical in the debate on +the whole subject, in its various phases, were the declarations of +M. Matrineau. He was loud and long for paper money, his only fear +being that the Committee had not authorized enough of it; he declared +that business was stagnant, and that the sole cause was a want of more +of the circulating medium; that paper money ought to be made a legal +tender; that the Assembly should rise above prejudices which the +failures of John Law's paper money had caused, several decades before. +Like every supporter of irredeemable paper money then or since, he +seemed to think that the laws of Nature had changed since previous +disastrous issues. He said: "Paper money under a despotism is +dangerous; it favors corruption; but in a nation constitutionally +governed, which itself takes care in the emission of its notes, which +determines their number and use, that danger no longer exists." He +insisted that John Law's notes at first restored prosperity, but that +the wretchedness and ruin they caused resulted from their overissue, +and that such an overissue is possible only under a despotism.[3] + +M. de la Rochefoucauld gave his opinion that "the _assignats_ will +draw specie out of the coffers where it is now hoarded.[4] + +On the other hand Cazalès and Maury showed that the result could only +be disastrous. Never, perhaps, did a political prophecy meet with +more exact fulfillment in every line than the terrible picture drawn +in one of Cazalès' speeches in this debate. Still the current ran +stronger and stronger; Petion made a brilliant oration in favor of the +report, and Necker's influence and experience were gradually worn +away. + +Mingled with the financial argument was a strong political plea. The +National Assembly had determined to confiscate the vast real property +of the French Church,--the pious accumulations of fifteen hundred +years. There were princely estates in the country, bishops' palaces +and conventual buildings in the towns; these formed between one-fourth +and one-third of the entire real property of France, and amounted in +value to at least two thousand million _livres_. By a few sweeping +strokes all this became the property of the nation. Never, +apparently, did a government secure a more solid basis for a great +financial future.[5] + +There were two special reasons why French statesmen desired speedily +to sell these lands. First, a financial reason,--to obtain money to +relieve the government. Secondly, a political reason,--to get this +land distributed among the thrifty middle-classes, and so commit them +to the Revolution and to the government which gave their title. + +It was urged, then, that the issue of four hundred millions of paper, +(not in the shape of interest-bearing bonds, as had at first been +proposed, but in notes small as well as large), would give the +treasury something to pay out immediately, and relieve the national +necessities; that, having been put into circulation, this paper money +would stimulate business; that it would give to all capitalists, large +or small, the means for buying from the nation the ecclesiastical real +estate, and that from the proceeds of this real estate the nation +would pay its debts and also obtain new funds for new necessities: +never was theory more seductive both to financiers and statesmen. + +It would be a great mistake to suppose that the statesmen of France, +or the French people, were ignorant of the dangers in issuing +irredeemable paper money. No matter how skillfully the bright side of +such a currency was exhibited, all thoughtful men in France remembered +its dark side. They knew too well, from that ruinous experience, +seventy years before, in John Law's time, the difficulties and dangers +of a currency not well based and controlled. They had then learned +how easy it is to issue it; how difficult it is to check its +overissue; how seductively it leads to the absorption of the means of +the workingmen and men of small fortunes; how heavily it falls on all +those living on fixed incomes, salaries or wages; how securely it +creates on the ruins of the prosperity of all men of meagre means a +class of debauched speculators, the most injurious class that a nation +can harbor,--more injurious, indeed, than professional criminals whom +the law recognizes and can throttle; how it stimulates overproduction +at first and leaves every industry flaccid afterward; how it breaks +down thrift and develops political and social immorality. All this +France had been thoroughly taught by experience. Many then living had +felt the result of such an experiment--the issues of paper money under +John Law, a man who to this day is acknowledged one of the most +ingenious financiers the world has ever known; and there were then +sitting in the National Assembly of France many who owed the poverty +of their families to those issues of paper. Hardly a man in the +country who had not heard those who issued it cursed as the authors of +the most frightful catastrophe France had then experienced.[6] + +It was no mere attempt at theatrical display, but a natural impulse, +which led a thoughtful statesman, during the debate, to hold up a +piece of that old paper money and to declare that it was stained with +the blood and tears of their fathers. + +And it would also be a mistake to suppose that the National Assembly, +which discussed this matter, was composed of mere wild revolutionists; +no inference could be more wide of the fact. Whatever may have been +the character of the men who legislated for France afterward, no +thoughtful student of history can deny, despite all the arguments and +sneers of reactionary statesmen and historians, that few more +keen-sighted legislative bodies have ever met than this first French +Constitutional Assembly. In it were such men as Sieyès, Bailly, +Necker, Mirabeau, Talleyrand, DuPont de Nemours and a multitude of +others who, in various sciences and in the political world, had +already shown and were destined afterward to show themselves among the +strongest and shrewdest men that Europe has yet seen. + +But the current toward paper money had become irresistible. It was +constantly urged, and with a great show of force, that if any nation +could safely issue it, France was now that nation; that she was fully +warned by her severe experience under John Law; that she was now a +constitutional government, controlled by an enlightened, patriotic +people,--not, as in the days of the former issues of paper money, an +absolute monarchy controlled by politicians and adventurers; that she +was able to secure every _livre_ of her paper money by a virtual +mortgage on a landed domain vastly greater in value than the entire +issue; that, with men like Bailly, Mirabeau and Necker at her head, +she could not commit the financial mistakes and crimes from which +France had suffered under John Law, the Regent Duke of Orleans and +Cardinal Dubois. + +Oratory prevailed over science and experience. In April, 1790, came +the final decree to issue four hundred millions of _livres_ in paper +money, based upon confiscated property of the Church for its security. +The deliberations on this first decree and on the bill carrying it +into effect were most interesting; prominent in the debate being +Necker, Du Pont de Nemours, Maury, Cazalès, Petion, Bailly and many +others hardly inferior. The discussions were certainly very able; no +person can read them at length in the "Moniteur," nor even in the +summaries of the parliamentary history, without feeling that various +modern historians have done wretched injustice to those men who were +then endeavoring to stand between France and ruin. + +This sum--four hundred millions, so vast in those days, was issued in +_assignats_, which were notes secured by a pledge of productive real +estate and bearing interest to the holder at three per cent. No +irredeemable currency has ever claimed a more scientific and practical +guarantee for its goodness and for its proper action on public +finances. On the one hand, it had what the world recognized as a most +practical security,--a mortgage an productive real estate of vastly +greater value than the issue. On the other hand, as the notes bore +interest, there seemed cogent reason for their being withdrawn from +circulation whenever they became redundant.[7] + +As speedily as possible the notes were put into circulation. Unlike +those issued in John Law's time, they were engraved in the best style +of the art. To stimulate loyalty, the portrait of the king was placed +in the center; to arouse public spirit, patriotic legends and emblems +surrounded it; to stimulate public cupidity, the amount of interest +which the note would yield each day to the holder was printed in the +margin; and the whole was duly garnished with stamps and signatures to +show that it was carefully registered and controlled.[8] + +To crown its work the National Assembly, to explain the advantages of +this new currency, issued an address to the French people. In this +address it spoke of the nation as "delivered by this grand means from +all uncertainty and from all ruinous results of the credit system." +It foretold that this issue "would bring back into the public +treasury, into commerce and into all branches of industry strength, +abundance and prosperity."[9] + +Some of the arguments in this address are worth recalling, and, among +them, the following:--"Paper money is without inherent value unless it +represents some special property. Without representing some special +property it is inadmissible in trade to compete with a metallic +currency, which has a value real and independent of the public action; +therefore it is that the paper money which has only the public +authority as its basis has always caused ruin where it has been +established; that is the reason why the bank notes of 1720, issued by +John Law, after having caused terrible evils, have left only frightful +memories. Therefore it is that the National Assembly has not wished +to expose you to this danger, but has given this new paper money not +only a value derived from the national authority but a value real and +immutable, a value which permits it to sustain advantageously a +competition with the precious metals themselves."[10] + +But the final declaration was, perhaps, the most interesting. It was +as follows:-- + +"These _assignats_, bearing interest as they do, will soon be +considered better than the coin now hoarded, and will bring it out +again into circulation." The king was also induced to issue a +proclamation recommending that his people receive this new money +without objection. + +All this caused great joy. Among the various utterances of this +feeling was the letter of M. Sarot, directed to the editor of the +Journal of the National Assembly, and scattered through France. +M. Sarot is hardly able to contain himself as he anticipates the +prosperity and glory that this issue of paper is to bring to his +country. One thing only vexes him, and that is the pamphlet of +M. Bergasse against the _assignats_; therefore it is after a long +series of arguments and protestations, in order to give a final proof +of his confidence in the paper money and his entire skepticism as to +the evils predicted by Bergasse and others, M. Sarot solemnly lays his +house, garden and furniture upon the altar of his country and offers +to sell them for paper money alone. + +There were, indeed, some gainsayers. These especially appeared among +the clergy, who, naturally, abhorred the confiscation of Church +property. Various ecclesiastics made speeches, some of them full of +pithy and weighty arguments, against the proposed issue of paper, and +there is preserved a sermon from one priest threatening all persons +handling the new money with eternal damnation. But the great majority +of the French people, who had suffered ecclesiastical oppression so +long, regarded these utterances as the wriggling of a fish on the +hook, and enjoyed the sport all the better.[11] + +The first result of this issue was apparently all that the most +sanguine could desire: the treasury was at once greatly relieved; a +portion of the public debt was paid; creditors were encouraged; credit +revived; ordinary expenses were met, and, a considerable part of this +paper money having thus been passed from the government into the hands +of the people, trade increased and all difficulties seemed to vanish. +The anxieties of Necker, the prophecies of Maury and Cazalès seemed +proven utterly futile. And, indeed, it is quite possible that, if the +national authorities had stopped with this issue, few of the financial +evils which afterwards arose would have been severely felt; the four +hundred millions of paper money then issued would have simply +discharged the function of a similar amount of specie. But soon there +came another result: times grew less easy; by the end of September, +within five months after the issue of the four hundred millions in +_assignats_, the government had spent them and was again in +distress.[12] + +The old remedy immediately and naturally recurred to the minds of men. +Throughout the country began a cry for another issue of paper; +thoughtful men then began to recall what their fathers had told them +about the seductive path of paper-money issues in John Law's time, and +to remember the prophecies that they themselves had heard in the +debate on the first issue of _assignats_ less than six months before. + +At that time the opponents of paper had prophesied that, once on the +downward path of inflation, the nation could not be restrained and +that more issues would follow. The supporters of the first issue had +asserted that this was a calumny; that the people were now in control +and that they could and would check these issues whenever they +desired. + +The condition of opinion in the Assembly was, therefore, chaotic: a +few schemers and dreamers were loud and outspoken for paper money; +many of the more shallow and easy-going were inclined to yield; the +more thoughtful endeavored to breast the current. + +One man there was who could have withstood the pressure: Mirabeau. He +was the popular idol,--the great orator of the Assembly and much more +than a great orator,--he had carried the nation through some of its +worst dangers by a boldness almost godlike; in the various conflicts +he had shown not only oratorical boldness, but amazing foresight. As +to his real opinion on an irredeemable currency there can be no doubt. +It was the opinion which all true statesmen have held, before his time +and since,--in his own country, in England, in America, in every +modern civilized nation. In his letter to Cerutti, written in +January, 1789, hardly six months before, he had spoken of paper money +as "A nursery of tyranny, corruption and delusion; a veritable debauch +of authority in delirium." In one of his early speeches in the +National Assembly he had called such money, when Anson covertly +suggested its issue, "a loan to an armed robber," and said of it: +"that infamous word, paper money, ought to be banished from our +language." In his private letters written at this very time, which +were revealed at a later period, he showed that he was fully aware of +the dangers of inflation. But he yielded to the pressure: partly +because he thought it important to sell the government lands rapidly +to the people, and so develop speedily a large class of small +landholders pledged to stand by the government which gave them their +titles; partly, doubtless, from a love of immediate rather than of +remote applause; and, generally, in a vague hope that the severe, +inexorable laws of finance which had brought heavy punishments upon +governments emitting an irredeemable currency in other lands, at other +times, might in some way at this time, be warded off from France.[13] + +The question was brought up by Montesquieu's report on the 27th of +August, 1790. This report favored, with evident reluctance, an +additional issue of paper. It went on to declare that the original +issue of four hundred millions, though opposed at the beginning, had +proved successful; that _assignats_ were economical, though they had +dangers; and, as a climax, came the declaration: "We must save the +country."[14] + +Upon this report Mirabeau then made one of his most powerful speeches. +He confessed that he had at first feared the issue of _assignats_, but +that he now dared urge it; that experience had shown the issue of +paper money most serviceable; that the report proved the first issue +of _assignats_ a success; that public affairs had come out of +distress; that ruin had been averted and credit established. He then +argued that there was a difference between paper money of the recent +issue and that from which the nation had suffered so much in John +Law's time; he declared that the French nation had now become +enlightened and he added, "Deceptive subtleties can no longer mislead +patriots and men of sense in this matter." He then went on to say: +"We must accomplish that which we have begun," and declared that there +must be one more large issue of paper, guaranteed by the national +lands and by the good faith of the French nation. To show how +practical the system was he insisted that just as soon as paper money +should become too abundant it would be absorbed in rapid purchases of +national lands; and he made a very striking comparison between this +self- adjusting, self-converting system and the rains descending in +showers upon the earth, then in swelling rivers discharged into the +sea, then drawn up in vapor and finally scattered over the earth again +in rapidly fertilizing showers. He predicted that the members would +be surprised at the astonishing success of this paper money and that +there would be none too much of it. + +His theory grew by what it fed upon,--as the paper-money theory has +generally done. Toward the close, in a burst of eloquence, he +suggested that _assignats_ be created to an amount sufficient to cover +the national debt, and that all the national lands be exposed for sale +immediately, predicting that thus prosperity would return to the +nation and that an classes would find this additional issue of paper +money a blessing.[15] + +This speech was frequently interrupted by applause; a unanimous vote +ordered it printed, and copies were spread throughout France. The +impulse given by it permeated all subsequent discussion; Gouy arose +and proposed to liquidate the national debt of twenty-four hundred +millions,--to use his own words--"by one single operation, grand, +simple, magnificent."[16] This "operation" was to be the emission of +twenty-four hundred millions in legal tender notes, and a law that +specie should not be accepted in purchasing national lands. His +demagogy bloomed forth magnificently. He advocated an appeal to the +people, who, to use his flattering expression, "ought alone to give +the law in a matter so interesting." The newspapers of the period, in +reporting his speech, noted it with the very significant remark, "This +discourse was loudly applauded." + +To him replied Brillat-Savarin. He called attention to the +depreciation of _assignats_ already felt. He tried to make the +Assembly see that natural laws work as inexorably in France as +elsewhere; he predicted that if this new issue were made there would +come a depreciation of thirty per cent. Singular, that the man who so +fearlessly stood against this tide of unreason has left to the world +simply a reputation as the most brilliant cook that ever existed! He +was followed by the Abbe Goutes, who declared,--what seems grotesque +to those who have read the history of an irredeemable paper currency +in any country--that new issues of paper money "will supply a +circulating medium which will protect public morals from +corruption."[17] + +Into this debate was brought a report by Necker. He was not, indeed, +the great statesman whom France especially needed at this time, of all +times. He did not recognize the fact that the nation was entering a +great revolution, but he could and did see that, come what might, +there were simple principles of finance which must be adhered to. +Most earnestly, therefore, he endeavored to dissuade the Assembly from +the proposed issue; suggesting that other means could be found for +accomplishing the result, and he predicted terrible evils. But the +current was running too fast. The only result was that Necker was +spurned as a man of the past; he sent in his resignation and left +France forever.[18] The paper-money demagogues shouted for joy at his +departure; their chorus rang through the journalism of the time. No +words could express their contempt for a man who was unable to see the +advantages of filling the treasury with the issues of a printing +press. Marat, Hébert, Camille Desmoulins and the whole mass of +demagogues so soon to follow them to the guillotine were especially +jubilant.[19] + +Continuing the debate, Rewbell attacked Necker, saying that the +_assignats_ were not at par because there were not yet enough of them; +he insisted that payments for public lands be received in _assignats_ +alone; and suggested that the church bells of the kingdom be melted +down into small money. Le Brun attacked the whole scheme in the +Assembly, as he had done in the Committee, declaring that the +proposal, instead of relieving the nation, would wreck it. The papers +of the time very significantly say that at this there arose many +murmurs. Chabroud came to the rescue. He said that the issue of +_assignats_ would relieve the distress of the people and he presented +very neatly the new theory of paper money and its basis in the +following words: "The earth is the source of value; you cannot +distribute the earth in a circulating value, but this paper becomes +representative of that value and it is evident that the creditors of +the nation will not be injured by taking it." On the other hand, +appeared in the leading paper, the "Moniteur," a very thoughtful +article against paper money, which sums up all by saying, "It is, +then, evident that all paper which cannot, at the will of the bearer, +be converted into specie cannot discharge the functions of money." +This article goes on to cite Mirabeau's former opinion in his letter +to Cerutti, published in 1789,--the famous opinion of paper money as +"a nursery of tyranny, corruption and delusion; a veritable debauch of +authority in delirium." Lablache, in the Assembly, quoted a saying +that "paper money is the emetic of great states."[20] + +Boutidoux, resorting to phrasemaking, called the _assignats_ _"un +papier terre,"_ or "land converted into paper." Boislandry answered +vigorously and foretold evil results. Pamphlets continued to be +issued,--among them, one so pungent that it was brought into the +Assembly and read there,--the truth which it presented with great +clearness being simply that doubling the quantity of money or +substitutes for money in a nation simply increases prices, disturbs +values, alarms capital, diminishes legitimate enterprise, and so +decreases the demand both for products and for labor; that the only +persons to be helped by it are the rich who have large debts to pay. +This pamphlet was signed "A Friend of the People," and was received +with great applause by the thoughtful minority in the Assembly. Du +Pont de Nemours, who had stood by Necker in the debate on the first +issue of _assignats_, arose, avowed the pamphlet to be his, and said +sturdily that he had always voted against the emission of irredeemable +paper and always would.[21] + +Far more important than any other argument against inflation was the +speech of Talleyrand. He had been among the boldest and most radical +French statesmen. He it was,--a former bishop,--who, more than any +other, had carried the extreme measure of taking into the possession +of the nation the great landed estates of the, Church, and he had +supported the first issue of four hundred millions. But he now +adopted a judicial tone--attempted to show to the Assembly the very +simple truth that the effect of a second issue of _assignats_ may be +different from that of the first; that the first was evidently needed; +that the second may be as injurious as the first was useful. He +exhibited various weak points in the inflation fallacies and presented +forcibly the trite truth that no laws and no decrees can keep large +issues of irredeemable paper at par with specie. + +In his speech occur these words: "You can, indeed, arrange it so that +the people shall be forced to take a thousand _livres_ in paper for a +thousand _livres_ in specie; but you can never arrange it so that a +man shall be obliged to give a thousand _livres_ in specie for a +thousand _livres_ in paper,--in that fact is embedded the entire +question; and on account of that fact the whole system fails."[22] + +The nation at large now began to take part in the debate; thoughtful +men saw that here was the turning Point between good and evil, that +the nation stood at the parting of the ways. Most of the great +commercial cities bestirred themselves and sent up remonstrances +against the new emission,--twenty-five being opposed and seven in +favor of it. + +But eloquent theorists arose to glorify paper and among these, Royer, +who on September 14, 1790, put forth a pamphlet entitled "Reflections +of a patriotic Citizen on the issue of _Assignats_," in which he gave +many specious reasons of the why the _assignats_ could not be +depressed, and spoke of the argument against them as "vile clamors of +people bribed to affect public opinion." He said to the National +Assembly, "If it is necessary to create five thousand millions, and +more, of the paper, decree such a creation gladly." He, too, +predicted, as many others had done, a time when gold was to lose all +its value, since all exchanges would be made with this admirable, +guaranteed paper, and therefore that coin would come out from the +places where it was hoarded. He foretold prosperous times to France +in case these great issues of paper were continued and declared these +"the only means to insure happiness, glory and liberty to the French +nation." Speeches like this gave courage to a new swarm of +theorists,--it began to be especially noted that men who had never +shown any ability to make or increase fortunes for themselves abounded +in brilliant plans for creating and increasing wealth for the country +at large. + +Greatest force of all, on September 27, 1790, came Mirabeau's final +speech. The most sober and conservative of his modern opponents +speaks of its eloquence as "prodigious." In this the great orator +dwelt first on the political necessity involved, declaring that the +most pressing need was to get the government lands into the hands of +the people, and so to commit to the nation and against the old +privileged classes the class of landholders thus created. + +Through the whole course of his arguments there is one leading point +enforced with all his eloquence and ingenuity--the excellence of the +proposed currency, its stability and its security. He declares that, +being based on the pledge of public lands and convertible into them, +the notes are better secured than if redeemable in specie; that the +precious metals are only employed in the secondary arts, while the +French paper money represents the first and most real of all property, +the source of all production, the land; that while other nations have +been obliged to emit paper money, none have ever been so fortunate as +the French nation, for the reason that none had ever before been able +to give this landed security; that whoever takes French paper money +has practically a mortgage to secure it,--and on landed property which +can easily be sold to satisfy his claims, while other nations have +been able only to give a vague claim on the entire nation. "And," he +ones, "I would rather have a mortgage on a garden than on a kingdom!" + +Other arguments of his are more demagogical. He declares that the +only interests affected will be those of bankers and capitalists, but +that manufacturers will see prosperity restored to them. Some of his +arguments seem almost puerile, as when he says, "If gold has been +hoarded through timidity or malignity, the issue of paper will show +that gold is not necessary, and it will then come forth." But, as a +whole, the speech was brilliant; it was often interrupted by applause; +it settled the question. People did not stop to consider that it was +the dashing speech of an orator and not the matured judgment of a +financial expert; they did not see that calling Mirabeau or Talleyrand +to advise upon a monetary policy, because they had shown boldness in +danger and strength in conflict, was like summoning a prize-fighter to +mend a watch. + +In vain did Maury show that, while the first issues of John Law's +paper had brought prosperity, those that followed brought misery; in +vain did he quote from a book published in John Law's time, showing +that Law was at first considered a patriot and friend of humanity; in +vain did he hold up to the Assembly one of Law's bills and appeal to +their memories of the wretchedness brought upon France by them; in +vain did Du Pont present a simple and really wise plan of substituting +notes in the payment of the floating debt which should not form a part +of the ordinary circulating medium; nothing could resist the eloquence +of Mirabeau. Barnave, following, insisted that "Law's paper was based +upon the phantoms of the Mississippi; ours, upon the solid basis of +ecclesiastical lands," and he proved that the _assignats_ could not +depreciate further. Prudhomme's newspaper poured contempt over gold +as security for the currency, extolled real estate as the only true +basis and was fervent in praise of the convertibility and +self-adjusting features of the proposed scheme. In spite of all this +plausibility and eloquence, a large minority stood firm to their +earlier principles; but on the 29th of September, 1790, by a vote of +508 to 423, the deed was done; a bill was passed authorizing the issue +of eight hundred millions of new _assignats_, but solemnly declaring +that in no case should the entire amount put in circulation exceed +twelve hundred millions. To make assurance doubly sure, it also +provided that as fast as the _assignats_ were paid into the treasury +for land they should be burned, and thus a healthful contraction be +constantly maintained. Unlike the first issue, these new notes were +to bear no interest.[23] + +Great were the plaudits of the nation at this relief. Among the +multitudes of pamphlets expressing this joy which have come down to us +the "Friend of the Revolution" is the most interesting. It begins as +follows: "Citizens, the deed is done. The _assignats_ are the +keystone of the arch. It has just been happily put in position. Now +I can announce to you that the Revolution is finished and there only +remain one or two important questions. All the rest is but a matter +of detail which cannot deprive us any longer of the pleasure of +admiring this important work in its entirety. The provinces and the +commercial cities which were at first alarmed at the proposal to issue +so much paper money now send expressions of their thanks; specie is +coming out to be joined with paper money. Foreigners come to us from +all parts of Europe to seek their happiness under laws which they +admire; and soon France, enriched by her new property and by the +national industry which is preparing for fruitfulness, will demand +still another creation of paper money." + +France was now fully committed to a policy of inflation; and, if there +had been any question of this before, all doubts were removed now by +various acts very significant as show- ing the exceeding difficulty of +stopping a nation once in the full tide of a depreciating currency. +The National Assembly had from the first shown an amazing liberality +to all sorts of enterprises, wise or foolish, which were urged "for +the good of the people." As a result of these and other largesses the +old cry of the "lack of a circulating medium" broke forth again; and +especially loud were the clamors for more small bills. The cheaper +currency had largely driven out the dearer; paper had caused small +silver and copper money mainly to disappear; all sorts of notes of +hand, circulating under the name of "confidence bills," flooded +France--sixty-three kinds in Paris alone. This unguaranteed currency +caused endless confusion and fraud. Different districts of France +began to issue their own _assignats_ in small denominations, and this +action stirred the National Assembly to evade the solemn pledge that +the circulation should not go above twelve hundred millions and that +all _assignats_ returned to the treasury for lands should immediately +be burned.[24] Within a short time there had been received into the +treasury for lands one hundred and sixty million _livres_ in paper. +By the terms of the previous acts this amount of paper ought to have +been retired. Instead of this, under the plea of necessity, the +greater part of it was reissued in the form of small notes. + +There was, indeed, much excuse for new issues of small notes, for, +under the theory that an issue of smaller notes would drive silver out +of circulation, the smallest authorized _assignat_ was for fifty +_livres_. To supply silver and copper and hold it in circulation +everything was tried. Citizens had been spurred on by law to send +their silverware and jewels to the mint. Even the king sent his +silver and gold plate, and the churches and convents were required by +law to send to the government melting pot all silver and gold vessels +not absolutely necessary for public worship. For copper money the +church bells were melted down. But silver and even copper continued +to become more and more scarce. In the midst of all this, various +juggleries were tried, and in November, 1790, the Assembly decreed a +single standard of coinage, the chosen metal being silver, and the +ratio between the two precious metals was changed from 15 1/2 to 1, to +14 1/2 to 1--but all in vain. It was found necessary to issue the +dreaded small paper, and a beginning was made by issuing one hundred +millions in notes of five _francs_, and, ere long, obedient to the +universal clamor, there were issued parchment notes for various small +amounts down to a single _sou_.[25] + +Yet each of these issues, great or small, was but as a drop of cold +water to a parched throat. Although there was already a rise in +prices which showed that the amount needed for circulation had been +exceeded, the cry for "more circulating medium" was continued. The +pressure for new issues became stronger and stronger. The Parisian +populace and the Jacobin Club were especially loud in their demands +for them; and, a few months later, on June 19, 1791, with few +speeches, in a silence very ominous, a new issue was made of six +hundred millions more;--less than nine months after the former great +issue, with its solemn pledges to keep down the amount in circulation. +With the exception of a few thoughtful men, the whole nation again +sang paeans.[26] + +In this comparative ease of new issues is seen the action of a law in +finance as certain as the working of a similar law in natural +philosophy. If a material body fall from a height its velocity is +accelerated, by a well-known law, in a constantly increasing ratio: so +in issues of irredeemable currency, in obedience to the theories of a +legislative body or of the people at large, there is a natural law of +rapidly increasing emission and depreciation. The first inflation +bills were passed with great difficulty, after very sturdy resistance +and by a majority of a few score out of nearly a thousand votes; but +we observe now that new inflation measures were passed more and more +easily and we shall have occasion to see the working of this same law +in a more striking degree as this history develops itself. + +During the various stages of this debate there cropped up a doctrine +old and ominous. It was the same which appeared toward the end of the +nineteenth century in the United States during what became known as +the "greenback craze" and the free "silver craze." In France it had +been refuted, a generation before the Revolution, by Turgot, just as +brilliantly as it was met a hundred years later in the United States +by James A. Garfield and his compeers. This was the doctrine that all +currency, whether gold, paper, leather or any other material, derives +its efficiency from the official stamp it bears, and that, this being +the case, a government may relieve itself of its debts and make itself +rich and prosperous simply by means of a printing +press:--fundamentally the theory which underlay the later American +doctrine of "fiat money." + +There came mutterings and finally speeches in the Jacobin Club, in the +Assembly and in newspaper articles and pamphlets throughout the +country, taking this doctrine for granted. These could hardly affect +thinking men who bore in mind the calamities brought upon the whole +people, and especially upon the poorer classes, by this same theory as +put in practice by John Law, or as refuted by Turgot, but it served to +swell the popular chorus in favor of the issue of more _assignats_ and +plenty of them.[27] + +The great majority of Frenchmen now became desperate optimists, +declaring that inflation is prosperity. Throughout France there came +temporary good feeling. The nation was becoming inebriated with paper +money. The good feeling was that of a drunkard just after his +draught; and it is to be noted as a simple historical fact, +corresponding to a physiological fact, that, as draughts of paper +money came faster the successive periods of good feeling grew shorter. + +Various bad signs began to appear. Immediately after each new issue +came a marked depreciation; curious it is to note the general +reluctance to assign the right reason. The decline in the purchasing +power of paper money was in obedience to the simplest laws in +economics, but France had now gone beyond her thoughtful statesmen and +taken refuge in unwavering optimism, giving any explanation of the new +difficulties rather than the right one. A leading member of the +Assembly insisted, in an elaborate speech, that the cause of +depreciation was simply the want of knowledge and of confidence among +the rural population and he suggested means of enlightening them. La +Rochefoucauld proposed to issue an address to the people showing the +goodness of the currency and the absurdity of preferring coin. The +address was unanimously voted. As well might they have attempted to +show that a beverage made by mixing a quart of wine and two quarts of +water would possess all the exhilarating quality of the original, +undiluted liquid. + +Attention was aroused by another menacing fact;--specie disappeared +more and more. The explanations of this fact also displayed wonderful +ingenuity in finding false reasons and in evading the true one. A +very common explanation was indicated in Prudhomme's newspaper, "Les +Révolutions de Paris," of January 17, 1791, which declared that coin +"will keep rising until the people shall have hanged a broker." +Another popular theory was that the Bourbon family were, in some +mysterious way, drawing off all solid money to the chief centers of +their intrigues in Germany. Comic and, at the same time, pathetic, +were evidences of the wide-spread idea that if only a goodly number of +people engaged in trade were hanged, the par value of the _assignats_ +would be restored. + +Still another favorite idea was that British emissaries were in the +midst of the people, instilling notions hostile to paper. Great +efforts were made to find these emissaries and more than one innocent +person experienced the popular wrath under the supposition that he was +engaged in raising gold and depressing paper. Even Talleyrand, shrewd +as he was, insisted that the cause was simply that the imports were +too great and the exports too little.[28] As well might he explain +that fact that, when oil is mingled with water, water sinks to the +bottom, by saying that this is because the oil rises to the top. This +disappearance of specie was the result of a natural law as simple and +as sure in its action as gravitation; the superior currency had been +withdrawn because an inferior currency could be used.[29] Some efforts +were made to remedy this. In the municipality of Quilleboeuf a +considerable amount in specie having been found in the possession of a +citizen, the money was seized and sent to the Assembly. The people of +that town treated this hoarded gold as the result of unpatriotic +wickedness or madness, instead of seeing that it was but the sure +result of a law working in every land and time, when certain causes +are present. Marat followed out this theory by asserting that death +was the proper penalty for persons who thus hid their money. + +Still another troublesome fact began now to appear. Though paper +money had increased in amount, prosperity had steadily diminished. In +spite of all the paper issues, commercial activity grew more and more +spasmodic. Enterprise was chilled and business became more and more +stagnant. Mirabeau, in his speech which decided the second great +issue of paper, had insisted that, though bankers might suffer, this +issue would be of great service to manufacturers and restore +prosperity to them and their workmen. The latter were for a time +deluded, but were at last rudely awakened from this delusion. The +plenty of currency had at first stimulated production and created a +great activity in manufactures, but soon the markets were glutted and +the demand was diminished. In spite of the wretched financial policy +of years gone by, and especially in spite of the Revocation of the +Edict of Nantes, by which religious bigotry had driven out of the +kingdom thousands of its most skillful Protestant workmen, the +manufactures of France had before the Revolution come into full bloom. +In the finer woolen goods, in silk and satin fabrics of all sorts, in +choice pottery and porcelain, in manufactures of iron, steel, and +copper, they had again taken their old leading place upon the +Continent. All the previous changes had, at the worst, done no more +than to inflict a momentary check on this highly developed system of +manufactures. But what the bigotry of Louis XIV and the shiftlessness +of Louis XV could not do in nearly a century, was accomplished by this +tampering with the currency in a few months. One manufactory after +another stopped. At one town, Lodève, five thousand workmen were +discharged from the cloth manufactories. Every cause except the right +one was assigned for this. Heavy duties were put upon foreign goods; +everything that tariffs and custom-houses could do was done. Still +the great manufactories of Normandy were closed, those of the rest of +the kingdom speedily followed, and vast numbers of workmen in all +parts of the country were thrown out of employment.[30] Nor was this +the case with the home demand alone. The foreign demand, which at +first had been stimulated, soon fell off. In no way can this be +better stated than by one of the most thoughtful historians of modern +times, who says, "It is true that at first the _assignats_ gave the +same impulse to business in the city as in the country, but the +apparent improvement had no firm foundation, even in the towns. +Whenever a great quantity of paper money is suddenly issued we +invariably see a rapid increase of trade. The great quantity of the +circulating medium sets in motion all the energies of commerce and +manufactures; capital for investment is more easily found than usual +and trade perpetually receives fresh nutriment. If this paper +represents real credit, founded upon order and legal security, from +which it can derive a firm and lasting value, such a movement may be +the starting point of a great and widely-extended prosperity, as, for +instance, a splendid improvement in English agriculture was +undoubtedly owing to the emancipation of the country bankers. If on +the contrary, the new paper is of precarious value, as was clearly +seen to be the case with the French _assignats_ as early as February, +1791, it can confer no lasting benefits. For the moment, perhaps, +business receives an impulse, all the more violent because every one +endeavors to invest his doubtful paper in buildings, machines and +goods, which, under all circumstances, retain some intrinsic value. +Such a movement was witnessed in France in 1791, and from every +quarter there came satisfactory reports of the activity of +manufactures." + +"But, for the moment, the French manufacturers derived great advantage +from this state of things. As their products could be so cheaply paid +for, orders poured in from foreign countries to such a degree that it +was often difficult for the manufacturers to satisfy their customers. +It is easy to see that prosperity of this kind must very soon find its +limit. . . . When a further fall in the _assignats_ took place this +prosperity would necessarily collapse, and be succeeded by a crisis +all the more destructive the more deeply men had engaged in +speculation under the influence of the first favorable prospects."[31] + +Thus came a collapse in manufacturing and commerce, just as it had +come previously in France: just as it came at various periods in +Austria, Russia, America, and in all countries where men have tried to +build up prosperity on irredeemable paper.[32] + +All this breaking down of the manufactures and commerce of the nation +made fearful inroads on the greater fortunes; but upon the lesser, and +upon the little properties of the masses of the nation who relied upon +their labor, it pressed with intense severity. The capitalist could +put his surplus paper money into the government lands and await +results; but the men who needed their money from day to day suffered +the worst of the misery. Still another difficulty appeared. There +had come a complete uncertainty as to the future. Long before the +close of 1791 no one knew whether a piece of paper money representing +a hundred _livres_ would, a month later, have a purchasing power of +ninety or eighty or sixty _livres_. The result was that capitalists +feared to embark their means in business. Enterprise received a +mortal blow. Demand for labor was still further diminished; and here +came a new cause of calamity: for this uncertainty withered all +far-reaching undertakings. The business of France dwindled into a +mere living from hand to mouth. This state of things, too, while it +bore heavily upon the moneyed classes, was still more ruinous to those +in moderate and, most of all, to those in straitened circumstances. +With the masses of the people, the purchase of every article of supply +became a speculation--a speculation in which the professional +speculator had an immense advantage over the ordinary buyer. Says the +most brilliant of apologists for French revolutionary statesmanship, +"Commerce was dead; betting took its place."[33] + +Nor was there any compensating advantage to the mercantile classes. +The merchant was forced to add to his ordinary profit a sum sufficient +to cover probable or possible fluctuations in value, and while prices +of products thus went higher, the wages of labor, owing to the number +of workmen who were thrown out of employment, went lower. + +But these evils, though great, were small compared to those far more +deep-seated signs of disease which now showed themselves throughout +the country. One of these was the _obliteration of thrift_ from the +minds of the French people. The French are naturally thrifty; but, +with such masses of money and with such uncertainty as to its future +value, the ordinary motives for saving and care diminished, And a +loose luxury spread throughout the country. A still worse outgrowth +was the increase of speculation and gambling. With the plethora of +paper currency in 1791 appeared the first evidences of that cancerous +disease which always follows large issues of irredeemable currency,--a +disease more permanently injurious to a nation than war, pestilence or +famine. For at the great metropolitan centers grew a luxurious, +speculative, stock-gambling body, which, like a malignant tumor, +absorbed into itself the strength of the nation and sent out its +cancerous fibres to the remotest hamlets. At these city centers +abundant wealth seemed to be piled up: in the country at, large there +grew a dislike of steady labor and a contempt for moderate gains and +simple living. In a pamphlet published in May, 1791, we see how, in +regard to this also, public opinion was blinded. The author calls +attention to the increase of gambling in values of all sorts in these +words: "What shall I say of the stock-jobbing, as frightful as it is +scandalous, which goes on in Paris under the very eyes of our +legislators,--a most terrible evil, yet, under the present +circumstances,--necessary?" The author also speaks of these +stock-gamblers as using the most insidious means to influence public +opinion in favor of their measures; and then proposes, seriously, a +change in various matters of detail, thinking that this would prove a +sufficient remedy for an evil which had its roots far down in the +whole system of irredeemable currency. As well might a physician +prescribe a pimple wash for a diseased liver.[34] + +Now began to be seen more plainly some of the many ways in which an +inflation policy robs the working class. As these knots of plotting +schemers at the city centers were becoming bloated with sudden wealth, +the producing classes of the country, though having in their +possession more and more currency, grew lean. In the schemes and +speculations put forth by stock-jobbers and stimulated by the printing +of more currency, multitudes of small fortunes were absorbed and lost +while a few swollen fortunes were rapidly aggregated in the larger +cities. This crippled a large class in the country districts, which +had employed a great number of workmen. + +In the leading French cities now arose a luxury and license which was +a greater evil even than the plundering which ministered to it. In +the country the gambling spirit spread more and more. Says the same +thoughtful historian whom I have already quoted: "What a prospect for +a country when its rural population was changed into a great band of +gamblers!"[35] + +Nor was this reckless and corrupt spirit confined to business men; it +began to break out in official circles, and public men who, a few +years before, had been thought above all possibility of taint, became +luxurious, reckless, cynical and finally corrupt. Mirabeau, himself, +who, not many months previous, had risked imprisonment and even death +to establish constitutional government, was now--at this very +time--secretly receiving heavy bribes. When, at the downfall of the +monarchy a few years later, the famous iron chest of the Tuileries was +opened, there were found evidences that, in this carnival of inflation +and corruption, he had been a regularly paid servant of the Royal +court.[36] The artful plundering of the people at large was bad +enough, but worse still was this growing corruption in official and +legislative circles. Out of the speculating and gambling of the +inflation period grew luxury, and, out of this, corruption. It grew +as naturally as a fungus on a muck heap. It was first felt in +business operations, but soon began to be seen in the legislative body +and in journalism. Mirabeau was, by no means, the only example. Such +members of the legislative body as Jullien of Toulouse, Delaunay of +Angers, Fabre d'Eglantine and their disciples, were among the most +noxious of those conspiring by legislative action to raise and depress +securities for stock-jobbing purposes. Bribery of legislators +followed as a matter of course, Delaunay, Jullien and Chabot accepted +a bribe of five hundred thousand _livres_ for aiding legislation +calculated to promote the purposes of certain stock-jobbers. It is +some comfort to know that nearly all concerned were guillotined for +it.[37] + +It is true that the number of these corrupt legislators was small, far +less than alarmists led the nation to suppose, but there were enough +to cause wide-spread distrust, cynicism and want of faith in any +patriotism or any virtue. + + +II. + +Even worse than this was the breaking down of the morals of the +country at large, resulting from the sudden building up of +ostentatious wealth in a few large cities, and from the gambling, +speculative spirit spreading from these to the small towns and rural +districts. From this was developed an even more disgraceful +result,--the decay of a true sense of national good faith. The +patriotism which the fear of the absolute monarchy, the machinations +of the court party, the menaces of the army and the threats of all +monarchical Europe had been unable to shake was gradually +disintegrated by this same speculative, stock-jobbing habit fostered +by the superabundant currency. At the outset, in the discussions +preliminary to the first issue of paper money, Mirabeau and others who +had favored it had insisted that patriotism as well as an enlightened +self-interest, would lead the people to keep up the value of paper +money. The very opposite of this was now revealed, for there +appeared, as another outgrowth of this disease, what has always been +seen under similar circumstances. It is a result of previous, and a +cause of future evils. This outgrowth was a vast debtor class in the +nation, directly interested in the depreciation of the currency in +which they were to pay their debts. The nucleus of this class was +formed by those who had purchased the church lands from the +government. Only small payments down had been required and the +remainder was to be paid in deferred installments: an indebtedness of +a multitude of people had thus been created to the amount of hundreds +of millions. This body of debtors soon saw, of course, that their +interest was to depreciate the currency in which their debts were to +be paid; and these were speedily joined by a far more influential +class;--by that class whose speculative tendencies had been stimulated +by the abundance of paper money, and who had gone largely into debt, +looking for a rise in nominal values. Soon demagogues of the viler +sort in the political clubs began to pander to it; a little later +important persons in this debtor class were to be found intriguing in +the Assembly--first in its seats and later in more conspicuous places +of public trust. Before long, the debtor class became a powerful body +extending through all ranks of society. From the stock-gambler who +sat in the Assembly to the small land speculator in the rural +districts; from the sleek inventor of _canards_ on the Paris Exchange +to the lying stock-jobber in the market town, all pressed vigorously +for new issues of paper; all were apparently able to demonstrate to +the people that in new issues of paper lay the only chance for +national prosperity. + +This great debtor class, relying on the multitude who could be +approached by superficial arguments, soon gained control. Strange as +it might seem to those who have not watched the same causes at work at +a previous period in France and at various times in other countries, +while every issue of paper money really made matters worse, a +superstition gained ground among the people at large that, if only +_enough_ paper money were issued and were more cunningly handled the +poor would be made rich. Henceforth, all opposition was futile. In +December, 1791, a report was made in the Legislative Assembly in favor +of yet another great issue of three hundred millions more of paper +money. In regard to this report Cambon said that more money was +needed but asked, "Will you, in a moment when stock-jobbing is carried +on with such fury, give it new power by adding so much more to the +circulation?" But such high considerations were now little regarded. +Dorisy declared, "There is not enough money yet in circulation; if +there were more the sales of national lands would be more rapid." And +the official report of his speech states that these words were +applauded. + +Dorisy then went on to insist that the government lands were worth at +least thirty-five hundred million _livres_ and said: "Why should +members ascend the tribunal and disquiet France? Fear nothing; your +currency reposes upon a sound mortgage." Then followed a +glorification of the patriotism of the French people, which, he +asserted, would carry the nation through all its difficulties. + +Becquet, speaking next, declared that "The circulation is becoming +more rare every day." + +On December 17, 1791, a new issue was ordered, making in all +twenty-one hundred millions authorized. Coupled with this was the +declaration that the total amount in actual circulation should never +reach more than sixteen hundred millions. Before this issue the value +of the 100 _livres_ note had fallen at Paris to about 80 _livres_;[38] +immediately afterward it fell to about 68 _livres_. What limitations +of the currency were worth may be judged from the fact that not only +had the declaration made hardly a year before, limiting the amount in +circulation to twelve hundred millions, been violated, but the +declaration, made hardly a month previous, in which the Assembly had +as solemnly limited the amount of circulation to fourteen hundred +millions, had also been repudiated. + +The evils which we have already seen arising from the earlier issues +were now aggravated; but the most curious thing evolved out of all +this chaos was a _new system of political economy_. In speeches, +newspapers and pamphlets about this time, we begin to find it declared +that, after all, a depreciated currency is a blessing; that gold and +silver form an unsatisfactory standard for measuring values: that it +is a good thing to have a currency that will not go out of the kingdom +and which separates France from other nations: that thus shall +manufacturers be encouraged; that commerce with other nations may be a +curse, and hindrance thereto may be a blessing; that the laws of +political economy however applicable in other times, are not +applicable to this particular period, and, however operative in other +nations, are not now so in France; that the ordinary rules of +political economy are perhaps suited to the minions of despotism but +not to the free and enlightened inhabitants of France at the close of +the eighteenth century; that the whole state of present things, so far +from being an evil is a blessing. All these ideas, and others quite +as striking, were brought to the surface in the debates on the various +new issues.[39] + +Within four months came another report to the Assembly as ingenious as +those preceding. It declared: "Your committee are thoroughly +persuaded that the amount of the circulating medium before the +Revolution was greater than that of the _assignats_ today: but at that +time the money circulated slowly and now it passes rapidly so that one +thousand million _assignats_ do the work of two thousand millions of +specie." The report foretells further increase in prices, but by some +curious jugglery reaches a conclusion favorable to further inflation. +Despite these encouragements the _assignats_ nominally worth 100 +_livres_ had fallen, at the beginning of February, 1792, to about 60 +_livres_, and during that month fell to 53 _livres_.[40] + +In March, Clavière became minister of financ. He was especially +proud of his share in the invention and advocacy of the _assignats_, +and now pressed their creation more vigorously than ever, and on April +30th, of the same year, came the fifth great issue of paper money, +amounting to three hundred millions: at about the same time Cambon +sneered ominously at public creditors as "rich people, old financiers +and bankers." Soon payment was suspended on dues to public creditors +for all amounts exceeding ten thousand _francs_. + +This was hailed by many as a measure in the interests of the poorer +classes of people, but the result was that it injured them most of +all. Henceforward, until the end of this history, capital was quietly +taken from labor and locked up in all the ways that financial +ingenuity could devise. All that saved thousands of laborers in +France from starvation was that they were drafted off into the army +and sent to be killed on foreign battlefields. + +On the last day of July, 1792, came another brilliant re- port from +Fouquet, showing that the total amount of currency already issued was +about twenty-four hundred millions, but claiming that the national +lands were worth a little more than this sum. A decree was now passed +issuing three hundred millions more. By this the prices of everything +were again enhanced save one thing, and that one thing was labor. +Strange as it may at first appear, while the depreciation of the +currency had raised all products enormously in price, the stoppage of +so many manufactories and the withdrawal of capital caused wages in +the summer of 1792, after all the inflation, to be as small as they +had been four years before--viz., fifteen _sous_ per day. No more +striking example can be seen of the truth uttered by Daniel Webster, +that "of all the contrivances for cheating the laboring classes of +mankind, none has been more effective than that which deludes them +with paper-money."[41] + +Issue after issue followed at intervals of a few months, until, on +December 14, 1792, we have an official statement to the effect that +thirty-five hundred millions had been put forth, of which six hundred +millions had been burned, leaving in circulation twenty-eight hundred +millions. + +When it is remembered that there was little business to do and that +the purchasing power of the _livre_ or franc, when judged by the +staple products of the country, was equal to about half the present +purchasing power of our own dollar, it will be seen into what evils +France had drifted. As the mania for paper money ran its course, even +the _sous_, obtained by melting down the church bells, were more and +more driven out of circulation and more and more parchment notes from +twenty _four_ to five were issued, and at last pieces of one _sou_, of +half a _sou_ and even of one-quarter of a _sou_ were put in +circulation.[42] + +But now another source of wealth was opened to the nation. There came +a confiscation of the large estates of landed proprietors who had fled +the country. An estimate in 1793 made the value of these estates +three billions of _francs_. As a consequence, the issues of paper +money were continued in increased amounts, on the old theory that they +were guaranteed by the solemn pledge of these lands belonging to the +state. Under the Legislative Assembly through the year 1792 new +issues were made virtually every month, so that at the end of January, +1793, it was more and more realized that the paper money actually in +circulation amounted close upon three thousand millions of _francs_. +All this had been issued publicly, in open sessions of the National +and Legislative Assemblies; but now under the National Convention, the +two Committees of Public Safety and of Finance began to decree new +issues privately, in secret session. + +As a result, the issues became larger still, and four hundred workmen +were added to those previously engaged in furnishing this paper money, +and these were so pressed with work from six o'clock in the morning +until eight in the evening that they struck for higher wages and were +successful.[43] + +The consequences of these overissues now began to be more painfully +evident to the people at large. Articles of common consumption became +enormously dear and prices were constantly rising. Orators in the +Legislative Assembly, clubs, local meetings and elsewhere now +endeavored to enlighten people by assigning every reason for this +depreciation save the true one. They declaimed against the corruption +of the ministry, the want of patriotism among the Moderates, the +intrigues of the emigrant nobles, the hard-heartedness of the rich, +the monopolizing spirit of the merchants, the perversity of the +shopkeepers,---each and all of these as causes of the difficulty.[44] + +This decline in the government paper was at first somewhat masked by +fluctuations. For at various times the value of the currency _rose_. +The victory of Jemappes and the general success of the French army +against the invaders, with the additional security offered by new +confiscations of land, caused, in November, 1792, an appreciation in +the value of the currency; the franc had stood at 57 and it rose to +about 69; but the downward tendency was soon resumed and in September, +1793, the _assignats_ had sunk below 30. Then sundry new victories +and coruscations of oratory gave momentary confidence so that in +December, 1793, they rose above 50. But despite these fluctuations +the downward tendency soon became more rapid than ever.[45] + +The washerwomen of Paris, finding soap so dear that they could hardly +purchase it, insisted that all the merchants who were endeavoring to +save something of their little property by refusing to sell their +goods for the wretched currency with which France was flooded, should +be punished with death; the women of the markets and the hangers-on of +the Jacobin Club called loudly for a law "to equalize the value of +paper money and silver coin." It was also demanded that a tax be laid +especially on the rich, to the amount of four hundred million +_francs_, to buy bread. Marat declared loudly that the people, by +hanging shopkeepers and plundering stores, could easily remove the +trouble. The result was that on the 28th of February, 1793, at eight +o'clock in the evening, a mob of men and women in disguise began +plundering the stores and shops of Paris. At first they demanded only +bread; soon they insisted on coffee and rice and sugar; at last they +seized everything on which they could lay their hands--cloth, +clothing, groceries and luxuries of every kind. Two hundred such +places were plundered. This was endured for six hours and finally +order was restored only by a grant of seven million _francs_ to buy +off the mob. The new political economy was beginning to bear, its +fruits luxuriantly. A gaudy growth of it appeared at the City Hall of +Paris when, in response to the complaints of the plundered merchants, +Roux declared, in the midst of great applause, that "shopkeepers were +only giving back to the people what they had hitherto robbed them of." + +The mob having thus been bought off by concessions and appeased by +oratory, the government gained time to think, and now came a series of +amazing expedients,--and yet all perfectly logical. + +Three of these have gained in French history an evil pre-eminence, and +first of the three was the Forced Loan. + +In view of the fact that the well-to-do citizens were thought to be +lukewarm in their support of the politicians controlling the country, +various demagogues in the National Convention, which had now succeeded +the National, Constituent and Legislative Assemblies, found ample +matter for denunciations long and loud. The result outside the +Convention was increased activity of the guillotine; the results +inside were new measures against all who had money, and on June 22, +1793, the Convention determined that there should be a Forced Loan, +secured on the confiscated lands of the emigrants and levied upon all +married men with incomes of ten thousand _francs_, and upon all +unmarried men with incomes of six thousand _francs_. It was +calculated that these would bring into the treasury a thousand +millions of _francs_. But a difficulty was found. So many of the +rich had lied or had concealed their wealth that only a fifth of the +sum required could be raised, and therefore a law was soon passed +which levied forced loans upon incomes as low as one thousand, +_francs_,--or, say, two hundred dollars of American money. This tax +was made progressive. On the smaller proprietors it was fixed at +one-tenth and on the larger, that is, on all incomes above nine +thousand _francs_, it was made one-half of the entire income. Little +if any provision was made for the repayment of this loan but the +certificates might be used for purchasing the confiscated real estate +of the church and of the nobility.[46] + +But if this first expedient shows how naturally a "fiat" money system +runs into despotism, the next is no less instructive in showing how +easily it becomes repudiation and dishonor. + +As we have seen, the first issue of the _assignats_,--made by the +National Assembly, bore a portrait of the king; but on the various +issues after the establishment of a republic this emblem had been +discarded. This change led to a difference in value between the +earlier and the later paper money. The wild follies of fanatics and +demagogues had led to an increasing belief that the existing state of +things could not last; that the Bourbons must ere long return; that in +such case, while a new monarch would repudiate all the vast mass of +the later paper issued by the Republic, he would recognize that first +issue bearing the face and therefore the guarantee of the king. So it +was that this first issue came to bear a higher value than those of +later date. To meet this condition of things it was now proposed to +repudiate an that earlier issue. In vain did sundry more thoughtful +members of the Convention plead that this paper money, amounting to +five hundred and fifty-eight millions of _francs_, bore the solemn +guarantee of the nation, as well as of the king; the current was +irresistible. All that Cambon, the great leader of finance at that +time, could secure was a clause claiming to protect the poor, to the +effect that this demonetization should not extend to notes below a +hundred _francs_ in value; and it was also agreed that any of the +notes, large or small, might be received in payment of taxes and for +the confiscated property of the clergy and nobility. To all the +arguments advanced against this breach of the national faith Danton, +then at the height of his power, simply declared that only aristocrats +could favor notes bearing the royal portrait, and gave forth his +famous utterance: "Imitate Nature, which watches over the preservation +of the race but has no regard for individuals." The decree was passed +on the 31st of July, 1793, yet its futility was apparent in less than +two months, when the Convention decreed that there should be issued +two thousand millions of _francs_ more in _assignats_ between the +values of ten _sous_ and four hundred _francs_, and when, before the +end of the year, five hundred millions more were authorized.[47] + +The third outgrowth of the vast issue of fiat money was the _Maximum_. +As far back as November, 1792, the Terrorist associate of Robespierre, +St. Just, in view of the steady rise in prices of the necessaries of +life, had proposed a scheme by which these prices should be +established by law, at a rate proportionate to the wages of the +working classes. This plan lingered in men's minds, taking shape in +various resolutions and decrees until the whole culminated on +September 29, 1793, in the Law of the _Maximum_. + +While all this legislation was high-handed, it was not careless. Even +statesmen of the greatest strength, having once been drawn into this +flood, were borne on into excesses which, a little earlier, would have +appalled them. Committees of experts were appointed to study the +whole subject of prices, and at last there were adopted the great +"four rules" which seemed to statesmen of that time a masterly +solution of the whole difficulty.[48] + +_First_, the price of each article of necessity was to be fixed at one +and one-third its price in 1790. _Secondly_, all transportation was +to be added at a fixed rate per league. _Thirdly_, five per cent was +to be added for the profit of the wholesaler. _Fourthly_, ten per +cent was to be added for the profit of the retailer. Nothing could +look more reasonable. Great was the jubilation. The report was +presented and supported by Barrère,--"the tiger monkey,"--then in all +the glory of his great orations: now best known from his portrait by +Macaulay. Nothing could withstand Barrère's eloquence. He insisted +that France had been suffering from a "_Monarchical_ commerce which +only sought wealth," while what she needed and what she was now to +receive was a "_Republican_ commerce--a commerce of moderate profits +and virtuous." He exulted in the fact that "France alone enjoys such +a commerce,--that it exists in no other nation." He poured contempt +over political economy as "that science which quacks have corrupted, +which pedants have obscured and which academicians have depreciated." +France, he said, has something better, and he declared in conclusion, +"The needs of the people will no longer be spied upon in order that +the commercial classes may arbitrarily take advantage."[49] + +The first result of the _Maximum_ was that every means was taken to +evade the fixed price imposed, and the farmers brought in as little +produce as they possibly could. This increased the scarcity, and the +people of the large cities were put on an allowance. Tickets were +issued authorizing the bearer to obtain at the official prices a +certain amount of bread or sugar or soap or wood or coal to cover +immediate necessities.[50] + +But it was found that the _Maximum_, with its divinely revealed four +rules, could not be made to work well--even by the shrewdest devices. +In the greater part of France it could not be enforced. As to +merchandise of foreign origin or merchandise into which any foreign +product entered, the war had raised it far above the price allowed +under the first rule, namely, the price of 1790, with an addition of +one-third. Shopkeepers therefore could not sell such goods without +ruin. The result was that very many went out of business and the +remainder forced buyers to pay enormous charges under the very natural +excuse that the seller risked his life in trading at all. That this +excuse was valid is easily seen by the daily lists of those condemned +to the guillotine, in which not infrequently figure the names of men +charged with violating the _Maximum_ laws. Manufactures were very +generally crippled and frequently destroyed, and agriculture was +fearfully depressed. To detect goods concealed by farmers and +shopkeepers, a spy system was established with a reward to the +informer of one-third of the value of the goods discovered. To spread +terror, the Criminal Tribunal at Strassburg was ordered to destroy the +dwelling of any one found guilty of selling goods above the price set +by law. The farmer often found that he could not raise his products +at anything like the price required by the new law, and when he tried +to hold back his crops or cattle, alleging that he could not afford to +sell them at the prices fixed by law, they were frequently taken from +him by force and he was fortunate if paid even in the depreciated fiat +money--fortunate, indeed, if he finally escaped with his life.[51] + +Involved in all these perplexities, the Convention tried to cut the +Gordian knot. It decreed that any person selling gold or silver coin, +or making any difference in any transaction between paper and specie, +should be imprisoned in irons for six years:--that any one who refused +to accept a payment in _assignats_, or accepted _assignats_ at a +discount, should pay a fine of three thousand _francs_; and that any +one committing this crime a second time should pay a fine of six +thousand _francs_ and suffer imprisonment twenty years in irons. +Later, on the 8th of September, 1793, the penalty for such offences +was made death, with confiscation of the criminal's property, and so +reward was offered to any person informing the authorities regarding +any such criminal transaction. To reach the climax of ferocity, the +Convention decreed, in May, 1794, that the death penalty should be +inflicted on any person convicted of "having asked, be- fore a bargain +was concluded, in what money payment was to be made." Nor was this +all. The great finance minister, Cambon, soon saw that the worst +enemies of his policy were gold and silver. Therefore it was that, +under his lead, the Convention closed the Exchange and finally, on +November 13, 1793, under terrifying penalties, suppressed all commerce +in the precious metals. About a year later came the abolition of the +Maximum itself.[52] + +It is easily seen that these _Maximum_ laws were perfectly logical. +Whenever any nation intrusts to its legislators the issue of a +currency not based on the idea of redemption in standard coin +recognized in the commerce of civilized nations, it intrusts to them +the power to raise or depress the value of every article in the +possession of every citizen. Louis XIV had claimed that all property +in Prance was his own, and that what private persons held was as much +his as if it were in his coffers. But even this assumption is +exceeded by the confiscating power exercised in a country, where, +instead of leaving values to be measured by a standard common to the +whole world, they are left to be depressed or raised at the whim, +caprice or interest of a body of legislators. When this power is +given, the power of prices is inevitably included in it.[53] + +It may be said that these measures were made necessary by the war then +going on. Nothing could be more baseless than such an objection. In +this war the French soon became generally successful. It was quickly +pushed mainly upon foreign soil. Numerous contributions were levied +upon the subjugated countries to support the French armies. The war +was one of those in which the loss, falling apparently on future +generations, first stimulates, in a sad way, trade and production. +The main cause of these evils was tampering with the circulating +medium of an entire nation; keeping all values in fluctuation; +discouraging enterprise; paralyzing energy; undermining sobriety; +obliterating thrift; promoting extravagance and exciting riot by the +issue of an irredeemable currency. The true business way of meeting +the enormous demands on France during the first years of the +Revolution had been stated by a true statesman and sound financier, Du +Pont de Nemours, at the very beginning. He had shown that using the +same paper as a circulating medium and as a means for selling the +national real estate was like using the same implement for an oyster +knife and a razor.[54] + +It has been argued that the _assignats_ sank in value because they +were not well secured,--that securing them on government real estate +was as futile as if the United States had, in the financial troubles +of its early days, secured notes on its real estate. This objection +is utterly fallacious. The government lands of our country were +remote from the centers of capital and difficult to examine; the +French national real estate was near these centers--even _in_ +them--and easy to examine. Our national real estate was unimproved +and unproductive; theirs was improved and productive--its average +productiveness in market in ordinary times being from four to five per +cent.[55] + +It has also been objected that the attempt to secure the _assignats_ +on government real estate failed because of the general want of +confidence in the title derived by the purchasers from the new +government. Every thorough student of that period must know that this +is a misleading statement. Everything shows that the vast majority of +the French people had a fanatical confidence in the stability of the +new government during the greater part of the Revolution. There were +disbelievers in the security of the _assignats_ just as there were +disbelievers in the paper money of the United States throughout our +Civil War; but they were usually a small minority. Even granting that +there was a doubt as to investment in French lands, the French people +certainly had as much confidence in the secure possession of +government lands as any people can ever have in large issues of +government bonds: indeed, it is certain that they had far more +confidence in their lands as a security than modern nations can +usually have in large issues of bonds obtained by payments of +irredeemable paper. One simple fact, as stated by John Stuart Mill, +which made _assignats_ difficult to convert into real estate was that +the vast majority of people could not afford to make investments +outside their business; and this fact is no less fatal to any attempt +to contract large issues of irredeemable paper--save, perhaps, a bold, +statesmanlike attempt, which seizes the best time and presses every +advantage, eschewing all juggling devices and sacrificing everything +to maintain a sound currency based on standards common to the entire +financial world. + +And now was seen, taking possession of the nation, that idea which +developed so easily out of the fiat money system;--the idea that the +ordinary needs of government may be legitimately met wholly by the +means of paper currency;--that taxes may be dispensed with. As a +result, it was found that the _assignat_ printing press was the one +resource left to the government, and the increase in the volume of +paper money became every day more appalling. + +It will doubtless surprise many to learn that, in spite of these +evident results of too much currency, the old cry of a "scarcity of +circulating medium" was not stilled; it appeared not long after each +issue, no matter how large. + +But every thoughtful student of financial history knows that this cry +always comes after such issues--nay, that it _must_ come,--because in +obedience to a natural law, the former scarcity, or rather +_insufficiency_ of currency recurs just as soon as prices become +adjusted to the new volume, and there comes some little revival of +business with the usual increase of credit.[56] + +In August, 1793, appeared a new report by Cambon. No one can read it +without being struck by its mingled ability and folly. His final plan +of dealing with the public debt has outlasted all revolutions since, +but his disposition of the inflated currency came to a wretched +failure. Against Du Pont, who showed conclusively that the wild +increase of paper money was leading straight to, ruin, Cambon carried +the majority in the great assemblies and clubs by sheer audacity--the +audacity of desperation. Zeal in supporting the _assignats_ became +his religion. The National Convention which succeeded the Legislative +Assembly, issued in 1793 over three thousand millions of _assignats_, +and, of these, over twelve hundred millions were poured into the +circulation. And yet Cambon steadily insisted that the security for +the _assignat_ currency was perfect. The climax of his zeal was +reached when he counted as assets in the national treasury the +indemnities which, he declared, France was sure to receive after +future victories over the allied nations with which she was then +waging a desperate war. As patriotism, it was sublime; as finance it +was deadly.[57] + +Everything was tried. Very elaborately he devised a funding scheme +which, taken in connection with his system of issues, was in effect +what in these days would be called an "_interconvertibility scheme_" +By various degrees of persuasion or force,--the guillotine looming up +in the background,--holders of _assignats_ were urged to convert them +into evidence of national debt, bearing interest at five per cent, +with the understanding that if more paper were afterward needed more +would be issued. All in vain. The official tables of depreciation +show that the _assignats_ continued to fall. A forced loan, calling +in a billion of these, checked this fall, but only for a moment. The +"_interconvertibility scheme_" between currency and bonds failed as +dismally as the "_interconvertibility scheme_" between currency and +land had failed.[58] + +A more effective expedient was a law confiscating the property of all +Frenchmen who left France after July 14, 1789, and who had not +returned. This gave new land to be mortgaged for the security of +paper money. + +All this vast chapter in financial folly is sometimes referred to as +if it resulted from the direct action of men utterly unskilled in +finance. This is a grave error. That wild schemers and dreamers took +a leading part in setting the fiat money system going is true; that +speculation and interested financiers made it worse is also true: but +the men who had charge of French finance during the Reign of Terror +and who made these experiments, which seem to us so monstrous, in +order to rescue themselves and their country from the flood which was +sweeping everything to financial ruin were universally recognized as +among the most skillful and honest financiers in Europe. Cambon, +especially, ranked then and ranks now as among the most expert in any +period. The disastrous results of all his courage and ability in the +attempt to stand against the deluge of paper money show how powerless +are the most skillful masters of finance to stem the tide of fiat +money calamity when once it is fairly under headway; and how useless +are all enactments which they can devise against the underlying laws +of nature. + +Month after month, year after year new issues went on. Meanwhile +everything possible was done to keep up the value of paper. The city +authorities of Metz took a solemn oath that the _assignats_ should +bear the same price whether in paper or specie,--and whether in buying +or selling, and various other official bodies throughout the nation +followed this example. In obedience to those who believed with the +market women of Paris, as stated in their famous petition, that "laws +should be passed making paper money as good as gold," Couthon, in +August, 1793, had proposed and carried a law punishing any person who +should sell _assignats_ at less than their nominal value with +imprisonment for twenty years in chains, and later carried a law +making investments in foreign countries by Frenchmen punishable with +death.[59] + +But to the surprise of the great majority of the French people, the +value of the _assignats_ was found, after the momentary spasm of fear +had passed, not to have been permanently increased by these measures: +on the contrary, this "fiat" paper persisted in obeying the natural +laws of finance and, as new issues increased, their value decreased. +Nor did the most lavish aid of nature avail. The paper money of the +nation seemed to possess a magic power to transmute prosperity into +adversity and plenty into famine. The year 1794 was exceptionally +fruitful: and yet with the autumn came scarcity of provisions and with +the winter came distress. The reason is perfectly simple. The +sequences in that whole history are absolutely logical. First, the +Assembly had inflated the currency and raised prices enormously. +Next, it had been forced to establish an arbitrary maximum price for +produce. But this price, large as it seemed, soon fell below the real +value of produce; many of the farmers, therefore, raised less produce +or refrained from bringing what they had to market.[60] But, as is +usual in such cases, the trouble was ascribed to everything rather +than the real cause, and the most severe measures were established in +all parts of the country to force farmers to bring produce to market, +millers to grind and shopkeepers to sell it.[61] The issues of paper +money continued. Toward the end of 1794 seven thousand millions in +_assignats_ were in circulation.[62] By the end of May, 1795, the +circulation was increased to ten thousand millions, at the end of +July, to fourteen thousand millions; and the value of one hundred +_francs_ in paper fell steadily, first to four _francs_ in gold, then +to three, then to two and one-half.[63] But, curiously enough, while +this depreciation was rapidly going on, as at various other periods +when depreciation was rapid, there came an apparent revival of +business. The hopes of many were revived by the fact that in spite of +the decline of paper there was an exceedingly brisk trade in all kinds +of permanent property. Whatever articles of permanent value certain +needy people were willing to sell certain cunning people were willing +to buy and to pay good prices for in _assignats_. At this, hope +revived for a time in certain quarters. But ere long it was +discovered that this was one of the most distressing results of a +natural law which is sure to come into play under such circumstances. +It was simply a feverish activity caused by the intense desire of a +large number of the shrewder class to convert their paper money into +anything and everything which they could hold and hoard until the +collapse which they foresaw should take place. This very activity in +business simply indicated the disease. It was simply legal robbery of +the more enthusiastic and trusting by the more cold-hearted and keen. +It was, the "unloading" of the _assignats_ upon the mass of the +people.[64] + +Interesting is it to note in the midst of all this the steady action +of another simple law in finance. Prisons, guillotines, enactments +inflicting twenty years' imprisonment in chains upon persons twice +convicted of buying or selling paper money at less than its nominal +value, and death upon investors in foreign securities, were powerless. +The National Convention, fighting a world in arms and with an armed +revolt on its own soil, showed titanic power, but in its struggle to +circumvent one simple law of nature its weakness was pitiable. The +_louis d'or_ stood in the market as a monitor, noting each day, with +unerring fidelity, the decline in value of the _assignat_; a monitor +not to be bribed, not to be scared. As well might the National +Convention try to bribe or scare away the polarity of the mariner's +compass. On August 1, 1795, this gold _louis_ of 25 _francs_ was +worth in paper, 920 _francs_; on September 1st, 1,200 _francs_; on +November 1st, 2,600 _francs_; on December 1st, 3,050 _francs_. In +February, 1796, it was worth 7,200 _francs_ or one franc in gold was +worth 288 _francs_ in paper. Prices of all commodities went up nearly +in proportion.[65] The writings of this period give curious details. +Thibaudeau, in his Memoirs, speaks of sugar as 500 _francs_ a pound, +soap, 230 _francs_, candles, 140 _francs_. Mercier, in his lifelike +pictures of the French metropolis at that period, mentions 600 +_francs_ as carriage hire for a single drive, and 6,000 for an entire +day. Examples from other sources are such as the following:--a +measure of flour advanced from two _francs_ in 1790, to 225 _francs_ +in 1795; a pair of shoes, from five _francs_ to 200; a hat, from 14 +_francs_ to 500; butter, to, 560 _francs_ a pound; a turkey, to 900 +_francs_.[66] Everything was enormously inflated in price _except the +wages of labor_. As manufacturers had closed, wages had fallen, until +all that kept them up seemed to be the fact that so many laborers were +drafted off into the army. From this state of things came grievous +wrong and gross fraud. Men who had foreseen these results and had +gone into debt were of course jubilant. He who in 1790 had borrowed +10,000 _francs_ could pay his debts in 1796 for about 35 _francs_. +Laws were made to meet these abuses. As far back as 1794 a plan was +devised for publishing official "tables of depreciation" to be used in +making equitable settlements of debts, but all such machinery proved +futile. On the 18th of May, 1796, a young man complained to the +National Convention that his elder brother, who had been acting as +administrator of his deceased father's estate, had paid the heirs in +_assignats_, and that he had received scarcely one three-hundredth +part of the real value of his share.[67] To meet cases like this, a +law was passed establishing a "scale of proportion." Taking as a +standard the value of the _assignat_ when there were two billions in +circulation, this law declared that, in payment of debts, one-quarter +should be added to the amount originally borrowed for every five +hundred millions added to the circulation. In obedience to this law a +man who borrowed two thousand _francs_ when there were two billions in +circulation would have to pay his creditors twenty-five hundred +_francs_ when half a billion more were added to the currency, and over +thirty-five thousand _francs_ before the emissions of paper reached +their final amount. This brought new evils, worse, if possible, than +the old.[68] + +The question will naturally be asked, _On whom did this vast +depreciation mainly fall at last_? When this currency had sunk to +about one three-hundredth part of its nominal value and, after that, +to nothing, in whose hands was the bulk of it? The answer is simple. +I shall give it in the exact words of that thoughtful historian from +whom I have already quoted: "Before the end of the year 1795 the paper +money was almost exclusively in the hands of the working classes, +employees and men of small means, whose property was not large enough +to invest in stores of goods or national lands.[69] Financiers and men +of large means were shrewd enough to put as much of their property as +possible into objects of permanent value. The working classes had no +such foresight or skill or means. On them finally came the great +crushing weight of the loss. After the first collapse came up the +cries of the starving. Roads and bridges were neglected; many +manufactures were given up in utter helplessness." To continue, in +the words of the historian already cited: "None felt any confidence in +the future in any respect; few dared to make a business investment for +any length of time and it was accounted a folly to curtail the +pleasures of the moment, to accumulate or save for so uncertain a +future."[70] + +This system in finance was accompanied by a system in politics no less +startling, and each system tended to aggravate the other. The wild +radicals, having sent to the guillotine first all the Royalists and +next all the leading Republicans they could entrap, the various +factions began sending each other to the same +destination:--Hébertists, Dantonists, with various other factions and +groups, and, finally, the Robespierrists, followed each other in rapid +succession. After these declaimers and phrase-mongers had thus +disappeared there came to power, in October, 1795, a new +government,--mainly a survival of the more scoundrelly,--the +Directory. It found the country utterly impoverished and its only +resource at first was to print more paper and to issue even while wet +from the press. These new issues were made at last by the two great +committees, with or without warrant of law, and in greater sums than +ever. Complaints were made that the array of engravers and printers +at the mint could not meet the demand for _assignats_--that they could +produce only from sixty to seventy millions per day and that the +government was spending daily from eighty to ninety millions. Four +thousand millions of _francs_ were issued during one month, a little +later three thousand millions, a little later four thousand millions, +until there had been put forth over thirty-five thousand millions. +The purchasing power of this paper having now become almost nothing, +it was decreed, on the 22nd of December, 1795, that the whole amount +issued should be limited to forty thousand millions, including all +that had previously been put forth and that when this had been done +the copper plates should be broken. Even in spite of this, additional +issues were made amounting to about ten thousand millions. But on the +18th of February, 1796, at nine o'clock in the morning, in the +presence of a great crowd, the machinery, plates and paper for +printing _assignats_ were brought to the Place Vendome and there, on +the spot where the Napoleon Column now stands, these were solemnly +broken and burned. + +Shortly afterward a report by Camus was made to the Assembly that the +entire amount of paper money issued in less than six years by the +Revolutionary Government of France had been over forty-five thousand +millions of _francs_--that over six thousand millions had been +annulled and burned and that at the final catastrophe there were in +circulation close upon forty thousand millions. It will be readily +seen that it was fully time to put an end to the system, for the gold +"_louis_" of twenty-five _francs_ in specie had, in February, 1796, as +we have seen, become worth 7,200 _francs_, and, at the latest +quotation of all, no less than 15,000 _francs_ in paper money--that +is, one franc in gold was nominally worth 600 _francs_ in paper. + +Such were the results of allowing dreamers, schemers, phrase-mongers, +declaimers and strong men subservient to these to control a +government.[71] + + +III. + +The first new expedient of the Directory was to secure a forced loan +of six hundred million _francs_ from the wealthier classes; but this +was found fruitless. Ominous it was when persons compelled to take +this loan found for an _assignat_ of one hundred _francs_ only one +franc was allowed. Next a National Bank was proposed; but capitalists +were loath to embark in banking while the howls of the mob against all +who had anything especially to do with money resounded in every city. +At last the Directory bethought themselves of another expedient. This +was by no means new. It had been fully tried on our continent twice +before that time: and once, since--first, in our colonial period; +next, during our Confederation; lastly, by the "Southern Confederacy" +and here, as elsewhere, always in vain. But experience yielded to +theory--plain business sense to financial metaphysics. It was +determined to issue a new paper which should be "fully secured" and +"as good as gold." + +Pursuant to this decision it was decreed that a new paper money "fully +secured and as good as gold" be issued under the name of "_mandats_." +In order that these new notes should be "fully secured," choice public +real estate was set apart to an amount fully equal to the nominal +value of the issue, and any one offering any amount of the _mandats_ +could at once take possession of government lands; the price of the +lands to be determined by two experts, one named by the government and +one by the buyer, and without the formalities and delays previously +established in regard to the purchase of lands with _assignats_. + +Perhaps the most whimsical thing in the whole situation was the fact +that the government, pressed as it was by demands of all sorts, +continued to issue the old _assignats_ at the same time that it was +discrediting them by issuing the new _mandats_. And yet in order to +make the _mandats_ "as good as gold" it was planned by forced loans +and other means to reduce the quantity of _assignats_ in circulation, +so that the value of each _assignat_ should be raised to one-thirtieth +of the value of gold, then to make _mandats_ legal tender and to +substitute them for _assignats_ at the rate of one for thirty. Never +were great expectations more cruelly disappointed. Even before the +_mandats_ could be issued from the press they fell to thirty-five per +cent of their nominal value; from this they speedily fell to fifteen, +and soon after to five per cent, and finally, in August, 1796, six +months from their first issue, to three per cent. This plan +failed--just as it failed in New England in 1737; just as it failed +under our own Confederation in 1781; just as it failed under the +Southern Confederacy during our Civil War.[72] + +To sustain this new currency the government resorted to every method +that ingenuity could devise. Pamphlets suited to people of every +capacity were published explaining its advantages. Never was there +more skillful puffing. A pamphlet signed "Marchant" and dedicated to +"People of Good Faith" was widely circulated, in which Marchant took +pains to show the great advantage of the _mandats_ as compared with +_assignats_,--how land could be more easily acquired with them; how +their security was better than with _assignats_; how they could not, +by any possibility, sink in values as the _assignats_ had done. But +even before the pamphlet was dry from the press the depreciation of +the _mandats_ had refuted his entire argument.[73] + +The old plan of penal measures was again pressed. Monot led off by +proposing penalties against those who shall speak publicly against the +_mandats_; Talot thought the penalties ought to be made especially +severe; and finally it was enacted that any persons "who by their +discourse or writing shall decry the _mandats_ shall be condemned to a +fine of not less than one thousand _francs_ or more than ten thousand; +and in case of a repetition of the offence, to four years in irons." +It was also decreed that those who refused to receive the _mandats_ +should be fined,--the first time, the exact sum which they refuse; the +second time, ten times as much; and the third time, punished with two +years in prison. But here, too, came in the action of those natural +laws which are alike inexorable in all countries. This attempt proved +futile in France just as it had proved futile less than twenty years +before in America. No enactments could stop the downward tendency of +this new paper "fully secured," "as good as gold"; the laws that +finally govern finance are not made in conventions or congresses.[74] + +From time to time various new financial juggles were tried, some of +them ingenious, most of them drastic. It was decreed that all +_assignats_ above the value of one hundred _francs_ should cease to +circulate after the beginning of June, 1796. But this only served to +destroy the last vestige of, confidence in government notes of any +kind. Another expedient was seen in the decree that paper money +should be made to accord with a natural and immutable standard of +value and that one franc in paper should thenceforth be worth ten +pounds of wheat. This also failed. On July 16th another decree +seemed to show that the authorities despaired of regulating the +existing currency and it was decreed that all paper, whether _mandats_ +or _assignats_, should be taken at its real value, and that bargains +might be made in whatever currency people chose. The real value of +the _mandats_ speedily sank to about two per cent of their nominal +value and the only effect of this legislation seemed to be that both +_assignats_ and _mandats_ went still lower. Then from February 4 to +February 14, 1797, came decrees and orders that the engraving +apparatus for the _mandats_ should be destroyed as that for the +_assignats_ had been, that neither _assignats_ nor _mandats_ should +longer be a legal tender and that old debts to the state might be paid +for a time with government paper at the rate of one per cent of their +face value.[75] Then, less than three months later, it was decreed +that the twenty-one billions of _assignats_ still in circulation +should be annulled. Finally, on September 30, 1797, as the +culmination of these and various other experiments and expedients, +came an order of the Directory that the national debts should be paid +two-thirds in bonds which might be used in purchasing confiscated real +estate, and the remaining "Consolidated Third," as it was called, was +to be placed on the "Great Book" of the national debt to be paid +thenceforth as the government should think best. + +As to the bonds which the creditors of the nation were thus forced to +take, they sank rapidly, as the _assignats_ and _mandats_ had done, +even to three per cent of their value. As to the "Consolidated +Third," that was largely paid, until the coming of Bonaparte, in paper +money which sank gradually to about six per cent of its face value. +Since May, 1797, both _assignats_ and _mandats_ had been virtually +worth nothing. + +So ended the reign of paper money in France. The twenty-five hundred +millions of _mandats_ went into the common heap of refuse with the +previous forty-five thousand millions of _assignats_: the nation in +general, rich and poor alike, was plunged into financial ruin from one +end to the other. + +On the prices charged for articles of ordinary use light is thrown by +extracts from a table published in 1795, reduced to American coinage. + + 1790 1795 +For a bushel of flour 40 cents 45 dollars +For a bushel of oats 18 cents 10 dollars +For a cartload of wood 4 dollars 500 dollars +For a bushel of coal 7 cents 2 dollars +For a pound of sugar 18 cents 12 1/2 dollars +For a pound of soap 18 cents 8 dollars +For a pound of candles 18 cents 8 dollars +For one cabbage 8 cents 5 1/2 dollars +For a pair of shoes 1 dollar 40 dollars +For twenty-five eggs 24 cents 5 dollars + +But these prices about the middle of 1795 were moderate compared with +those which were reached before the close of that year and during the +year following. Perfectly authentic examples were such as the +following: + +A pound of bread 9 dollars +A bushel of potatoes 40 dollars +A pound of candles 40 dollars +A cartload of wood 250 dollars + +So much for the poorer people. Typical of those esteemed wealthy may +be mentioned a manufacturer of hardware who, having retired from +business in 1790 with 321,000 _livres_, found his property in 1796 +worth 14,000 _francs_.[76] + +For this general distress arising from the development and collapse of +"fiat" money in France, there was, indeed, one exception. In Paris +and a few of the other great cities, men like Tallien, of the +heartless, debauched, luxurious, speculator, contractor and +stock-gambler class, had risen above the ruins of the multitudes of +smaller fortunes. Tallien, one of the worst demagogue "reformers," +and a certain number of men like him, had been skillful enough to +become millionaires, while their dupes, who had clamored for issues of +paper money, had become paupers. + +The luxury and extravagance of the currency gamblers and their +families form one of the most significant features in any picture of +the social condition of that period.[77] + +A few years before this the leading women in French society showed a +nobility of character and a simplicity in dress worthy of Roman +matrons. Of these were Madame Boland and Madame Desmoulins; but now +all was changed. At the head of society stood Madame Tallien and +others like her, wild in extravagance, daily seeking new refinements +in luxury, and demanding of their husbands and lovers vast sums to +array them and to feed their whims. If such sums could not be +obtained honestly they must be had dishonestly. The more closely one +examines that period, the more clearly he sees that the pictures, +given by Thibaudeau and Challamel and De Goncourt are not at all +exaggerated.[78] + +The contrast between these gay creatures of the Directory period and +the people at large was striking. Indeed much as the vast majority of +the wealthy classes suffered from impoverishment, the laboring +classes, salaried employees of all sorts, and people of fixed income +and of small means, especially in the cities, underwent yet greater +distress. These were found, as a rule, to subsist mainly on daily +government rations of bread at the rate of one pound per person. This +was frequently unfit for food and was distributed to long lines of +people, men, women and children, who were at times obliged to wait +their turn even from dawn to dusk. The very rich could, by various +means, especially by bribery, obtain better bread, but only at +enormous cost. In May, 1796, the market price of good bread was, in +paper, 80 _francs_ (16 dollars) per pound and a little later +provisions could not be bought for paper money at any price.[79] + +And here it may be worth mentioning that there was another financial +trouble especially vexatious. While, as we have seen, such enormous +sums, rising from twenty to forty thousand millions of _francs_ in +paper, were put in circulation by the successive governments of the +Revolution, enormous sums had been set afloat in counterfeits by +criminals and by the enemies of France. These came not only from +various parts of the French Republic but from nearly all the +surrounding nations, the main source being London. Thence it was that +Count Joseph de Puisaye sent off cargoes of false paper, excellently +engraved and printed, through ports in Brittany and other disaffected +parts of France. One seizure by General Hoche was declared by him to +exceed in nominal value ten thousand millions of _francs_. With the +exception of a few of these issues, detection was exceedingly +difficult, even for experts; for the vast majority of the people it +was impossible. + +Nor was this all. At various times the insurgent royalists in La +Vendee and elsewhere put _their_ presses also in operation, issuing +notes bearing the Bourbon arms,--the _fleur-de-lis_, the portrait of +the Dauphin (as Louis XVII) with the magic legend "_De Par le Roi_," +and large bodies of the population in the insurgent districts were +_forced_ to take these. Even as late as 1799 these notes continued to +appear.[80] + +The financial agony was prolonged somewhat by attempts to secure funds +by still another "forced loan," and other discredited measures, but +when all was over with paper money, specie began to reappear--first in +sufficient sums to do the small amount of business which remained +after the collapse. Then as the business demand increased, the amount +of specie flowed in from the world at large to meet it and the nation +gradually recovered from that long paper-money debauch. + +Thibaudeau, a very thoughtful observer, tells us in his Memoirs that +great fears were felt as to a want of circulating medium between the +time when paper should go out and coin should come in; but that no +such want was severely felt--that coin came in gradually as it was +wanted.[81] + +Nothing could better exemplify the saying of one of the most shrewd of +modern statesmen that "There will always be money."[82] + +But though there soon came a degree of prosperity--as compared with +the distress during the paper-money orgy, convalescence was slow. The +acute suffering from the wreck and rain brought by _assignats_, +_mandats_ and other paper currency in process of repudiation lasted +nearly ten years, but the period of recovery lasted longer than the +generation which followed. It required fully forty years to bring +capital, industry, commerce and credit up to their condition when the +Revolution began, and demanded a "man on horseback," who established +monarchy on the ruins of the Republic and thew away millions of lives +for the Empire, to be added to the millions which had been sacrificed +by the Revolution.[83] + +Such, briefly sketched in its leading features, is the history of the +most skillful, vigorous and persistent attempt ever made to substitute +for natural laws in finance the ability of legislative bodies, and, +for a standard of value recognized throughout the world, a national +standard devised by theorists and manipulated by schemers. Every +other attempt of the same kind in human history, under whatever +circumstances, has reached similar results in kind if not in degree; +all of them show the existence of financial laws as real in their +operation as those which hold the planets in their courses.[84] + +I have now presented this history in its chronological order--the +order of events: let me, in conclusion, sum it up, briefly, in its +_logical_ order,--the order of cause and effect. + +And, first, in the economic department. From the early reluctant and +careful issues of paper we saw, as an immediate result, improvement +and activity in business. Then arose the clamor for more paper money. +At first, new issues were made with great difficulty; but, the dyke +once broken, the current of irredeemable currency poured through; and, +the breach thus enlarging, this currency was soon swollen beyond +control. It was urged on by speculators for a rise in values; by +demagogues who persuaded the mob that a nation, by its simple fiat, +could stamp real value to any amount upon valueless objects. As a +natural consequence a great debtor class grew rapidly, and this class +gave its influence to depreciate more and more the currency in which +its debts were to be paid.[85] + +The government now began, and continued by spasms to grind out still +more paper; commerce was at first stimulated by the difference in +exchange; but this cause soon ceased to operate, and commerce, having +been stimulated unhealthfully, wasted away. + +Manufactures at first received a great impulse; but, ere long, this +overproduction and overstimulus proved as fatal to them as to +commerce. From time to time there was a revival of hope caused by an +apparent revival of business; but this revival of business was at last +seen to be caused more and more by the desire of far-seeing and +cunning men of affairs to exchange paper money for objects of +permanent value. As to the people at large, the classes living on +fixed incomes and small salaries felt the pressure first, as soon as +the purchasing power of their fixed incomes was reduced. Soon the +great class living on wages felt it even more sadly. + +Prices of the necessities of life increased: merchants were obliged to +increase them, not only to cover depreciation of their merchandise, +but also to cover their risk of loss from fluctuation; and, while the +prices of products thus rose, wages, which had at first gone up, under +the general stimulus, lagged behind. Under the universal doubt and +discouragement, commerce and manufactures were checked or destroyed. +As a consequence the demand for labor was diminished; laboring men +were thrown out of employment, and, under the operation of the +simplest law of supply and demand, the price of labor--the daily wages +of the laboring class--went down until, at a time when prices of food, +clothing and various articles of consumption were enormous, wages were +nearly as low as at the time preceding the first issue of irredeemable +currency. + +The mercantile classes at first thought themselves exempt from the +general misfortune. They were delighted at the apparent advance in +the value of the goods upon their shelves. But they soon found that, +as they increased prices to cover the inflation of currency and the +risk from fluctuation and uncertainty, purchases became less in amount +and payments less sure; a feeling of insecurity spread throughout the +country; enterprise was deadened and stagnation followed. + +New issues of paper were then clamored for as more drams are demanded +by a drunkard. New issues only increased the evil; capitalists were +all the more reluctant to embark their money on such a sea of doubt. +Workmen of all sorts were more and more thrown out of employment. +Issue after issue of currency came; but no relief resulted save a +momentary stimulus, which aggravated the disease. The most ingenious +evasions of natural laws in finance which the most subtle theorists +could contrive were tried--all in vain; the most brilliant substitutes +for those laws were tried; "self-regulating" schemes, +"interconverting" schemes--all equally vain.[86] All thoughtful men +had lost confidence. All men were _waiting_; stagnation became worse +and worse. At last came the collapse and then a return, by a fearful +shock, to a state of things which presented something like certainty +of remuneration to capital and labor. Then, and not till then, came +the beginning of a new era of prosperity. + +Just as dependent on the law of cause and effect was the _moral_ +development. Out of the inflation of prices grew a speculating class; +and, in the complete uncertainty as to the future, all business became +a game of chance, and all business men, gamblers. In city centers +came a quick growth of stock-jobbers and speculators; and these set a +debasing fashion in business which spread to the remotest parts of the +country. Instead of satisfaction with legitimate profits, came a +passion for inordinate gains. Then, too, as values became more and +more uncertain, there was no longer any motive for care or economy, +but every motive for immediate expenditure and present enjoyment. So +came upon the nation the _obliteration of thrift_. In this mania for +yielding to present enjoyment rather than providing for future comfort +were the seeds of new growths of wretchedness: luxury, senseless and +extravagant, set in: this, too, spread as a fashion. To feed it, +there came cheatery in the nation at large and corruption among +officials and persons holding trusts. While men set such fashions in +private and official business, women set fashions of extravagance in +dress and living that added to the incentives to corruption. Faith in +moral considerations, or even in good impulses, yielded to general +distrust. National honor was thought a fiction cherished only by +hypocrites. Patriotism was eaten out by cynicism. + +Thus was the history of France logically developed in obedience to +natural laws; such has, to a greater or less degree, always been the +result of irredeemable paper, created according to the whim or +interest of legislative assemblies rather than based upon standards of +value permanent in their nature and agreed upon throughout the entire +world. Such, we may fairly expect, will always be the result of them +until the fiat of the Almighty shall evolve laws in the universe +radically different from those which at present obtain.[87] + +And, finally, as to the general development of the theory and practice +which all this history records: my subject has been Fiat Money in +France; How it came; What it brought; and How it ended. + +It came by seeking a remedy for a comparatively small evil in an evil +infinitely more dangerous. To cure a disease temporary in its +character, a corrosive poison was administered, which ate out the +vitals of French prosperity. + +It progressed according to a law in social physics which we may call +the "_law of accelerating issue and depreciation._" It was +comparatively easy to refrain from the first issue; it was exceedingly +difficult to refrain from the second; to refrain from the third and +those following was practically impossible. + +It brought, as we have seen, commerce and manufactures, the mercantile +interest, the agricultural interest, to ruin. It brought on these the +same destruction which would come to a Hollander opening the dykes of +the sea to irrigate his garden in a dry summer. + +It ended in the complete financial, moral and political prostration of +France-a prostration from which only a Napoleon could raise it. + +But this history would be incomplete without a brief sequel, showing +how that great genius profited by all his experience. When Bonaparte +took the consulship the condition of fiscal affairs was appalling. +The government was bankrupt; an immense debt was unpaid. The further +collection of taxes seemed impossible; the assessments were in +hopeless confusion. War was going on in the East, on the Rhine, and +in Italy, and civil war, in La Vendée. All the armies had long been +unpaid, and the largest loan that could for the moment be effected was +for a sum hardly meeting the expenses of the government for a single +day. At the first cabinet council Bonaparte was asked what he +intended to do. He replied, "I will pay cash or pay nothing." From +this time he conducted all his operations on this basis. He arranged +the assessments, funded the debt, and made payments in cash; and from +this time--during all the campaigns of Marengo, Austerlitz, Jena, +Eylau, Friedland, down to the Peace of Tilsit in 1807--there was but +one suspension of specie payment, and this only for a few days. When +the first great European coalition was formed against the Empire, +Napoleon was hard pressed financially, and it was proposed to resort +to paper money; but he wrote to his minister, "While I live I will +never resort to irredeemable paper." He never did, and France, under +this determination, commanded all the gold she needed. When Waterloo +came, with the invasion of the Allies, with war on her own soil, with +a change of dynasty, and with heavy expenses for war and indemnities, +France, on a specie basis, experienced no severe financial distress. + +If we glance at the financial history of France during the +Franco-Prussian War and the Communist struggle, in which a far more +serious pressure was brought upon French finances than our own recent +Civil War put upon American finance, and yet with no national +stagnation or distress, but with a steady progress in prosperity, we +shall see still more clearly the advantage of meeting a financial +crisis in an honest and straightforward way, and by methods sanctioned +by the world's most costly experience, rather than by yielding to +dreamers, theorists, phrase-mongers, declaimers, schemers, speculators +or to that sort of, "Reform" which is "the last refuge of a +scoundrel."[88] + +There is a lesson in all this which it behooves every thinking man to +ponder. + + +NOTES + + +Note: The White Collection at the Cornell University library mentioned +in many of the following notes is described here: + +http://rmc.library.cornell.edu/collections/subjects/frrev.html + +[1] A paper read before a meeting of Senators and Members of the House +of Representatives of both political parties, at Washington, April +12th, and before the Union League Club, at New York, April 13th, 1876, +and now (1914) revised and extended. + +[2] For proof that the financial situation of France at that time was +by no means hopeless, see Storch, "Economie Politique," vol. iv, +p. 159. + +[3] See Moniteur, sitting of April 10, 1790. + +[4] Ibid., sitting of April 15, 1790. + +[5] For details of this struggle, see Buchez and Roux, "Histoire +Parlementaire de la Révolution Française," vol. iii, pp. 364, 365, +404. For the wild utterances of Marat throughout this whole history, +see the full set of his "L'ami du peuple" in the President White +Collection of the Cornell University. For Bergasse's pamphlet and a +mass of similar publications, see the same collection. For the effect +produced by them, see Challamel, "Les Français sous la Révolution"; +also De Goncourt, "La Société Française pendant la Révolution," +&c. + +For the Report referred to, see Levasseur, "Histoire des classes +ouvriès et de l'industrie en France de 1789 à 1870," Paris, 1903, +vol. i., chap. 6. Levasseur (vol. 1, p. 120), a very strong +conservative in such estimates, sets the total value of church +property at two thousand millions; other authorities put it as high as +twice that sum. See especially Taine, liv. ii, ch. I., who gives the +valuation as "about four milliards." Sybel, "Gesch. der +Revolutionszeit," gives it as two milliards and Briand, "La +séparation" &c., agrees with him. See also De Nerve, "Finances +Françaises," vol. ii, pp. 236-240; also Alison, "History of Europe," +vol. i. + +[6] For striking pictures of this feeling among the younger generation +of Frenchmen, see Challamel, "Sur la Révolution," p. 305. For +general history of John Law's paper money, see Henri Martin, "Histoire +de France"; also Blanqui, "Histoire de l'économie politique," +vol. ii, pp. 65-87; also Senior on "Paper Money," sec. iii, Pt. I, +also Thiers, "Histoire de Law"; also Levasseur, op. cit. Liv. i., +chap. VI. Several specimens of John Law's paper currency are to be +found in the White Collection in the Library of Cornell +University,--some, numbered with enormous figures. + +[7] See Buchez and Roux, "Histoire Parlementaire," vol. v, p. 321, et +seq. For an argument to prove that the _assignats_ were, after all, +not so well secured as John Law's money, see Storch, "Economie +Politique," vol. iv, p. 160. + +[8] For specimens of this first issue and of nearly every other issue +during the French Revolution, see the extensive collection of +originals in the Cornell University Library. For a virtually complete +collection of photographic copies, see Dewamin, "Cent ans de +numismatique française," vol. i, passim. + +[9] See "Addresse de l'Assemblée nationals sur lea emissions +_d'assignats_ monnaies," p. 5. + +[10] Ibid., p. 10. + +[11] For Sarot, see "Lettre de M. Sarot," Paris, April 19, 1790. As +to the sermon referred to see Levasseur as above, vol. i, p. 136. + +[12] Von Sybel, "History of the French Revolution," vol. i, p. 252; +also Levasseur, as above, pp. 137 and following. + +[13] For Mirabeau's real opinion on irredeemable paper, see his letter +to Cerutti, in a leading article of the "Moniteur"; also "Mèmoires do +Mirabeau," vol. vii, pp. 23, 24 and elsewhere. For his pungent +remarks above quoted, see Levasseur, ibid., vol. i, p. 118. + +[14] See "Moniteur," August 27, 1790. + +[15] "Moniteur," August 28, 1790; also Levasseur, as above, pp. 139 +_et seq_. + +[16] "Par une seule opération, grande, simple, magnifique." See +"Moniteur." The whole sounds curiously like the proposals of the +"Greenbackers," regarding the American debt, some years since. + +[17] "Moniteur," August 29, 1790. + +[18] See Lacretelle, "18me Siécle," vol. viii, pp. 84-87; also Thiers +and Mignet. + +[19] See Hatin, Histoire de la Presse en France, vols. v and vi. + +[20] See "Moniteur," Sept. 5, 6 and 20, 1790. + +[21] See Levasseur, vol. i, p. 142. + +[22] See speech in "Moniteur"; also in Appendix to Thiers' "History of +the French Revolution." + +[23] See Levassear, "Classes ouvrières," etc., vol. i, p. 149. + +[24] See Levasseur, pp. 151 et seq. Various examples of these +"confidence bills" are to be seen in the Library of Cornell +University. + +[25] See Levasseur, vol. i, pp. 155-156. + +[26] See Von Sybel, "History of the Revolution," vol. i, p. 265; also +Levasseur, as above, vol. i, pp. 152-160. + +[27] For Turgot's argument against "fiat money" theory, see A. D. +White, "Seven Great Statesmen in the Warfare of Humanity with +Unreason," article on Turgot, pp. 169, et seq. + +[28] See De Goncourt, Société française," for other explanations; +"Les Révolutions de Paris," vol. ii, p. 216; Challamel, "Les +Français sous la Révolution"; Senior, "On Some Effects of Paper +Money," p. 82; Buchez and Roux, "Histoire Parlementaire," etc., +vol. x, p. 216; Aulard, "Paris pendant la Révolution +thermidorienne," _passim_, and especially "Rapport du bureau de +surveillance," vol. ii, pp. 562, et seq. (Dec. 4-24, 1795.) + +[29] For statements and illustration of the general action of this +law, see Sumner, "History of American Currency," pp. 157, 158; also +Jevons, on "Money," p. 80. + +[30] See De Goncourt, "Société Française," p. 214. + +[31] See Von Sybel, History of the French Revolution, vol. 1, pp. +281, 283. + +[32] For proofs that issues of irredeemable paper at first stimulated +manufactures and commerce in Austria and afterward ruined them, see +Storch's "Economie politique," vol. iv, p. 223, note; and for the same +effect produced by the same causes in Russia, see ibid., end of +vol. iv. For the same effects in America, see Sumner's "History of +American Currency." For general statement of effect of inconvertible +issues on foreign exchanges see McLeod on "Banking," p. 186. + +[33] See Louis Blanc, "Histoire de la Révolution," tome xii, p. 113. + +[34] See "Extrait du registre des délibérations de la section de la +bibliothèque," May 3, 1791, pp. 4, 5. + +[35] Von Sybel, vol. i, p. 273. + +[36] For general account, see Thiers' "Révolution," chap. xiv; also +Lacretelle, vol. viii, p. 109; also "Memoirs of Mallet du Pan." For a +good account of the intrigues between the court and Mirabeau and of +the prices paid him, see Reeve, "Democracy and Monarchy in France," +vol. i, pp. 213-220. For a very striking caricature published after +the iron chest in the Tuileries was opened and the evidences of +bribery of Mirabeau fully revealed, see Challamel, "Musée," etc. Vol. +i, p. 341, is represented as a skeleton sitting on a pile of letters, +holding the French crown in one hand and a purse of gold in the other. + +[37] Thiers, chap. ix. + +[38] For this and other evidences of steady decline in the purchasing +power of the _assignats_, see Caron, "Tableaux de Dépréciation du +papier-monnaie," Paris, 1909, p. 386. + +[39] See especially "Discours de Fabre d'Eglantine," in "Moniteur" for +August 11, 1793; also debate in "Moniteur" of September 15, 1793; also +Prudhomme's "Révolutions de Paris." For arguments of much the same +tenor, see vast numbers of pamphlets, newspaper articles and speeches +during the "Greenback Craze,"--and the craze for unlimited coinage of +silver,--in the United States. + +[40] See Caron, "Tableaux de Dépréciation," as above, p. 386. + +[41] Von Sybel, vol. i, pp. 509, 510, 515; also Villeneuve Bargemont, +"Histoire de l'Economie Politique," vol. ii, p. 213. + +[42] As to the purchasing power of money at that time, see Arthur +Young, "Travels in France during the Years 1787, 1788 and 1789." For +notices of the small currency with examples of satirical verses +written regarding it, see Challamel, "Les français sous la +Révolution," pp. 307, 308. See also Mercier, "Le Nouveau Paris," +edition of 1800, chapter ccv., entitled "Parchemin Monnaie." A series +of these petty notes will be found in the White collection of the +Cornell University Library. They are very dirty and much worn, but +being printed on parchment, remain perfectly legible. For issue of +quarter-"_sou_" pieces see Levasseur, p. 180. + +[43] See Levasseur, vol. i, p. 176. + +[44] For Chaumette's brilliant display of fictitious reasons for the +decline see Thiers, Shoberl's translation, published by Bentley, vol. +iii, p. 248. + +[45] For these fluctuations, see Caron, as above, p. 387. + +[46] One of the Forced Loan certificates will be found in the White +Collection in the Library of Cornell University. + +[47] For details of these transactions, see Levasseur, as above, +vol. i, chap. 6, pp. 181, et seq. Original specimens of these notes, +bearing the portrait of Louis XVI will be found in the Cornell +University Library (White Collection) and for the whole series +perfectly photographed in the same collection, Dewarmin, "Cent ans de +numismatique française," vol. i, pp. 143-165. + +[48] For statements showing the distress and disorder that forced the +Convention to establish the "_Maximum_" see Levasseur, vol. i, pp. +188-193. + +[49] See Levasseur, as above, vol. i, pp. 195-225. + +[50] See specimens of these tickets in the White Collection in the +Cornell Library. + +[51] For these condemnations to the guillotine see the officially +published trials and also the lists of the condemned, in the White +Collection, also the lists given daily in the "Moniteur." For the spy +system, see Levasseur, vol. i, p. 194. + +[52] See Levasseur, as above, vol. i, p. 186. For an argument to show +that the Convention was led into this Draconian legislation, not by +necessity, but by its despotic tendencies, see Von Sybel's "History of +the French Revolution," vol. iii, pp. 11, 12. For general statements +of theories underlying the "_Maximum_," see Thiers; for a very +interesting picture, by an eye-witness, of the absurdities and +miseries it caused, see Mercier, "Nouveau Paris," edition of 1800, +chapter XLIV. + +[53] For a summary of the report of the Committee, with list of +articles embraced under it, and for various interesting details, see +Villeneuve Bargemont, "Histoire de l'Economie Politique," vol. ii, +pp. 213-239; also Levasseur, as above. For curious examples of severe +penalties for very slight infringements on the law on the subject, see +Louis Blanc, "Histoire de la Révolution française," tome x, p. 144. +For Louis XIVth's claim see "Memoirs of Louis XIV for the Instruction +of the Dauphin." + +For a simple exposition of the way in which the exercise of this power +became simply confiscation of all private property in France, see +Mallet Du Pan's "Memoirs," London, 1852, vol. ii, p. 14. + +[54] See Du Pont's arguments, as given by Levasseur. + +[55] Louis Blanc calls attention to this very fact in showing the +superiority of the French _assignats_ to the old American Continental +currency, See his "Histoire de la Révolution française," tome xii, +p. 98. + +[56] See Sumner, as above, p. 220. + +[57] See Levasseur, as above, vol. i, p. 178. + +[58] See Cambon's "Report," Aug. 15, 1793, pp. 49-60; also, "Decree of +Aug. 24, 1793," sec. 31, chapters XCVI-CIII. Also, "Tableaux de la +dépréciation de papier monnaie dans le department de la Seine." + +[59] For the example of Metz and other authorities, see Levasseur, as +above, vol. i, p. 180. + +[60] See Von Sybel, vol. iii, p. 173. + +[61] See Thiers; also, for curious details of measures taken to compel +farmers and merchants, see Senior, Lectures on "Results of Paper +Money," pp. 86, 87. + +[62] See Von Sybel, vol. iv, p. 231. + +[63] See Von Sybel, vol. iv, p. 330; also tables of depreciation in +"Moniteur"; also official reports in the White Collection; also +Caron's "Tables," etc. + +[64] For a lifelike sketch of the way in which these exchanges of +_assignats_ for valuable property went on at periods of the rapid +depreciation of paper, see Challamel, "Les français sous la +Révolution," p. 309; also Say, "Economic Politique." + +[65] For a very complete table of the depreciation from day to day, +see "Supplement to the Moniteur" of October 2, 1797; also Caron, as +above. For the market prices of the _louis d'or_ at the first of +every month, as the collapse approached, see Montgaillard. See also +"Official Lists" in the White Collection. For a table showing the +steady rise of the franc in gold during a single week, from 251 to 280 +_francs_, see Dewarmin, as above, vol. i, p. 136. + +[66] See "Mèmoires de Thibaudeau," vol. ii, p. 26, also Mercier, "Lo +Nouveau Paris," vol. ii, p. 90; for curious example of the scales of +depreciation see the White Collection. See also extended table of +comparative values in 1790 and 1795. See Levasseur, as above, vol. i, +pp. 223-4. + +[67] For a striking similar case in our own country, see Sumner, +"History of American Currency, " p. 47. + +[68] See Villeneuve Bargemont, "Histoire de l'économie politique," +vol. ii, p. 229. + +[69] See Von Sybel, vol. iv, pp. 337, 338. See also for confirmation +Challamel, "Histoire Musée," vol. ii, p. 179. For a thoughtful +statement of the reasons why such paper was not invested in lands by +men of moderate means, and workingmen, see Mill, "Political Economy," +vol. ii, pp. 81, 82. + +[70] See Von Sybel, vol. iv, p. 222. + +[71] See especially Levasseur, "Histoire des classes ouvrières," etc. +vol. i, pp. 219, 230 and elsewhere; also De Nervo, "Finance +française," p. 280; also Stourm, as already cited. The exact amount +of _assignats_ in circulation at the final suppression is given by +Dowarmin, (vol. i, p. 189), as 39,999,945,428 _livres_ or _francs_. + +[72] For details of the mandat system very thoroughly given, see +Thiers' "History of the French Revolution," Bentley's edition, vol. +iv, pp. 410-412. For the issue of _assignats_ and _mandats_ at the +same time, see Dewarmin, vol. i, p. 136; also Levasseur, vol. i, pp. +230-257. For an account of "new tenor bills" in America and their +failure in 1737, see Summer, pp. 27-31; for their failure in 1781, see +Morse, "Life of Alexander Hamilton," vol. i, pp. 86, 87. For similar +failure in Austria, see Summer, p. 314. + +[73] See Marchant, "Lettre aux gens de bonne foi." + +[74] See Summer, p. 44; also De Nervo, "Finances françaises," p. 282. + +[75] See De Nervo, "Finances françaises," p. 282; also Levasseur, +vol. i, p. 236 et seq. + +[76] See Table from "Gazette de France" and extracts from other +sources in Levasseur, vol. i, pp. 223-4. + +[77] Among the many striking accounts of the debasing effects of +"inflation" upon France under the Directory perhaps the best is that +of Lacretelle, vol. xiii, pp. 32-36. For similar effect, produced by +the same cause in our own country in 1819, see statement from Niles' +"Register," in Sumner, p. 80. For the jumble of families reduced to +beggary with families lifted into sudden wealth and for the mass of +folly and misery thus mingled, see Levassour, vol. i, p. 237. + +[78] For Madame Tallien and luxury of the stock-gambler classes, see +Challamel, "Les français sous la Révolution," pp. 30, 33; also De +Goncourt, "Les français sous le Directoire." Regarding the outburst +of vice in Paris and the demoralization of the police, see Levasseur, +as above. + +[79] See Levasseur, Vol. i, p. 237, et seq. + +[80] For specimens of counterfeit _assignats_, see the White +Collection in the Cornell University Library, but for the great series +of various issues of them in fac-simile, also for detective warnings +and attempted descriptions of many varieties of them, and for the +history of their Issue, see especially Dewarmin, vol. i, pp. 152-161. +For photographic copies of Royalist _assignats_, etc., see also +Dewarmin, ibid., pp. 192-197, etc. For a photograph of probably the +last of the Royalist notes ever issued, bearing the words "Pro Deo, +pro Rege, pro Patria" and "Armée Catholique et Royale" with the date +1799, and for the sum of 100 _livres_, see Dewarmin, vol. i, p. 204. + +[81] For similar expectation of a "shock," which did not occur, at the +resumption of specie payments in Massachusetts, see Sumner, "History +of American Currency," p. 34. + +[82] See Thiers. + +[83] See Levasseur, vol. i, p. 246. + +[84] For examples of similar effects in Russia, Austria and Denmark, +see Storch, "Economie Politique," vol. iv; for similar effects in the +United States, see Gouge, "Paper Money and Banking in the United +States," also Summer, "History of American Currency." For working out +of the same principles in England, depicted in a masterly way, see +Macaulay, "History of England," chap. xxi; and for curious exhibition +of the same causes producing same results in ancient Greece, see a +curious quotation by Macaulay in same chapter. + +[85] For parallel cases in the early history of our own country, see +Sumner, p. 21, and elsewhere. + +[86] For a review of some of these attempts, with eloquent statement +of their evil results, see "Mémoires de Durand de Maillane," pp. +166-169. + +[87] For similar effect of inflated currency in enervating and +undermining trade, husbandry, manufactures and morals in our own +country, see Daniel Webster, cited in Sumner, pp. 45-50. For similar +effects in other countries, see Senior, Storch, Macaulay and others +already cited. + +[88] For facts regarding French finance under Napoleon I am indebted +to Hon. David A. Wells. For more recent triumphs of financial +commonsense in France, see Bonnet's articles, translated by the late +George Walker, Esq. For general subject, see Levasseur. + + + +THE BANK OF NEW YORK, established in 1784, was the only Bank in +existence in the city of New York at the time of the French experiment +with fiat money. + +THE BANK OF NEW YORK AND TRUST COMPANY, which celebrates its +one-hundred and fiftieth anniversary in March, 1934, considers it a +privilege to be able to distribute some copies of this scholarly +article of the late Andrew D. White. The article emphasizes the fact +that the use of fiat money in France was in its beginning a sincere +effort on the part of intelligent members of the National Assembly to +stem the tide of misery and wretchedness which had brought about the +Revolution in 1789. But the article also shows clearly that once +started on a small scale, it became utterly impossible to control the +currency inflation and that after some slight indications of +improvement in conditions, the situation went from bad to worse. In +the long run, those most injured were the people whom it was most +desired to help--the laborer, the wage earner and those whose incomes +from previous savings were smallest. + +ANDREW D. WHITE had a long and distinguished career as educator, +historian, economist and diplomat; his description of the events in +France that followed the experiment with fiat money is intensely +interesting and well Worth the attention of every thinking person in +the United States of 1933. + + + + +*** END OF THE PROJECT GUTENBERG EBOOK, FIAT MONEY INFLATION IN FRANCE *** + +This file should be named fiatm10.txt or fiatm10.zip +Corrected EDITIONS of our eBooks get a new NUMBER, fiatm11.txt +VERSIONS based on separate sources get new LETTER, fiatm10a.txt + +Project Gutenberg eBooks are often created from several printed +editions, all of which are confirmed as Public Domain in the US +unless a copyright notice is included. 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