A CAMPAIGN DOCUMENT FOR 1876. PAPER-MONEY INFLATION IN FRANCE: HOW IT CAME, WHAT IT BROUGHT, AND HOW IT ENDED. A PAPER READ BEFORE SEVERAL SENATORS AND MFEMBERS OF TEE OUE USE OF REPRESENTATIVES, OF BOTH POLITICAL PARTIES, AT WAS.fEINGTON, APRIL 12, AND BEFORE THE UNION LEAGUE CLUP, AT,tNEW YORK, APRIL 13, 1876. BY ANDREW D. WHITE, LL.D., PRESIDENT OF CORNELL UNIVERSITY. NEW YORK: D. APPLETON AND COMPANY, 549 AND 551 BROADWAY. 1876. ENTERED, according to Act of Congress, in the year 1876, BY D. APPLETON AND COMPANY, In the Office of the Librarian of Congress, at Washington. PAPER-MONEY INFLATION IN FRANCE: HOW IT CAME, WHAT IT BROUGHT, AND HOW IT ENDED.1 NEAR the end of the year 1789 the French Necker. In financial ability he was ac nation found itself in deep financial embar- knowledged among the great bankers o rassment; there was a heavy debt and a Europe; but he had something more thai serious deficit. financial ability-he had a deep feeling o: The vast reforms of that year, though a patriotism and a high sense of persona lasting blessing politically, were a tempo- honor. The difficulties in his way wer( rary evil financially. There was a general great, but he steadily endeavored to keel want of confidence in business circles; capi- France faithful to those financial principle! tal had shown its proverbial timidity by re- which the general experience of moderi tiring out of sight as far as possible; but times had established as the only path t( little money was in circulation; throughout national safety. As difficulties arose, th( the land was temporary stagnation. National Assembly drew away from him. Statesman-like mneasures, careful watch- and soon came among the members muting, and wise management, would probably tered praises of paper-money; members like have led, ere long, to a return of confidence, Allarde and Gouy held it up as a panaceaa reappearance of money, and resumption as a way of "securing resources without of business; 2 but this involved waiting, self- paying interest." This was echoed outside; denial, and self-sacrifice; and thus far in the journalist Loustalot caught it up anl human history those are the rarest products proclaimed its beauties; Marat, in his newsof an improved political condition. Few paper, also joined the cries against Necker, nations, up to this time, have been able to picturing him-a man who gave up health exercise these virtues; and France was not and fortune for the sake of France-as a then one of those few. wretch seeking only to enrich himself from There was a general looking about for the public purse. some short road to prosperity, and, ere long, Against the tendency to the issue of irthe idea was set afloat that the great want redeemable paper Necker contended as best of the country was more of the circulating he might. He knew well to what it had medium; and this was speedily followed by always led, even when surrounded by the calls for an issue of paper-money. The most skillful guarantees. Among those who Minister of Finance at this period was struggled to aid Necker outside the National Assembly was Bergasse, a deputy from 1 A paper read before a meeting of Senators Lyons. His pamphlets against an irredeemand members of the House of Representatives of able paper exerted, perhaps, a wider infuboth political parties, at Washington, April 12, ence than any others; parts of them seem and before the Union League Club, at New York, i A o to- ai Apr il 13,~ 1876. ~fairly inspired. Any one to-day reading his April 13, 1876. 2 For proof that the financial situation of prophecies of the evils sure to follow such a France at that time was by no means hopeless, currency would certainly ascribe to him a see Storch, " Economie Politique," vol. iv., p. 159. miraculous foresight, were it not that we I PAPER-MONEY INFLATION IN FRANCE. can see that this prophetic power was sim- issue, and that such an over-issue is possible ply due to a knowledge of natural laws.l But only under a despotism.2 the current was too strong; on the 19th of M. de la Rochefoucauld gives his opinion April, 1790, the Finance Committee of the that " the assignats will draw specie out of Assembly reported that" the people demand the coffers where it is now hoarded." 3 a new circulating medium;" that " the cir- On the other hand, Cazales and Maury culation of paper-money is the best of oper- show that the result can only be disastrous. ations;" that " it is the most free because Never, perhaps, did a political prophecy it reposes on the will of the people;" that meet with more exact fulfillment in every "it will bind the interests of the citizens to line than the terrible picture drawn in one the public good." of Cazales's speeches in this debate. Still The report appealed to the patriotism the current ran stronger and stronger; Peof the French people with the following ex- tion makes a brilliant oration in favor of the hortation: "Let us show to Europe that we report, and Necker's influence and expeunderstand our own resources; let us im- rience are gradually worn away. mediately take the broad road to our libera- But mingled with the financial argument tion, instead of dragging ourselves along the -was a very strong political argument. The tortuous and obscure paths of fragmentary nation had just taken as its own the vast loans; " it concluded by recommending an real property of the French Church, the issue of paper-money, carefully guarded, to pious accumulations of thirteen hundred the amount of four'hundred million francs. years. There were princely estates in the The next day the debate begins. M. Mar- country, sumptuous palaces and conventual tineau is loud and long for paper-money. buildings in the towns; these formed more His only fear is, that the committee has not than one-third of the entire real property of authorized enough of it; he declares that France, and amounted in value to about four business is stagnant, and that the sole cause thousand million francs, yielding a yearly is a want of more of the circulating medium; income of about two hundred millions. By that paper-money ought to be made a legal one sweeping stroke all this had become the tender; that the Assembly should rise above property of the nation; never, apparently, the prejudices which the failure of John did a nation secure a more solid basis for a Law's paper-money had caused. Like every great financial future. supporter of irredeemable paper-money, be- There were, therefore, two great reasons fore or since, he thinks that circumstances why French statesmen desired speedily to are not the same at the time and place of sell these lands: First, a financial reason - the issue proposed as at previous disastrous to obtain money to relieve the Government. issues. He says: " Paper-money under a Secondly, a political reason-to get this land despotism is dangerous; it favors corrup- distributed among a great number of the tion; but in a nation constitutionally gov- thrifty middle class, and so to commit them erned, which itself takes care of the emission to the Revolution and to the Government. of its notes, which determines their number which gave their title. and use, that danger no longer exists." He It was urged, then, that the issue of four insists that John Law's notes at first re- hundred millions of paper would give the stored prosperity, but the wretchedness and treasury something to pay out immediately, wrong they caused resulted from their over- and relieve the national necessities; that, having been put into circulation, this paper1See Buchez and Roux, "Histoire Parlemeh- money would stimulate business; that it taire de la Revolution Franuaise," vol. iii., pp. would give to all capitalists, large or small,.64, 365; also p. 405. For pamphlet itself, see "A. D. W. Collection;" for the effect produced by it, see Challamel, 2 See Moniteur, sitting of April 10, 1790. "Les Franqais sous la Revolution." Also, De Ibid., sitting of April 15, 1790. Goncourt, " La Societt Francaise pendant la Re- 4 See De Nervo, "Finances Franqaises," voL volution." ii., p. 236; also Alison, vol. i. PAPER-MONEY INFLATION IN FRANCE. 5 the means for buying of the nation the eccle- rical display, but a natural impulse, which siastical real estate, and that from the pro- led a thoughtful statesman, during this deceeds of this real estate the nation would bate, to hold up in the Assembly a piece of again obtain new funds for new necessities: paper-money, and to declare that it was never was theory more seductive both to moistened with the blood and tears of their financiers and statesmen. fathers. And it would also be a mistake to But it would be a great mistake to sup- suppose that the National Assembly which pose that the statesmen of France, or the discussed this matter was composed of mere French people, were ignorant of the dangers wild revolutionists; no supposition could be of issuing irredeemable paper-money. No more wide of the fact. Whatever may have matter how skillfully the bright side of such been the character of the men who legislated a currency was exhibited, all thoughtful men for France afterward, no thoughtful student in France knew something of its dark side. of history can deny, despite all the arguThey knew too well, from that fearful ex- ments and sneers of English Tory statesmen perience in John Law's time, the difficulties and historians, that few more keen-sighted and dangers of a currency not based upon and patriotic.legislative bodies have ever sat specie. They had then learned how easy it upon this earth than this first French Conis to issue it; how difficult it is to check an stituent Assembly. In it were such men as over-issue; how seductively it leads to the Sieyes, Bailly, Necker, Mirabeau, Talleyrand, absorption of the means of the workingmen Dupont, and a multitude of others who, in and men of small fortunes; how surely it various sciences and in the political world, impoverishes all men living on fixed incomes, had already shown, and were destined aftersalaries, or wages; how it creates on the ward to show, themselves among the keenruins of the prosperity of all workingmen est and strongest men that Europe has yet a small class of debauched speculators, the seen. most injurious class that a nation can har- But the current toward paper-money bor, more injurious, indeed, than profes- had become irresistible. It was constantly sional criminals whom the law recognizes urged, and with a great show of force, that and can throttle; how it stimulates over- if any nation could safely issue paper-money, production at first, and leaves every industry France was now that nation; that she was flaccid afterward; how it breaks down the fully warned by a severe experience; that idea of thrift, and develops political and so- she was now a constitutional government, cial immorality. All this France had been controlled by an enlightened, patriotic peothoroughly taught by experience. Many then ple-not, as in the days of the former issue living had seen the experiment fully tried; of paper-money, an absolute monarchy conthey had seen that issue of paper-money un- trolled by politicians and adventurers; that der John Law, a man in his own time, and she was able to secure every franc of her to this day, acknowledged one of the most paper-money by'a virtual mortgage of a ingenious financiers the world has ever landed domain of vastly greater value than known; and there were then sitting in the the entire issue; that, with men like Bailly, National Assembly of France many who Mirabeau, and Necker, at her head, she owed the poverty of their families to those could not commit the financial mistakes and issues of paper. Hardly a child in the coun- crimes from which France had suffered try had not heard the men who issued when at the head stood John Law, and the that paper cursed as the authors of the regent, and Cardinal Dubois. most frightful catastrophe France had then Oratory prevailed over experience and known.' It was no mere attempt at theat- science. In December, 1789, came the first decree. After much discussion it was de1 For striking pictures of this feeling among the younger generation of Frenchmen, see Challamel, " Sur Ia R6volution," p. 305. For general " Histoire de l'Economie Politique," vol. ii., pp. history of John Law's paper-money, see Henri 65-87; also, "Senior on Paper-Money," section Martin, " Histoire de France;" also, Blanqui, iii., Part I. 6 PAPER-MONEY INFLATION IN FRANCE. cided to issue four hundred million francs in pie. In this address the Assembly spoke of paper-money, based upon the landed prop- the nation as " delivered by this grand erty of the nation as its security. The de- means from all uncertainty, and from all liberations on this first decree, and on the ruinous results of the credit system-incesbill carrying it into effect, were most in- santly a prey to the caprices of cupidity." teresting; prominent in the debate were It foretold that this issue "would bring Necker, Dupont, Maury, Cazales, Bailly, and back into the public treasury, into cornmany others hardly inferior. The discus- merce, and into all'branches of industry, sion was certainly very able; no person can strength, abundance, and prosperity." 2 read it at length in the Moniteur, or even in Some of the arguments used in this adthe summaries of the Parliamentary History, dress are worth recalling: without feeling that English historians have. "Paper-money is without inherent value, done wretched injustice to those men who unless it represents some special property. were then endeavoring to stand between Without representing some special property France and ruin. it is inadmissible in trade to compete with a At last, in April, 1790, the four hundred metallic currency, which has a value real million francs were issued in assignats-pa- and independent of the public action; thereper-money secured by a pledge of produc- fore it is that the paper-money which has tive real estate, and bearing interest to the only the public authority as its basis has holder at three per cent. No irredeemable always caused ruin where it has been estabcurrency has ever claimed a more scientific lished; that is the reason why the bankand practical guarantee for its goodness and notes of 1720, issued by John Law, after for its proper action on public finances. having caused terrible evils, have only left On one side it had what the world univer- frightful memories. Therefore it is that sally recognized as the most practical se- the National Assembly has not wished to curity-a mortgage on productive real es- expose you to this danger, but has given tate of vastly greater value than the issue. this new paper-money, not only a value deOn the other hand, as the notes bore interest, rived from the national authority, but a there was every reason for their being value real, immutable; a value which perwithdrawn from circulation whenever they mits it to sustain, advantageously, a compebecame redundant. tition with the precious metals themselves." As speedily as possible the notes were But the final declaration is perhaps the put in circulation. Unlike those issued in most interesting, as showing the attempt to John Law's time, they were engraved in the rely on interest-bearing notes, or an irrebest style of the art. To stimulate loyalty, deemable issue of notes based upon valuable the portrait of the king was placed in the securities. centre; to stimulate patriotism, patriotic It argues: " These assignats, bearing inlegends and emblems surrounded him; to terest as they do, will soon be considered stimulate public cupidity, the amount of in- better than the coin now hoarded, and will terest which the note would yield each day again bring it out into circulation." to its holder was printed in the margin; This legislation caused great joy. Among and the whole was duly garnished with the various utterances of this feeling was stamps and signatures, showing that it was the public letter of M. Sarot directed to the under careful registration and control. Hav- editor of the Journal of the National Asseming thus given France a new currency, the bly, and scattered throughout France. M. National Assembly, to explain its advan- Sarot is hardly able to contain himself as h'e tages, issued an address to the French peo- anticipates the prosperity and glory that this issue of paper is to bring to his country. 1 See Buchez and Roux, " Histoire Par]6mentaire," vol. v., p. 321, ed seq. For an argument to prove that the assignats were after all not so well See " Addresse de l'Assemblee Nationale sur secured as John Law's money, see Storch, " tco- les Imissions d'Assignats Monnaies," p. 5. nomie Politique," vol. iv., p. 160. 3 Ibid., p. 10. PAPER-MONEY INFLATION IN FRANCE. 7 One thing only embarrasses him, and that ary tendencies, had certainly feared many. is, the pamphlet of M. Bergasse against the The strong opponents of paper had propheassignats; therefore it is that after a long sied, at that time, that, once on the downseries of arguments and protestations, in ward path of inflation, the nation could not order to give a final proof of his confidence be restrained, and that more issues would in the paper-money, and his entire skep- follow. The supporters of the first issue ticism as to the evils predicted by Bergasse had asserted that this was a calumny; that and others, M. Sarot solemnly lays his France could and would check these issues house, garden, and furniture, upon the altar whenever she desired. of his country, and offers to sell them for The condition of opinion in the Assempaper-money alone. bly was, therefore, chaotic; a few schemers The first result of this issue was appar- and dreamers were loud and outspoken for ently all that the most sanguine could de- paper-money; many of the more shallow sire; the treasury was at once greatly re- and easy-going were inclined to yield; the lieved; a portion of the public debt was more thoughtful endeavored manfully to paid; creditors were encouraged; credit re- breast the current. vived; ordinary expenses were met, and the One man there was who had strength to paper-money having thus been passed from stand this pressure: that man was Mirabeau. the Government into the midst of the peo- He was the popular idol, the great orator of ple, trade was revived, and all difficulties the Assembly; and he was something more seemed past. The anxieties of Necker, the than a great orator; he had carried the naprophecies of Bergasse, Maury, and Cazals, tion through some of its greatest dangers by seemed proved utterly futile. And, indeed, a boldness almost godlike; in the various it is not impossible that, if the national au- conflicts, he had shown not only oratorical thorities had stopped with this issue, few of boldness, but a certain shrewdness, of great the evils which afterward arose would have value at the beginning of a revolution. As been severely felt; the four hundred mill- to his real opinion upon an irredeemable ions of paper-money then issued had simply currency, there can be no doubt. It was taken the place of a similar amount of spe- the opinion which all statesmen have held, cie; but soon there came another result before his time and since, in his own counmore disquieting; times grew less easy: by try, in England, and in America. In his letthe end of August, within four months after ter to Cerutti, written in January, 1789, the issue of the four hundred million assig- hardly six months before, he spoke of panats, the Government had spent them, and per-money as " a nursery of tyranny, corwas again in distress.a The old remedy ruption, and delusion; a veritable debauch immediately and naturally occurred to the of authority in delirium." In his private minds of men. Thoughtless persons through- letters written at this very time, which were out the country began to cry out for another revealed at a later period, he showed that issue of paper; thoughtful men then began he was fuly aware of the dangers of inflato recall what their fathers had told them tion, but he yielded to the pressure; partly about the seductive path of paper-money is- because he thought it important to relieve sues in John Law's time, and to remember the' Treasury at once, -partly because he the prophecies that they themselves had thought it important to sell the Government heard in the debate on the first issue of as- lands rapidly to the people, and so develop signats less than six months before. speedily a large class of small landholders, In that debate, as we have seen, Maury pledged to stand by the Government which and Cazalds foretold trouble and danger. gave them their titles; partly, doubtless, Necker, who was less suspected of reaction- from a love of immediate rather than remote See "Lettre de M. Sarot," Paris, April 19 applause; and wholly, probably, in a vague i/Ses "Lettre de M. Sarot," Paris, April 19. 1790. hope that the severe, inexorable laws of 2 Von Sybel, "History of the French Revolu- finance, which had brought heavy punishtion," vol. i., p. 252. ment to governments emitting an irredeem 8 PAPER-MONEY INFLATION IN FRANCE. able currency in other lands, at other times, scending in showers upon the earth, then in might, in some way, be warded off from swelling rivers discharged into the sea, then France at this time.1 drawn up in vapor, and gradually scattered The question was brought up by.Montes- over the earth again in rapidly-fertilizing quiou's report on the 27th of August. This showers. He predicts that the members report, though somewhat non- committal, will be surprised at the astonishing success leaned, on the whole, toward an additional of this paper-money, and that there will be issue of paper. It goes on to declare that no superabundance of it.3 the original issue of four hundred millions, His theory grows by what it feeds though opposed at the beginning, had proved upon, as the paper-money theory has always successful; that assignats are the most eco- done; toward the close, in a burst of elonomical method, though they have dangers; quence, he suggests that assignats be created and as a climax came the declaration, "We to an amount sufficient to cover the national must save the country." Still the commit- debt, and that all the national lands be extee hesitated to advise the issue of more pa- posed for sale immediately, predicting that per-money. prosperity will thus return to the nation, and Upon this report, on the 27th of August, that all classes will find this additional issue 1790, Mirabeau made his first speech. He of paper-money a great blessing. confessed that he had at first feared the is- This speech was frequently interrupted sue of assignats, but that he now dared urge by applause; by a unanimous vote it was it; that experience had shown that the issue ordered printed, and copies were spread of paper-money had served its purpose well; throughout France. The impulse given by that the report proved, despite the prophe- it can be seen throughout all the discussion cies of various opponents, that the'first issue afterward. Gouy arises and proposes to of assignats had been a great success; that liquidate the debt of twenty-four hundred public affairs had come out of distress satis- millions, to use his own words, " by one factorily; that ruin had been averted, and single operation-grand, simple, magnificredit established. He then argues that cent." 4 He supports an emission of twenthere is a difference between the paper- ty-four hundred millions in legal-tender money of the old sort, from which the na- notes, and a law that specie be not accepted tion had suffered so much in John Law's in purchasing national lands. His demagogtime, and the paper-money of the new is- ism blooms forth magnificently. He advosue; he declares that the French nation is cates an appeal to the people, who, to use now enlightened, and says, " Deceptive subt- his flattering expression, "ought alone to leties can no longer deceive patriots and give the law in a matter so interesting." men of sense in this matter." He then goes The newspapers of the period, in reporting on to say, " We must accomplish that which his speech,.note it with the very significant we have begun," declaring that there is-de- remark, "This discourse was loudly apmanded another large issue of paper, guar- plauded." anteed by the national lands and by the good To him replies Savarin. He calls attenfaith of the French nation. To show how tion to the depreciation of assignats already practical the system is, he insists that just felt. He tries to make the Assembly see as soon as paper-money shall become too that natural laws work as certainly in abundant it will be absorbed in rapid pur- France as elsewhere; and predicts that if chases of national lands; and a very striking this new issue be made there will come a comparison is made between this self-adjust- depreciation of thirty per cent. He is foling, self-converting system and the rains de- lowed by the Abb6 Gouttes, who declares -what seems very grotesque to those who 1For Mirabeau's real opinion on irredeemable h r t his have read the history of an irredeemable paper, see letter to Cerutti, in leading article of the _________ __________ Moniteur; also, " MWmoires de Mirabeau," vol. vii., s Moniteur, August 28, 1790. pp. 23, 24, and elsewhere. 4 Par une seule operation, grande, simple, See Moniteur, August 27, 1790. magnifique " (see Moniteur). PAPER-MONEY INFLATION IN FRANCE. 9 paper currency in any country-that new kingdom be melted down into small money. issues of paper-money " will supply a circu- Le Brun attacks the whole scheme in the lating material which will protect public Assembly, as he had done in the committee; morals from corruption." 1 declaring that the proposal, instead of reInto the midst of this debate is brought lieving the nation, will kill it. The papers a report by Necker. Most earnestly he en- of the time very significantly say that at deavors to dissuade the Assembly from the this arose many murmurs. Chabroux comes proposed issue; suggests that other means to the rescue. He says that the issue of ascan be found for accomplishing the result, signats will relieve the distress of the peoand predicts terrible evils. But the current ple, and presents very neatly the new theory is again running too fast. The only result of paper-money and its basis in the followis, that Necker is spurned as a man of the ing words: "The earth is the source of past.2 He at last sends in his resignation, value; you cannot distribute the earth in a and leaves France forever. The paper- circulating value, but this paper becomes money demagogues shout for joy at his de- representative of that value, and it is eviparture; their chorus rings through the dent that the creditors of the nation will journalism of the time. No words can ex- not be injured by taking it." On the other press their contempt for a man who cannot hand, appeared in the leading paper, the see the advantages of filling the Treasury ioniteur, a very thoughtful article against with the issues of a printing-press. Mlarat, paper-money, which sums up all by saying, Hebert, and Camille Desmoulins, are espe- "It is, then, evident that all paper which cially jubilant.' cannot at the will of the bearer be convertA curious parallel may perhaps be drawn ed into specie cannot discharge the functions between Necker, the Finance Minister at of money," and goes on to cite Mirabeau's the beginning of the French Revolution, former. opinion in his letter to Cerutti, puband the Secretary of the Treasury at the lished in 1789-the famous opinion that beginning of the recent struggle in our own " paper-money is a nursery of tyranny, corcountry. Each had shown his ability to ruption, and delusions; a veritable orgy of build up a fortune for himself before he authority in delirium." Lablache, in the entered public life; each had shown great Assembly, quotes the saying that " paperfinancial skill and integrity; each had thus money is the emetic of great states." 4 secured the confidence of the thoughtful Boutidoux follows in favor of paperpart of the nation in the time of national money, and calls the assignats "' un pacpier difficulty; each had proposed measures and terre," or land converted into paper. Boicarried them out, which resulted in great sandry answers vigorously,' and foretells good; each attempted to stop the nation on some evil results clearly. Pamphlets conthe downward path of inflation; each was tinue to be issued, among them one so punat last obliged to succumb; and each retired gent that it is brought into the Assembly from the country which he had endeavored and read there. The truth which it brings to save-Necker to Switzerland, Hugh Mc- out with great clearness is that doubling the Cullough to England. quantity of money. or substitutes for money Continuing the debate, Rewbell attacks in a nation simply increases prices, disturbs Necker, saying that assignats are not at par values, alarms capital, diminishes legitimate because there is not money enough; he asks enterprise, and so decreases the demand that payments for public lands be received both for products and for labor; that the in assignats alone; and suggests that for the only persons to be helped by it are the rich making of change the church-bells of the who have large debts to pay. This pamphlet was signed " A Friend of the People." k Monitewlj, August 29, 1790. See Lacretele, "8me Sicle, vl. p. It was received with great applause by the 2See Lacretelle,' 18me Siecle, vol. viii. pp. 84-87.; also Thiers and Mignet. thoughtful part of the Assembly. Dupont, 3 See Hatin, " Histoire de la Presse en France," vols. v. and vi. 4 See Moniteur, August 29. 1%90; 2 10 PAPER-MIONEY INFLATION IN FRANCE. who had stood by Necker in the debate on nation, and against the old privileged the first issue of assignats, arises, avows the classes. pamphlet to be his, and says sturdily that Through the rest of the speech there is he has always voted against the emission of one leading point enforced with all his eloirredeemable paper and always will. quence and ingenuity-the thorough excelBut far more important than any other lence of the proposed currency and the argument against inflation was the speech stability of its security. He declares that, of Talleyrand. He had been among the being based on the pledge of public lands, boldest and most radical French statesmen. and convertible into them, the notes are He it was who, more than any other, had better secured than if redeemable in specie; carried the extreme measure of taking into that the precious metals are only employed the possession of the nation the great landed in the secondary arts, while the French estates of the Church. He now takes a paper-money represents the first and most judicial tone-attempts to show to the As- real of all property, the source of all prosembly the very simple truth that the effect duction, the land itself; that, while other of a second issue of assignats may be dif- nations have been obliged to emit paperferent from the first; that the first was evi- money, none has ever been so fortunate as dently needed; that the second may be as the French nation, for never has any other injurious as the first was useful. He exhib- nation been able to give landed security for its various weak points in the inflation fal- its paper; that whoever takes French paperlacies, and presents forcibly the trite truth money has practically a mortgage to secure that no laws and no decrees can keep large it, on landed property which can be easily issues of irredeemable paper at a par with sold to satisfy his claims, while other naspecie. tions have only been able to give a vague In his speech occur these words: "You claim on the entire nation. "And," he can, indeed, arrange it so that the people cries, "I would rather have a mortgage on shall be forced to take a thousand francs in a garden than on a kingdom! " paper for a thousand francs in specie; but Other arguments of his are more demayou can never arrange it so that a man shall gogical. He declares that the only interests be obliged to give a thousand francs in spe- affected will be those of bankers and capicie for a thousand francs in paper. In that talists, but that manufacturers will see prosfact is imbedded the entire question; and perity restored to them. Some of his arguon account of that fact the whole system ments seem almost puerile, as when he says, fails."' "If gold has been hoarded through timidity The nation at large now began to take or malignity, the issue of paper will show part in the debate; thoughtful men saw that that gold is not necessary, and it will then here was the turning-point between good come forth." But as a whole the speech and evil; that the nation stood at the part- was brilliant; it was often interrupted by ing of the ways. Most of the great com- applause; it settled the question. People mercial cities bestirred themselves and sent did not stop to consider that this was the up remonstrances against the new emission, dashing speech of a bold orator, and not the twenty-five being opposed and seven in matured judgment of an expert in finance; favor of it. But on September 27, 1790, they did not see that calling Mirabeau to decame Mirabeau's great final speech. In this cide upon a financial policy, because he had he dwelt first on the political necessity in- shown boldness in danger and strength in volved, declaring that the most pressing conflict, was like calling a successful blackneed was to get the government lands into smith to mend a watch. the hands of the people, and so to commit In vain did Maury show that John Law's the class of landholders thus created to the paper had done well in its first issues; that the first issues had brought apparent prosSee speech in Moniteur; also in Appendix to perity, while those that followed brought Thiers's "History of the French Revolution." certain misery; in vain did he quote from a PAPER-MONEY INFLATION IN FRANCE. 11 book published in John Law's time, showing happiness under laws which they admire; that Law was at first considered as a patriot, and soon France, enriched by her new propand friend of humanity; in vain did he hold erty and by the national industry which is up to the Assembly one of Law's bills, and preparing for fruitfulness, will demand still appeal to their memories of the wretched- another creation of paper-money." ness brought on France by that last great To make these prophecies good, every issue of paper-money; nothing could resist means was taken to keep up the credit of the eloquence of Mirabeau. Barnave fol- this second issue of assignats. Among the lows; shows that "Law's paper was based multitude of pamphlets issued for this purupon the phantoms of the Mississippi; ours pose was one by Royer; it appeared Sepupon the solid basis of ecclesiastical lands," tember 14, 1790, and was entitled " Reflecand proves that the assignats cannot depre- tions of a Patriotic Citizen upon the Emission ciate further. Prudhomme's newspaper of Assignats." In this Royer gives many pours contempt over gold as coin or security excellent reasons why the assignats cannot for the currency, extols real estate as the be depressed; speaks of the argument against only true basis, and is fervent in praise of them as "vile clamors of people bribed to the convertibility and self-adjusting features affect public opinion." He says to the Naof the scheme. In spite of all this plausi- tional Assembly, "If it is necessary to crebility and eloquence, a large minority stood ate five thousand millions and more of firm to their earlier principles; but on the this paper, decree such a creation gladly." 29th of September, by a vote of 508 to 423, He, too, predicts, as Mirabeau and others the deed was done: a bill was passed au- had done, the time when gold will lose all thorizing the issue of eight hundred millions Its value, since all exchanges will be made of new assignats, but solemnly declaring with this admirably guaranteed paper, and that in no case should the entire amount put therefore that coin will come out from the in circulation exceed twelve hundred'mil- places where it is hoarded. He foretells lions. To make assurance doubly sure, it prosperous times to France in case these also provided that, as fast as the assignats great issues of paper are continued, and dewere paid into the Treasury for land, they cares this "the only means to insure hapshould be burned; and thus a healthful con- piness, glory, and liberty, to the French natraction be constantly maintained. tion." Great were the plaudits of the nation at The nation was now fully committed to this relief. Rejoicings were heard on every a policy of inflation; and, if there had been side. Among the multitudes of pamphlets any doubt of this before, it was soon proved expressing this joy, which have come down by an act of the Government, very plausible, to us, the " Friend of the Revolution " is but none the less significant, as showing the the most interesting. It begins as follows: exceeding difficulty of stopping a nation once "Citizens, the deed is done. The assignats in the full tide of a depreciated currency. are the keystone of the arch. It has just The old cry of the "lack of a circulating been happily put in position. Now I can medium" broke forth again; and especially announce to you that the Revolution is fin- loud were the clamors as to the need of more ished, and there only remain one or two small bills. This resulted in an evasion of important questions. All the rest is but a the solemn pledge that the circulation should rlatter of detail which cannot deprive us any not go above twelve hundred millions, and longer of the pleasure of admiring in its that all assignats returned to the Treasury entirety this important work. The prov- for land should immediately be burned. inces and the commercial cities, which were Within a short time there had been received at first alarmed at the proposal to issue so into the Treasury for lands one hundred and much paper-money, now send expressions sixty million francs in paper. By the terms of their thanks; specie is coming out to be of the previous acts this amount ought to joined with paper-money. Foreigners come have been retired and taken out of circulato us from all parts of Europe to seek their tion. Instead of this, under the plea of ne 12 PAPER-MONEY INFLATION IN FRANCE. cessity, one hundred millions were reissued paper-money came faster, the periods of sucin the form of small notes.' ceeding good feeling grew shorter. Yet this was but as a drop of cold water Various bad signs had begun to appear. to a parched throat. Although there was al- Immediately after this last issue came a deready a rise in prices which showed that the preciation of from eight to ten per cent.; amount needed for circulation had been ex- but it is very curious to note the general ceeded, the cry for "more circulating me- reluctance to assign the right reason. The dium" was continued. The pressure for decline in the purchasing power of papernew issues became more and more strong. money was in obedience to one of the simThe Parisian populace and the Jacobin Club plest laws in social physics; but France had were especially loud in their declarations; now gone beyond her thoughtful statesmen, and a few months later, with few speeches, taking refuge in unwavering optimism, and in a silence very ominous, on June 19, 1791, giving any explanation of the new difficulties a new issue was made of six hundred mill- rather than the right one. A leading memions more; less than nine months after the her of the Assembly insisted, in an elaborate former great issue, with its solemn pledges speech, that the cause of depreciation was as to keeping down the amount in circula- simply want of knowledge and confidence in tion. With the exception of a few thought- the rural districts, and proposed means of ful men, the whole nation again sang enlightening them. La Rochefoucauld propaoans. posed to issue an address to the people, In this comparative ease of a new issue showing the goodness of the currency and is seen the action of a law in finance as cer- the absurdity of. preferring coin. The adtain as the action of a similar law in natural dress was unanimously voted. As well philosophy. If a material body be allowed might they have attempted to show that, if, to fall from a height, in obedience to gravi- from the liquid made up by mixing a quart tation, its velocity is accelerated, by a well- of wine and two quarts of water, a gill be known law in physics, in a constantly-in- taken, this gill will possess all the exhilaratcreasing ratio: so in issues of irredeemable ing value of the original, undiluted beverage. currency, in obedience to the theories or in- Attention was next aroused by another terests of a legislative body, or of the people menacing fact-specie was fast disappearing. at large, there is a natural law of rapidly- The explanations for this fact were also increasing issue and depreciation. The first wonderful in displaying the ingenuity of the inflation bill was passed with great difficulty, people at large in finding false reasons and after a very sturdy resistance, and by a ma- evading the true one. A very common exjority of a few score out of nearly a thousand planation may be found in Prudhomme's votes cast; but you observe now that new newspaper, Les Revolutions de Paris, of inflation measures are passed more and more January 17, 1791, where it is declared that easily, and you will have occasion to see the " coin will keep rising until the people have working of this same law in a more striking hung a broker." 2 Another popular theory degree as this history develops itself. was that the Bourbon family were in some Nearly all Frenchmen now became des- miraculous way drawing off all solid money perate optimists, declaring that inflation is to the chief centres of their intrigues in Gerprosperity. Throughout France there came many.' temporary good feeling. The nation was Still another favorite idea was that En*becoming fairly inebriated with paper-mon- lish emissaries were in the midst of the ey. The good feeling was that of a drunkard people, instilling notions hostile to paper. after his draught; and it is to be noted, as Great efforts were made to find these emisa simple historical fact, corresponding to a saries, and more than one innocent person physiological fact, that, as the draughts of 2 See also De Goncourt, " Socit6 Frangaise," 1 See Von Sybel, " History of the Revolution," for other explanations. vol. i., p. 265. See Les Revolutions de Paris, vol. ii., p, 216. PAPER-MONEY INFLATION IN FRANCE. 13 experienced the popular wrath, under the currency had at first stimulated production, supposition that he was engaged in raising and created a great activity in manufactures; gold and depressing paper.' Even Talley- but soon the markets were glutted, and the rand, shrewd as he was, insisted that the demand was vastly diminished. In spite of cause was simply that the imports were too the wretched, financial policy of years gone great and the exports too little. As well by, and especially in spite of the Edict of might he explain the fact that, when oil is Nantes, by which religious bigotry had drivmingled with water, water sinks to the hot- en out of the kingdom thousands of its most tom, by saying that it is because the oil skillful workmen, the manufactures of France rises to the top. The disappearance of specie had again come into full bloom. In the was the result of a natural law as simple finer woolen and cotton goods, in silk and and sure in its action as gravitation: the satin fabrics of all sorts, in choice pottery superior currency had been withdrawn be- and porcelain, in manufactures of iron, steel, cause an inferior could be used.3 Some and copper, they had again taken their old efforts were made to remedy this. In the place upon the Continent. All the previous municipality of Quillebeuf, the sum of 817 changes had, at the worst, done no more marks in specie having been found in the than to inflict a momentary check on this possession of a citizen, the money was seized highly-developed system of manufactures; and sent to the Assembly. The good people but what the bigotry of Louis XIV. and the of that town treated this hoarded gold as shiftlessness of Louis XV. could not do in the result of some singularly unpatriotic nearly a century, was accomplished by this wickedness or madness, instead of seeing tampering with the currency in a few months. that it was but the sure result of a law, One manufactory after another stopped. At working in every land and time, when cer- one town, Lodeve, five thousand workmen tain causes are present. Marat followed out were discharged from the cloth-manufactothis theory by asserting that death was the ries. Every cause, except the right one, proper penalty for persons who thus hid was assigned for this. Heavy duties were their money. In order tb supply the specie put upon foreign goods. Everything that required a great number of church-bells were tariffs and custom-houses could do was done. melted down; but this proved delusive. Still the great manufactories of Normandy Still another troublesome fact began now were closed, those of the rest of the kingto appear. Though paper-money had in- dom speedily followed, and vast numbers of creased in amount, prosperity had steadily workmen, in all parts of the country, were diminished. In spite of all the paper issues, thrown out of employment.' Nor was this business activity grew more and more spas- the case alone in regard to home demand. modic. Enterprise was soon chilled, and The foreign demand, which had been at first stagnation followed. Mirabeau, in his speech stimulated, soon fell off. In no way can which decided the second great issue of this be better stated than by one of the most paper, had insisted that, though bankers thoughtful historians of modern times: "It might suffer, this issue would be of great is true that at first the assignats gave the service to manufacturers, and restore their same impulse to business in the city as in prosperity. The manufacturers were for a the country, but the apparent improvement time deluded, but were at last rudely awak- had no firm foundation even in the towns. ened from their delusions. The plenty of Whenever a great quantity of paper-money is suddenly issued, we invariably see a rapid 1 See Challamel, "Les Franais sous la Revolu- increase of trade. The great quantity of tion; " also, Senior, " On some Effects of Paper- the circulating medium sets in motion all the Money," p. 82. energies of commerce and manufactures; 2 See Buchez and Roux, vol. x., p. 216. capital for investment is more easily found s For an admirable statement and illustration of than usual and trade peetually receives the general action of this law, see Sumner, " Hisfresh nutriment. If this paper represents tory of American Currency," pp. 157, 158; also h ntment. If this p Jevons, on " Money," p. 80. 4 See De Goncourt, " Societe Francaise," p. 214. 14 PAPER-MONEY INFLATION IN FRANCE. real credit, founded upon order and legal All this breaking down of the manufactsecurity, from which it can derive a firm ures and commerce of the nation made fearand lasting value, such a movement may be ful inroads on the greater fortunes; but the starting-point of a great and widely-ex- upon the lesser fortunes, and the little accutended prosperity, as, for instance, the most mulated properties of the masses of the nasplendid improvements in English agricul- tion who relied upon their labor, it pressed ture were undoubtedly owing to the eman- with intense severity. cipation of the country bankers. If, on the Still another difficulty appeared. There contrary, the new paper is of precarious had come a complete uncertainty as to the value, as was clearly seen to be the case future. In the spring of 1791 no one knew with the French assignats as early as Febru- whether apiece of paper-money representing ary, 1791, it can have no lasting, beneficial a hundred francs would, a month later, have fruits. For the moment, perhaps; business a purchasing power of a hundred francs, or receives an impulse, all the more violent, ninety francs, or eighty, or sixty. The rebecause every one endeavors to invest his suit was, that capitalists declined to embark doubtful paper in buildings, machines, and their means in business. Enterprise received goods, which under all circumstances retain a mortal blow. Demand for labor was still some intrinsic value. Such a movement was further diminished; and here came an addiwitnessed in France in 1791, and from every tional cause of misery. By this uncertainty quarter there came satisfactory reports of all far-reaching undertakings were killed. the activity of manufactures. The business of France dwindled into a mere " But for the moment the French manu- living from hand to mouth. This state of facturers derived great advantage from this things, too, while it bore heavily against thle state of things. As their products could be interests of the moneyed classes, was still so cheaply paid for, orders poured in from more ruinous to those in more moderate foreign countries to such a degree that it and most of all to those in straitened cilwas often difficult for the manufacturers to cumstances. With the masses of the people, satisfy their customers. It is easy to see the purchase of every article of supply bethat prosperity of this kind must very soon came a speculation-a speculation in which find its limit. It was not founded upon any the professional speculator had an immense actual and permanent want of those who advantage over the buyer. Says the most gave the order, and could only last until the brilliant of apologists for French revolutionincreased exports from France had restored ary statesmanship, " Commerce was dead; the balance of the exchange. This facti- betting took its place." 3 tious prosperity was not calculated to lead Nor was there any compensating advanto lasting investments of capital and costly tage to the mercantile classes. The merextensions of business; and when a further chant was forced to add to his ordinary fall in the assignats took place it would profit a sum sufficient to cover probable or necessarily collapse at once, and be succeed- possible fluctuations in value. And while ed by a crisis all the more destructive the prices of products thus went higher, the more deeply men had engaged in speculation wages of labor, owing to the number of under the influence of the first favorable prospects." at first stimulated manufactures and commerce in Then came a collapse in manufacturing Austria, and afterward ruined them, see Storch's and commerce, just as it had come before in " economie Politique," vol. iv., p. 223, note; and France; just as it came afterward in Austria, for the same effect produced by the same causes in Russia, America, and all other countries Russia, see ibid., end of vol. iv. For the same effects where men have tried to build up prosperity in America, see Sumner's "History of American Currency." For general statement of effect of inon irredse~emable paper.' convertible issues on foreign exchanges, see McLeod'See Von Sybel, " History of the French Revo- on " Banking," p. 186. lution," vol. i., pp. 281-283. 3 See Louis Blanc, "Histoire de la Revolution 2 For proofs that issues of irredeemable paper Franiaise," tome xii., p. 113. PAPER-MONEY INFLATION IN FRANCE. 15 workmen who were thrown out of employ, Now began to be seen more plainly some went lower. of the many ways in which an inflation But these evils, though very great, were policy robs the working-classes. As these small compared to those far more deep- knots of plotting schemers at the city censeated signs of disease which now showed tres were becoming bloated with sudden themselves throughout the country. The wealth, the producing classes of the country, first of these was the obliteration of t4rift though having in their possession more curin the minds of the French people. The rency than before, grew lean. In the French are naturally a thrifty people; but, schemes and speculations put forth by stockwith plenty of money and with uncertainty jobbers, and stimulated by the printing of as to its future value, the ordinary motives more currency, multitudes of small fortunes for saving and care diminished, and a loose throughout the country were absorbed, and, luxury spread throughout the country. A while these many small fortunes were lost, still worse outgrowth of this feeling was the a few swollen fortunes were rapidly aggreincrease of speculation and gambling. With gated in the city centres. This crippled a the plethora of paper-currency in 1791 ap- large class in the country districts, which peared the first evidences of that cancerous had employed a great number of workmen; disease which always follows large issues of and created a small class in the cities, which irredeemable currency-a disease more per- employed a great number of lackeys. manently injurious to a nation than war, In the cities now arose a luxury and pestilence, or famine. At the great metro- license which is a greater evil even than the politan centres grew a luxurious, specula- plundering which ministers to it. In the tive, stock-gambling body, which, like a country the gambling spirit spread more and malignant tumor, absorbed into itself the more. Says the same thoughtful historian strength of the nation, and sent out its can- whom I have already quoted: " What a cerous fibres to the remotest hamlets. At prospect for a country.when its rural poputhese centres abundant wealth was piled up. lation was changed into a great band of gamIn the country at large there grew dislike of biers! " 2 steady labor, and contempt for moderate Nor was this reckless and corrupt spirit gains and simple living. In a pamphlet pub- confined to business-men; it began to break lished May, 1791, we see how, in regard to out in official circles, and public men who, this also, public opinion was blinded. The a few years before, had been pure in motive author calls attention to the frightful in- and above all probability of taint, became crease of gambling in values of all sorts in luxurious, reckless, cynical, and finally corthese words:'" What shall I say of the stock- rupt. Mirabeau himself, who, not many jobbing, as frightful as it is scandalous, months before, had risked imprisonment and which goes on in Paris under the very eyes even death to establish constitutional govof our legislators, a most terrible evil, yet ernment, was now-at this very time-seunder the present circumstances a necessary cretly receiving heavy bribes; when at the evil?" The author also speaks of these downfall of the monarchy, a few years later, stock-gamblers as using the most insidious the famous iron chest of the Tuileries was means to influence public opinion in favor of opened, there were found evidences that, in their measures; and then proposes, serious- this carnival of inflation and corruption, ly, a change in various matters of detail, Mirabeau himself had been a regularly paid thinking that this would prove a sufficient servant of the court.3 The artful plundering remedy for an evil which had its roots far down in the whole system of irredeemable Von ybel, vol. i., p. 273. i~currency.'~ l3 For general account, see Thiers's " Revolution," chapter xiv.; also Lacretelle, vol. viii., p. 109; also " Memoirs of Mallet Du Pan." For a 1 See " Extrait du Registre des Deliberations de good account of the intrigues between the court la Section de la Bibliotheque," May 3, 1791, pp. and Mirabeau, and of the prices paid him,, se 4, 5. Reeve, " Democracy and Monarchy hi France, 16 PAPER-MONEY INFLATION IN FRANCE. of the people at large was bad enough, but' was gradually disintegrated by this same worse still was this growing corruption in stock-jobbing, speculative habit fostered by official and legislative circles. Out of the the new currency. At the outset, in the speculating and gambling of the inflation discussions preliminary to the first issue of period grew luxury, and out of this grew paper-money, Mirabeau and others who had corruption. It grew as naturally as fungus favored it had insisted that patriotism, as on a muck-heap. It was first felt in business well as an enlightened self-interest, would operations, but soon began to be seen in the lead the people to keep up the value of paperlegislative body and in journalism. Mira- money. The very opposite of this was now beau was by no means the only example. found to be the case. There now appeared, Such members of the legislative body as as another outgrowth of this disease, what Jullien, of Toulouse, Delaunay, of Angers, has always been seen under similar circumFabre d'Eglantine, and their disciples, were stances. It is a result of previous evils and among the most noxious of those conspiring a cause of future evils. This outgrowth was by legislative action to raise and depress the creation of a great debtor class in the securities for stock-jobbing purposes. Brib- nation, directly interested in the depreciation cry of legislators followed as a matter of of the currency in which their debts were to course. Delaunay, Jullien,' and Chabot, ac- be paid. The nucleus of this debtor class cepted a bribe of five hundred thousand was formed by those who had purchased the francs for aiding legislation calculated to church-lands from' the Government. Only promote the purposes of certain stock-job- small payments down had been required, and bers. It is some comfort to know that near- the remainder was to be paid in small inly all concerned lost their heads for it.' stallments spread over much time: an inIt is true that the number of these corrupt debtedness had thus been created, by a large legislators was small, far less than alarmists number of people, to the amount of hundreds led the nation to suppose, but there were of millions. This large body of debtors, of enough to cause wide-spread distrust, cyni- course, soon saw that their interest was to cism, and want of faith in any patriotism or depreciate the currency in which their debts any virtue. were to be paid; and soon they were joined Even worse than this was the breaking by a far more influential class; by that class down of morals in the country at large, re- whose speculative tendencies had been stimsuiting from the sudden building up of os- ulated by the abundance of paper-money, tentatious wealth in a few large cities, and and had gone largely into debt, looking for a the gambling, speculative spirit fostered in rise in nominal values. Soon demagogues the small towns and rural districts. of the viler sort in the clubs began to pander Yet even a more openly disgraceful re- to this debtor class; soon important memsuit of this paper-money was to come, and bers of this debtor class were to be found inthis was the decay of any true sense of na- triguing in the Assembly-often on the seats tional honor or good faith. The patriotism of the Assembly and in places of public trust. which the fear of the absolute monarchy, Before long, the debtor class became a powerthe machinations of a court party, the dis- ful body, extending through all ranks of play of the army, and the threats of all mo- society. From the stock-gambler who sat in narchical Europe, had been unable to shake, the Assembly to the small land-speculator in the rural districts; from the sleek inventor vol. i., pp. 213-220. For a very striking caricature of canards on the Paris Exchange to the publishec after the iron chest in the Tuileries was lying stock-jobber in the market-town, all opened, and the evidences of bribery of Mirabeau pressed vigorously for new issues of paper; revealed, see Challamel, Musee de la Revolution all were ble, apparently, to demonstrate to Franiaise," vol i., p. 341. Mirabeauis represented the people that in new issues of paper lay as a skeleton sitting on a pile of letters, holding the French crown in one hand and a purse of gold the only chance for national properity. in the other. This great debtor class, relying on the 1 Thiers, chapter ix. multitude who.could be approached by su PAPER-MONEY INFLATION IN FRANCE. 17 perficial arguments, soon gained control. The evils which we have already seen arising Strange as it may seem to those who have from the earlier issues were now aggravated. not watched the same causes at work at a But the most curious thing evolved out previous period in France, and at various of all this chaos is a new system of political periods in other countries, while every issue economy. In the speeches about this time, of paper-money really made matters worse, we begin to find it declared that, after all, a a superstition steadily gained ground among depreciated currency is a blessing; that gold the people at large that, if only enough paper- and silver form an unsatisfactory standard money were issued and more cunningly for measuring values; that it is a good thing handled, the poor would be made rich. to have a currency that will not go out of Henceforth all opposition was futile. In the kingdom, and which separates France December, 1791, a report was made in the from other nations; that thus shall manuAssembly in favor of a fourth great issue of factures be encouraged; that commerce with three hundred millions more of paper-money. other nations is a curse, and every hinderance In regard to this report, Chambon says that to it a blessing; that the laws of political more money is needed, but asks, "Will you, economy, however applicable in other times, in a moment when stock-jobbing is carried are not applicable to that particular time, on with such fury, give it new power in and, however operative in other nations, adding so much more money to the circula- are not operative in France; that the ordition " But such high considerations were nary rules of political economy are perhaps now little regarded. Dorisy declares that suited to the minions of despotism, but not "there is not enough money yet in circula- to the enfranchised inhabitants of France at tion; that, if there were more, the sales of the close of the eighteenth century; that the national lands would be more rapid." And whole present state of things, so far from the official report of his speech declares that being an evil, is a blessing. All these ideas, these words were applauded. and others quite as striking, are brought to Dorisy declares that the Government the surface in the debates on the various new lands are worth at least thiity-five hundred issues. million francs, and asks: "Why should mem- Within four months comes another rebers ascend the tribune and disquiet France port to the Assembly as ingenious as those Fear nothing; your currency reposes upon preceding. It declares: "Your committee a sound mortgage." Then follows a glorifi- are thoroughly persuaded that the amount cation of the patriotism of the French people, of circulating medium before the Revolution which, he asserts, will carry the nation was greater than that of the assignats tothrough all its difficulties. day; but then the money circulated slowly, Becquet follows, declaring that the " cir- and now it passes rapidly, so that one thouculation is becoming more rare every day." sand million assignats do the work of two On December 17, 1791, a new issue was thousand millions of specie." The report ordered of three hundred millions more, foretells further increase in prices, but by making in all twenty-one hundred millions some curious jugglery reaches a conclusion authorized. Coupled with this was the dec- favorable to further inflation. laration that the total amount of circulation The result was, that on April 30, 1792, should never reach more than sixteen hun- came the fifth great issue of paper-money, dred millions. What this proviso was worth amounting to three hundred millions; and may be judged from the fact that not only at about the same time Cambon sneered had the declaration made hardly a year be- ominously at public creditors as "rich peofore, limiting the amount in circulation to ple, old financiers, and bankers'" Soon paytwelve hundred millions, been violated, but ment was suspended on dues to public cred the declaration, made hardly a month before,Di s de F e. See especially " Discours de Fabre d'Eglanin which the Assembly had as solemnly tine in Monit for August 11, 193; also debate limited the amount of circulation to fourteen in Moniteur of September 15, 1793; also Prudhundred millions, had also been repudiated. homme's Revolutions de Paris. 18 PAPER-MONEY INFLATION IN FRANCE. itor' for all amounts exceeding ten thousand been burned, leaving in circulation twentyfrancs. eight hundred millions. When it is rememThis was hailed by many as a measure in bered that there was little business to do, the interests of the poorer classes of people, and that the purchasing power of thefranc, but the result was that it injured them most when judged by the staple products of the of all. Henceforward, until the end of this country, was about equal to half the present history, capital was taken from labor and purchasing power of our own dollar, it will locked up in all the ways that financial in- be seen into what evils France had drifted.' genuity could devise. All that saved thou- As this mania for paper ran its course, even sands of laborers in France from starvation the bell-metal sous, obtained by melting was that they were drafted off into the down the bells, appear to have been driven army and sent to be killed on foreign battle- out of circulation; parchment-money from fields. twenty sous to five was issued, and at last In February, 1792, assignats were over bills of one sou, and even of half a sou, were thirty per cent. below par.l put in circulation. On the last day of July, 1792, came an- But now another source of wealth opens other brilliant report from Fouquet, show- to the nation. There comes a confiscation ing that the total amount already issued was of the large estates of nobles and landed about twenty-four hundred millions, but proprietors who had fled the country. An claiming that the national lands were worth estimate in 1793 makes the value of these a little more than this sum. Though it was estates three billion francs. As a conseeasy for any shrewd mind to find out the quence, the issues of paper-money were confallacy of this, and to show that the pa- tinued in increased amounts, on the old theper-money already issued far exceeded the ory that they were guaranteed by the solamount that could be obtained from the na- emn pledge of these lands belonging to the tional lands, a decree was passed issuing state. Early in 1793 the consequences of three hundred millions more. By this the over-issue of paper began to be more painprices of everything were again enhanced fully evident to the people at large. Artisave one thing, and that one thing was la- cles of common consumption became enorbor. Strange as it may at first appear, while mously dear, and the price was constantly all products had been raised enormously in rising. Orators in the clubs, local meetings, price by the depreciation of the currency, and elsewhere, endeavored to enlighten peothe stoppage of so many manufactories, and ple by assigning every reason except the the withdrawal of capital, caused wages in true one. They declaimed against the corthe summer of 1792, after all the inflation, ruption of the ministry, the want of patriotto be as small as they had been four years ism among the moderates, the intrigues of before, namely, fifteen sous per day.' No the emigrant nobles, the hard - heartedness more striking example can be seen of the of the rich, the monopolizing spirit of the truth uttered by Webster, that " of all the merchants, the perversity of the shopkeepcontrivances for cheating the laboring-class ers, and named these as causes of the diffiof mankind, none has been more effectual culty.' than that which deludes them with paperthan that which delud s - As to purchasing power of money at that money." time, see Arthur Young, " Travels in France durIssue after issue followed at intervals of ing the Years 1787, 1788, and 1789." a few months until on December 14, 1792, we 4 For notices of this small.currency, with exhave an official statement to the effect that amples of satirical verses written upon it, see Chalthirty-four hundred millions had been put lamel "Les Frangais sous la Revolution," pp. forth of which six hundred millions had 307, 308. See also Mercier, "Le Nouveau Paris," x____________________________________________ edition of 1800, chapter ccv., entitled " Parchemin Von Sybel, vol. i., pp. 509, 510. Aionnoie." Ibid., vol. i., p. 515; also Villeneuve Barge- 6 For Chaumette's brilliant argument to this mont, " Histoire de lEconomie Politique," vol. ii., effect, see Thiers, Shoberl's translation, published p. 213. by Bentley, vol. iii., p. 248. PAPER-MONEY INFLATION IN FRANCE. [ The washer-women of Paris, finding soap one which was not confined to the brains of so dear that they could scarcely purchase it, a few idle dreamers, but practically carried insisted that all the merchants who were out in all its terrible consequences. It was endeavoring to save something of their little made with fiery fanaticism and unbridled property by refusing to sell their goods for passion, and yet with systematic calculation. the worthless currency with which France Its originators-victorious at home and was flooded, should be punished with death; abroad-were perfectly free in their delibthe women of the markets, and the hangers- erations, and did not adopt their measures on of the Jacobin Club, called loudly for a.under the pressure of necessity or despair, law " to equalize the value of paper-money but from deliberate choice. These are facts and silver coin." It was also demanded of universal significance, on which we ought that a tax be laid especially on the rich, to to fix our attention all the more earnestly, the amount of four hundred million francs, because they have been disregarded, although to buy bread; and the National Convention, they are fraught with the most important which was now the legislative body of the consequences." French Republic, ordered that such a tax be I have said that these maximum laws levied. Marat declared loudly that the peo- were perfectlylogical; they were so. Whenple, by hanging a few shopkeepers and plun- ever any nation intrusts to its legislators dering their stores, could easily remove the the issue of a currency not based on the trouble. The result was, that on the 28th idea of possible redemption in coin, it inof February, 1793, at eight o'clock in the trusts to them the power to raise or depress evening, a mob of men and women in dis- the value of every article in the possession guise began plundering the stores and shops of every citizen. Louis XIV. claimed that of Paris. At first they demanded only bread; all property in France was his own, and that soon they insisted on coffee and rice and what private persons held was as much his sugar; at last they seized everything on as if it were in his coffers.2 But even this which they could lay their hands, cloth, falls short of the reality of the confiscating clothing, groceries, and luxuries of every power exercised in a country where, instead kind. Two hundred shops and stores were of leaving values to be measured by a standplundered. This was endured for six hours, ard common to the whole world, they are and finally order was restored only by a left to be depressed or raised at the whim, grant of seven million francs to buy off the caprice, or interest, of a body of legislators.3 mob. The new political economy was be- When this power is given, the power of fixginning to bear its fruits. One of its minor growths appeared at the City Hall of Paris, 1 See Von Sybel, vol. iii., pp. 11, 12. For genwhere, in response to the complaints of the eal statements of theories underlying the maiIMUM, see Thiers. For a very interesting picture plundered merchants, Roux declared, in the. For a very interesting picture, by an eye-witness, of the absurdities and miseries midst of great applause, that "the shop-t cuse see Mercier, Noveu Paris edition keepers were only giving back what they of 1800, chapter xliv. For summary of the Rehad hitherto robbed them of." port of the Committee, with lists of articles emThis mob was suppressed, but now came braced under it, and for various interesting details, the most monstrous of all financial out- seVilleneuveBargemont, "istoiredel'conogrowths of paper-money, and yet it was an mie Politique," vol. ii., pp. 213-39. For curious examples of severe penalties for very slight inoutgrowth perfectly logical. 2a nimu~ outgrowth perfectly logical. ax m fringements of the law on this subject, see Louis laws were passed-laws making the sales of Blanc, " listoire de la Ievolution Franlaise," goods compulsory, and fixing their price in tome x., p. 144. paper-money. As Von Sybel'declares, "it 2 See "Memoirs of Louis XIV." for the inwas ihe most comprehensive attack on the truction of the dauphin. 3 For a simple exposition of the way in which rights of property, as far as our historical i i i the exercise of this power became simply confiscaknowledge reaches, which was ever made in tion of all private property in France, see Mallet Western Europe-an attack made in the Du Pan's " Memoirs," London, 1852, vol. ii., p. heart of a great and civilized nation, and 14. 20 PAPER-MONEY INFLATION IN FRANCE. ing prices is naturally included in it, as the It has also been objected that the attempt less is included in the greater. to secure the assignats on Government real The first result of the maximum was, estate failed because of the general want of that every means was taken to evade the confidence in the title derived by the purfixed price imposed; the farmers brought chasers from the new Government. Every in as little produce as they possibly could. thorough student of that period must know This caused scarcity, and the people of the that this is a misleading statement. Everylarge cities were put on an allowance, thing shows that the French people generTickets were issued authorizing the bear- ally had the most unwavering confidence in er to obtain at the maximum prices a cer- the stability of the new Government during tain amount of bread, or sugar, or soap, or the greater part of the Revolution. There wood, or coal, to cover immediate necessi- were disbelievers in the perpetuity of it, ties.1 just as there were disbelievers in the perIt may be said that these measures were petuity of the United States throughout our the result of the war then going on. Noth- recent civil war; but they were a small miing could be more baseless than such an ob- nority. Even granting that there was a jection. The war was generally successful. doubt as to investments in French lands, the It was pushed mainly upon foreign soil. French people had certainly as much confiNumerous contributions were levied upon dence in the secure possession of Governthe subjugated countries to support the ment lands as any people can ever have in French armies. The war was one of those large issues of Government bonds; indeed, of which the loss, falling apparently upon it is certain that they had far more confifuture generations, stimulates, in a sad way, dence in their lands as a security than any trade and production in the generation in modern nation can have in large issues of being. The main cause of these evils was convertible bonds obtained by payments of the old false system of confiscating the prop- irredeemable paper. The simple fact, as erty of an entire nation; keeping all values stated by John Stuart Mehll, which made in fluctuation; discouraging all enterprise; assignats convertible into real estate unsucparalyzing all energy; undermining sober cessful was that the vast majority of peohabits; obliterating thrift; promoting ex- ple could not afford to make investments travagance and wild riot, by the issue of an outside their business; and this fact is just irredeemable currency. as fatal to any attempt to contract large isIt has also been argued that the assignats sues of irredeemable paper by making such sank in value because they were not well se- issues convertible into bonds bearing low cured-that securing them on Government interest-save, perhaps, a bold, statesmanreal estate was as futile as if the United like attempt, which seizes the best time and States were to secure notes on its real estate presses every advantage, eschewing all " inin distant Territories. This objection is ut- terconvertibility"' devices, and sacrificing terly fallacious. The Government lands of everything to regain a sound currency based our own country are remote from the cen-' on standards common to the entire financial tres of capital, and difficult to examine: world. the French national real estate was near On April 11, 1793, a law was passed to those centres-even in them-and easy to meet the case of those who bought specie examine. Our national real estate is unim- with paper. Nothing could be more natural proved and unproductive: theirs was im- than such purchases. Husbands who wished proved and productive; the average produc- to make provision for their wives, fathers tiveness of that in market was quite five whB wished to make provision for their per cent. in ordinary times.2 children, desired to accumulate something of acknowledged value, and enormous prices 1 See specimens of these tickets in A. D. W. collection. to our Continental currency. See Louis Blanc, 2 Louis Blanc calls attention to this very fact in "I Histoire de la Revolution Francaise," tome xii., showing the superiority of the French assignats p. 98. PAPER-MONEY INFLATION IN FRANCE. 21 in paper were paid for gold. The new law the understanding that if more paper were forbade the sale or exchange of specie for afterward needed, more would be issued. more than its nominal value in paper, with All in vain.' The official tables of depreciaa penalty of six years' imprisonment in tion show that the assignats continued to irons.' fall; soon a forced loan calling in a billion It will doubtless astonish many to learn of these checked this fall, but for a mothat, in spite of these evident results of too ment.4 The " interconvertibility scheme " much currency, the old cry of a "scarcity between currency and bonds failed as disof circulating medium" was not stilled; it mally as the "interconvertibility scheme" appeared not long after each issue, no mat- between currency and land had failed. ter how large, and reappeared now. Soon after came a law confiscating the But every thoughtful student of financial property of all Frenchmen who left France history knows that this cry always comes before July 14, 1789, and who had not reafter such issues-nay, that it must come- turned. This gave new land to be mortbecause in obedience to a natural law there gaged for the security of paper-money. is a scarcity, or rather insufficiency of cur- Month after month, year after year, this rency just as soon as prices become adjusted went on. Meanwhile every thing possible to the new volume, and there comes some was done to keep up the value of paper. In little revival of business with the usual in- obedience to those who believed, with the crease of credit. market-women of Paris, as stated in their The cry of "insufficient amount of cir- famous petition, that " laws should be passed culating medium " was again raised. The making paper as good as gold," Couthon, on needs of the Government were pressing, and August 1, 1793, proposed and carried a law within a month after the passage of the punishing any person who should sell assigfearful penal laws made necessary by the old nats at less than their nominal value, with issues, twelve hundred millions more were imprisonment for twenty years in chains. sent forth. Two years later Couthon carried a law makAbout ten days after this a law was ing investments in foreign countries, by passed making a forced loan of one thou- Frenchmen, punishable with death; and to sand millions from the rich. In August, make this series of measures complete, to 1793, appears a report by Cambon. No one keep up paper at all hazards, on August 15, can read it without being struck by its per- 1793, the national debt was virtually repuverted ability. diated.' But while Cambon's plan of dealing with But, to the surprise of the great majority the public debt has outlasted all revolutions of the people in France, after the momensince, his plan of dealing with the inflated tary spasm of fear had passed, the value of currency came to speedy and wretched fail- the assignats was found not to have been ure. increased by these measures; on the conVery carefully he had devised a funding trary, they persisted in obeying the natural scheme which, taken in connection with his laws of finance, end, as new issues increased, system of issues, was, in effect, what in these their values decreased in a constant ratio. days would be called an 1" interconvertibility Nor did the iaost lavish aid of Nature avail scheme." By various degrees of persuasion to help matters. The paper-money of the or force, holders of assignats were urged to nation seemed to possess a magic power to convert them into evidences of national transmute prosperity into adversity. The debt, bearing interest at five per cent.,3 with year 1794 was exceptionally fruitful; crops were abundant; and yet with the autumn i See Von Sybel, vol. iii., p. 26; also Montgaillard, "Histoire de la Revolution Frangaise," p. 49-60;, also Decree of August 15-24, 1793, ~ 31, 196. chapters xcvi.-ciii. 2 For an excellent statement of the action of 4 See " Tableau de Depreciation du Papier Monthis law in our own country, see Sumner, p. 220. naie clans le Departement de la Seine." s See Cambon's "Report," August 15, 1753, pp. 5 See Von Sybel, vol. iii., p. 172. 22 PAPER-MONEY INFLATION IN FRANCE. came scarcity of provisions, and with the feverish activity caused by the intense desire winter came famine. The reason is per- of a large number of the more shrewd class fectly simple. The sequences in that whqle to convert their paper-money into anything history are absolutely logical.. First, the and everything which they could hold and Legislature had inflated the currency and hoard until the collapse which they foresaw raised prices enormously. Next, it had been should take place. This very activity in forced to establish an arbitrary maximum business was simply the result of disease. price for produce. But this price, large as It was simply legal robbery of the more enit seemed, was not equal to the real value of thusiastic and trusting by the more coldproduce; many of the farmers, therefore, hearted and keen. It was the "unloading" raised less produce or refrained from bring- of the assignats by the cunning upon the ing what they had to market.l But, as is mass of the people.d usual in such cases, the trouble was ascribed But even this could not stop the madness to everything rather than the real cause, and of inflation. New issues continued, until at the most severe measures were established the beginning of. 1796 over forty-five thouin all parts of the country to force farmers sand million francs had been issued, of to bring produce to market, the millers to which over thirty-six thousand millions were grind it, and the shopkeepers to sell it.2 in actual circulation.6 The issues of paper-money continued. Tow- It is very interesting to note, in the midst ard the end of 1794, seven thousand million of all this, the steady action of another simassignats were in circulation.3 By the end pie law in finance. The Government, with of May, 1795, the circulation was increased its prisons and its guillotines, with its laws to ten thousand millions; at the end of June inflicting twenty years' imprisonment in to fourteen thousand millions; at the end of chains upon the buyers of gold, and death July to sixteen thousand millions; and the upon investors in foreign securities, was value of one hundred francs in paper fell utterly powerless against this law. The steadily, first to four francs in gold, then to louis d'or stood in the market as a monitor, three, then to two and a half.4 But, curi- noting each day, with unerring fidelity, the ously enough, when this depreciation was decline in value of the assignat; a monitor rapidly going on, as at various other periods not to be bribed, not to be scared. As well when depreciation was rapid, there came an might the National Convention try to bribe, apparent revival of business. The hopes of or scare away, the polarity of the mariner's many were revived by the fact that, in spite compass. On August 1, 1795, the gold louis of the decline of paper, there was an ex- of 25 francs was worth 920 francs; Septemceedingly brisk trade in all kinds of perma- ber 1st, 1,200 francs; on November 1st, nent property. Whatever articles of perma- 2,600 francs; on December 1st, 3,050 francs. nent value certain people were willing to In February, 1796, it was worth in market sell, certain other people were willing to 7,200 francs, or one franc in gold was worth buy and pay largely for in assignats. At 288 francs in paper-money. Prices of all this, hope revived for a time in certain quar- commodities went up in proportion.7 ters. But ere long it was discovered that this was one of the most terrible results of a 5 For a life-like sketch of the vigorous way in natural law which is sure to come into play which these exchanges of assignats for valuable under such cis It ws simy a property went on at periods of the rapid depreciaunder such circumstances. It was simply a o m i s tion of paper, see Challamel, " Les Franqais sous la 1 See Von Sybel, vol. iii., p. 173. Revolution," p. 809; also, Say, "Economie Poli2 See Thiers; also, for curious details of meas- tique," septieme edition, p. 147. ures taken to compel farmers and merchants, see 6 See De Nervo, " Finances Franqaises," p. 280. Senior, "Lectures on Results of Paper-Money," 7 For a very complete table of the depreciation pp. 86, 87. from day to day, see Supplement to the XMoiteur, See Von Sybel, vol. iv., p. 231. of October 2, O197. For the market prices of the 4 See Von Sybel, vol. iv., p. 330; also tables of louis d'or at the first of each month, as the collapse depreciation in Afoniteur; also, official reports in approached, see Montgaillard. See also official lists A. D. W. collection. in the A. D. W. collection. PAPER-MONEY INFLATION IN FRANCE. 23 The writings of the period give curious This brought new evils, worse, if possible, details of these prices. Thibaudeau, in his than the old.6 " Memoirs," speaks of sugar as 500 francs a But, wide-spread as these evils were, they pound, soap 230 francs, candles 140 francs.l were small compared with the universal disMercier, in his life-like pictures of the French tress. The question will naturally be asked, metropolis at that period, mentions 600 francs On whom did this vast depreciation mainly as carriage-hire for a single drive, and 6,000 fall, at last? When this currency had sunk francs for an entire day.2 Everything was to about one three-hundredth part of its inflated in about the same proportion, ex- nominal value, and, after that, to nothing, cept the wages of labor; as manufactories in whose hands was the bulk of it? The closed, wages had fallen, until all that kept answer i; simple. I will give it in the exact them up at all was the fact that so many words of that thoughtful hitorian from laborers were drafted into the army. From whom Ihave already quoted: "Before the this state of things came grievous wrong and end of the year 1795 the paper-money was gross fraud. Men who had foreseen these almost exclusively in the hands of the workresults fully, and had gone into debt, were ing-classes, employes, and men of small of course jubilant. He who in 1790 had means, whose property was not large enough borrowed 10,000 francs could pay his debts to invest in stores of goods or national in 1796 for about 35 francs. Laws were lands.6 The financiers and men of large made to meet these abuses. As far back as means, though they suffered terribly, were 1794: a plan was devised for publishing of- shrewd enough to put much of their propficial "tables of depreciation" to be used in erty into objects of permanent value. The making equitable settlements of debts, but working-classes had no such foresight, or all such machinery3 proved futile. On the skill, or means. On them finally came the 18th of May, 1796, a young man complained great, crushing weight of the loss. After to the National Convention that his elder the first collapse came up the cries of the brother, who had been acting as adminis- starving. Roads and bridges were neglecttrator of his deceased father's estate, had ed; manufactures were generally given up paid the heirs in assignats, and that he re- in utter helplessness." To continue, in the ceived scarcely one three-hundredth part of words of the historian already cited: " None the real value of his share. To meet cases felt any confidence in the future in any like this, a law was passed establishing a respect; none dared to make an investment " scale of proportion." Taking as a standard for any length of time, and it was accountedthe value of the assignat when there were a folly to curtail the pleasures of the motwo billions in circulation, this law declared ment, to accumulate or save for an uncertain that, in the payment of debts, one quarter future." should be added to the amount originally While this system was thus running on, borrowed for every five hundred millions a new Government had been established. added to the circulation. In obedience to In October, 1795, came into power the "Dithis law a man.who borrowed two thousand rectory." It found the country utterly imfrancs when there were two billions in cir- poverished, and its only resource at first culation would have to pay his creditors was to print more paper-money, and issue it twenty-five hundred francs when half a even while wet from the press. billion more was added to the currency, and 5 See Villeneuve Bargemont, " Histoire de l'coover thirty thousand francs before the emis- nomie Politique," vol. ii., p. o29. sions of paper reached their final amount. 6 See Von Sybel, vol. iv., pp: 337, 338. See, also, for confirmation, Challamel, "Histoire MuSee " Mmoires de Thibaudeau," vol. ii., p. 26. see," vol. ii., p. 179. For a thoughtful statement 2 See Le Nouveau Paris," vol. ii., p. 90. of the reasons why such paper was not invested in 3 For curious examples of these " scales of de- lands by men of moderate means, and workingpreciation," see the A. D. AV. collection. men, see Mill, "Political Economy," vol. ii., pp. 4 For a striking similar case in our own country, 81, 82. oee S Umner, "History of American Currency," p. 47. 7 See Von Sybel, vol. iv., p. 222. 24 PAPER-MONEY INFLATION IN FRANCE. The next attempt of the Directory was from this they speedily fell to fifteen per to secure a forced loan of six hundred mil- cent., and soon after to five per cent. This lion francs from the wealthier classes; but plan failed-just as it failed in New Engthis was found fruitless. Next a National land in 1737; just as it failed under our Bank was proposed; but capital was loath to own Confederation in 1781; just as it failed embark in banking, while the howls of the under the "Southern Confederacy " within mob against all who had anything to do the past few years.2 with money resounded in the ears of capi- To sustain this new currency the Governtalists. At last the Directory bethought ment resorted to every method that ingenuthemselves of another expedient. It was ity could devise. Pamphlets were published by no means new. It was fully tried on explaining their advantages so as to be underour own continent twice before that time, stood by people of every capacity. Never and once since-first, in our colonial period; was there more skillful puffing of a financial next, during our Confederation; last, by the scheme. A pamphlet, signed "Marchant," recent "Southern Confederacy "-and here, and dedicated to "People of Good Faith," as elsewhere, always in vain. But experi- was widely circulated. In this -Marchant ence yielded to theory-plain business sense took pains to show the great advantage of to financial metaphysics. It was determined the mandats as compared with the assignats: to issue a new paper which should be "fully how land could be more easily acquired with secured" and "as good as gold." them than with assignats; how their secuOn February 19, 1796, the copper plates rity was better; how they could not by any of the assignats were broken up, and it was possibility sink in value as the assignats had decreed that no more assignats be issued; done. Even before the pamphlet was dry instead of them, it was decreed that a new from the press, the depreciation of mandats paper-money, "fully secured, and as good had refuted his entire argument.3 Then, as gold," be issued; under the name of " man- too, we have at work again the old superdats." In order that these notes should be stition that there is some way of keeping " fully secured," choice public real estate was up the value of paper-money other than by set apart to an amount fully equal to the having gold ready to redeem as much of it nominal value of the issue, and any one pos- as may be presented. The old plan of penal sessing any quantity of the mandats could measures is again pressed. Monot leads off at once take possession of Government lands by proposing penalties against those who to their full face value; the price of the shall speako publicly against the mandats, lands to be determined according to their Talot thinks the penalties ought to be made actual rental, and without the formalities especially severe; but finally it is agreed and delays previously established in regard that any persons " who by their discourse to the purchase of lands with assignats. In or writing shall decry the mandats, shall be order to make the mandats "as good as condemned to a fine of not less than one gold," it was planned by forced loans and thousand livres, or more than ten thousand; other means to reduce the quantity of as- and in case of a repetition of the offense, to signats in circulation so that the value of four years in irons." It was also decreed each assignat should be raised to one-thir- that those who refuse to receive the mandats tieth of the value of gold, then to make be fined the first time the exact sum which mandats legal tender, and to substitute them they refuse; the second time, ten times as for assignats at the rate of one for thirty.' much; and the third time, be punished with Never were great expectations more cruelly disappointed. Even before they could be 2 For an account of" new tenor bills" and their issued from the press, the mandats fell to failure in 1737, see Sumner, pp. 27-31; for their thirty per cent. of their nominal value; failure in 1181, see Morse, "Life of Alexander _____________ Hamilton," vol. i., pp. 86, 87. For similar failure 1 For details of this plan very thoroughly given, i Austria, see Sumner, p. 314. see Thiers's " History of the French Revolution," See Marchant, " Lettre aux Gens (1e Bonne Bentley's edition, vol. iv., pp. 410-412. Foi." PAPER-MONEY INFLATION IN FRANCE. 25 two years in prison. But here, too, were en in French society showed a nobleness of seen those laws in France which are alike character, and a simplicity in dress, worthy inexorable in all countries. This attempt of Roman matrons. Of these were Maproved futile in France, just as it had proved dame Roland and Madame Desmoulins; but futile, less than twenty years before, in now all was changed. At the head of soAmerica.l No enactments could stop the ciety stood Madame Tallien, and others like downward tendency of this new paper, her, wild in extravagance, seeking, daily, "fully secured," "as good as gold:" the new refinements in luxury, and demanding laws that finally govern finance are not of their husbands and lovers vast sums to made in conventions or congresses. array them, and feed their whims. If such On July 16, 1796, the great blow was sums could not be obtained honestly, they struck. It was decreed that all paper, man- must be obtained dishonestly. The more dats and assignats, should be taken at its closely one examines that period,, the more real value, and that bargains might be made clearly it is seen that the pictures given by in whatever currency the people chose. The Thibaudeau, and Challamel, and De Gonreal value of the mandats at this time was court, are not at all exaggerated. about five per cent. of their nominal value.2 But'when all was over with paper-money, The reign of paper-money in France was specie began to' reappear-at first in suffiover. The twenty - five hundred million cient sums to do the small amount of busimandats went into the common heap of ref- ness which remained after the collapse. use with the previous thirty-six billion as- Then, as the business demand' increased, signats. The whole vast issue was repudi- the amount of specie flowed in from the ated. world at large to meet it, and the nation The collapse had come at last; the whole gradually recovered from her long papernation was plunged into financial distress money debauch. and debauchery from one end to the other. Thibaudeau, a very thoughtful observer, To this general distress there was, in- tells us in his "Memoirs " that great fears deed, one exception. In Paris and in a few were felt as to a want of circulating meof the greater cities, men, like Tallien, of dium between the time when paper should the heartless, debauched, luxurious, specu- go out and coin should come in; but that later,, contractor, and stock-gambler classes, no such want was ever felt-that coin came had risen above the ruins of the multitudes in as if by magic-that the nation rapidly of smaller fortunes. Tallien, one of the' recovered from its paper-money debauch, worst of the demagogue " reformers," and and, within a year, business entered a new a certain number of men like him, had been current of prosperity.5 skillful enough to become millionaires, while Nothing coild better exemplify the saytheir dupes, who had clamored for issues of ing of one of the most shrewd of modern irredeemable paper-money, had become pau- statesmen, that "there will always be pers. money."' The luxury and extravagance of these Such, briefly sketched in its leading featmen and their families form one of the most ures, is the history of the most skillful, vigsignificant features in any picture of the orous, and persistent attempt ever made to social condition of that period.3 substitute for natural laws in finance the A few years before this the leading wom- ability of a legislative body, and to substi1 See Sumner, p. 44. 4 For Madame Tallien and luxury of the stock2 See De Nervo, " Finances Frangaises," p. 282. gambler classes, see Challamel, " Les Frangais sous s Among the many striking accounts of the de- la R6volution," pp.. 30, 33; also De Goncourt, basing effects of "inflation" upon France under " Les Frangais sous le Directoire." the Directory, perhaps the best is that of Lacre- 5 For similar expectation of a " shock," which telle, vol. xiii., pp. 32-36. For similar effect, pro- did not occur, at the resumption of specie payduced by same cause in our own country in 1819, ments in Massachusetts, see Sumner, "History of see statement from Niles's Register in Sumner, p. American. Currency," p. 34. 80. 6 See Thiers. 26 PAPER-MONEY INFLATION IN FRANCE. tute for a standard of value, recognized impulse; but, ere long, this over-productiox throughout the world, a national standard and over-stimulus proved as fatal to them as devised by theorists and manipulated by to commerce. From time to time there schemers. Every other attempt of the same was a revival of hope by an apparent revikind in human history, under whatever cir- val of business; but this revival of business cumstances, has reached similar results in was at last seen to be simply caused by the kind if not in degree; all of them show the desire of the more far-seeing and cunning to existence in the world of financial laws as exchange paper-money for objects of permasure in their operation as those laws which nent value. As to the people at large, the hold the planets in their courses.' classes living oil fixed incomes or salaries I have now presented this history in its felt the pressure first, as soon as the purchronological order-the order of events: chasing power of their fixed incomes was let me, in conclusion, sum it up in its logical reduced. Soon the great class living on order-the order of causes and effects. wages felt it even more sadly. And, first, in the economic development. Prices of the necessities of life increased; From the first careful issues of paper-money, merchants were obliged to increase them, irredeemable but moderate, we saw, as an not only to cover depreciation of their merimmediate result, apparent improvement and chandise, but also to cover their risk of loss activity in business. Then arose the clamor from fluctuation; while the prices of prodfor more paper-money. At first, new issues ucts thus rose, wages, which had gone up were made with great difficulty; but, the at first under the general stimulus, fell. dike once broken, the current of irredeema- Under the universal doubt and discourageble currency poured through; and, the ment, commerce and manufactures were breach thus enlarging, this currency was checked or destroyed. As a consequence, soon swollen beyond control. It was urged the demand for labor was stopped; laboringon by speculators for a rise in values; by a men were thrown out of employment, and, thoughtless mob, who thought that a nation, under the operation of the simplest law of by its simple fiat, could stamp real value supply and demand, the price of labor-the upon a valueless object; as a consequence, a daily wages of the laboring-class-went great debtor class grew rapidly and natural- down until, at a time when prices of food, ly, and this class gave its influence to depre- clothing, and various articles of consumpciate more and more the currency in which tion were enormous, wages were as low as its debts were to be paid.2 All the energy at the time preceding the first issue of irreof the Government was devoted to grinding deemable currency. out still more paper; commerce was at first The mercantile classes at first thought stimulated by the difference in exchange; themselves exempt from the general misforbut this cause soon ceased to operate, and tune. They were delighted at the apparent commerce, having been stimulated unhealth- advance in the value of the goods on their fully, wasted away. shelves. But they soon found that, as they Manufactures at first received a great increased prices to cover the inflation of currency and the risk from fluctuation and un1 For examples of similar effects in Russia, certainty, purchasers were fewer, purchases Austria, and Denmark, see Storch, "Economie less, and payments less sure; a feeling of Politique," vol. iv.; for similar effects in the Unitd States, see Gouge, "Paper-Money and Bankers insecurity spread throughout the country; tso States, see Gouge, "1 Paper-M~oney and Bankers in the United States;" also, Sumner, "History enterprise was deadened and general stagef American Currency." For working out of the nation followed. same principles in England, depicted in a masterly.New issues of paper were clamored for way, see Macaulay, " History of England," chapter as a new dram is called for by a drunkard. xxi.; and for curious exhibition of same causes The new issues only increased the evil; producing same results in ancient Greece, see curious quotation by Macaulay in same chapter. 2 For parallel cases in early history of our own embark their money on such a sea of doubt. country, see Sumner, p. 21, and elsewhere. Workmen of all sorts were more and more PAPER-MONEY INFLATION IN FRANCE. 2'i cast out of employment. Issue after issue yielded to general distrust. National honor of currency came; but no relief save a mo- was thought a fiction cherished only by enmentary stimulus, which aggravated the dis- thusiasts. Patriotism was eaten out by ease. The most ingenious evasions of nat- cynicism. ural laws in finance which the most subtle Such was the history of France as log — theorists could contrive were tried-all in cally developed in obedience to natural laws; vain; the most brilliant substitutes for those such has, to a greater or less degree, always laws were tried; self-regulating schemes, been the result of irredeemable paper issues, "interconverting " schemes - all equally created according to the whim or interest of vain.1 All thoughtful men had lost confi- legislative assemblies rather than based upon dence. All men were waiting; stagnation standards of value permanent in their nature became worse and worse. At last came the and agreed upon throughout the entire comcollapse, and then a return by a shock to mercial world; such, we may fairly expect, real values and a future which presented will be always the result of them until the some elements of certainty of remuneration fiat of the Almighty shall evolve laws in to capital and labor. Then, and not until the universe radically different from those then, came the beginning of a new era of which at present obtain. prosperity. And, finally, as to the general developJust as dependent on the law of cause ment of the theory and practice which all and effect was the moral development. Out this history records. of the inflation of prices grew a speculating My subject has been " Paper-Money Inclass; and, in the complete uncertainty as flation in France; How it came; What it to the future, all business became a game of brought; and How it ended." chance, and all business-men unintentional It came, as you saw, by seeking a remedy, gamblers. In city centres came a quick for a comparatively small evil, in an evil ingrowth of stock-jobbers and speculators; finitely more dangerous. To cure a disease and these set a debasing fashion in business temporary in its character a corrosive poison which spread to the remotest parts of the was administered which ate out the vitals of country. Instead of satisfaction with legiti- French prosperity. mate gains came admiration for cheatery. It progressed according to a law in social Then, too, as values became more and more physics which we may call the law of acceluncertain, there was no longer any motive erating issue and depreciation. It was comfor care or economy, but every motive for paratively easy to refrain from the first issue; immediate expenditure and present enjoy- it was exceedingly difficult to refrain from ment. So came uponthe nationthe olitera- the second; to refrain from the third and tion of the idea of thrift. In this mania for those following was impossible. yielding to present enjoyment rather than It brought, as you have seen, to commerce providing for future comfort were the seeds and manufactures, the mercantile interest, of new growths of wretchedness; and lux- the agricultural interest, utter ruin. It ury, senseless and extravagant, set in, and brought on these the same-destruction which this, too, spread as a fashion. To feed it, would come to a Hollander opening the there came cheating in the nation at large, dikes of the sea to irrigate his land in a dry and corruption among officials and persons summer. holding trusts; while the men set such fash- It ended in the complete financial, moral, ions in business, private and official, women and political prostration of France-a proslike Madame Tallien set fashions of extrava- tration from which a great absolute monarch gance in dress and living that added to the alone was able to draw it. incentives to corruption. Faith in moral 2 For similar effect of an inflated currency in considerations, or even in good impulses, enervating and undermining trade, husbandry, manufactures, and morals, in our own country, in 1 For a review of some of these attempts, with 1779, see Webster, cited in Sumner, pp. 45-50. eloquent statement of their evil results, see " Me- For similar effects in other countries, see Senior moires de Durand de Maillane," pp. 166-169. Storch, Macaulay, and others, already cited. 28 PAPER-MIONEY INFLATION IN FRANCE. But this history would be incomplete deemable paper." He never did, and France without a brief sequel showing how that under this determination commanded all the monarch profited by this frightful experience. gold she needed. When Waterloo came, When Bonaparte took the consulship the with theinvasion of the allies, with war on condition of fiscal affairs was appalling. The her own soil, with a change of dynasty, and Government was bankrupt; an immense heavy expenses for war and indemnities, debt was unpaid. The further collection of France, on a specie basis, experienced no setaxes seemed impossible; the assessments vere financial distress. were in hopeless confusion. War was going If we glance at the financial history of on in the East, on the Rhine, and in Italy, France during the recent Franco-Prussian and civil war in La Vendee. All the armies War and the Communist struggle, in which had been long unpaid, and the largest loan a far more terrible pressure was brought that could for a moment be effected was for upon French finance than our own recent a sum hardly meeting the expenses of the civil war put upon American finance, and Government for a single day. ~ At the first yet with no national stagnation or distress, cabinet council Bonaparte was asked what but with a steady progress in prosperity, we he intended to do. He replied, "I will pay shall see still more clearly the advantage of cash or pay nothing." From this time he meeting a financial crisis in an honest and conducted all his operations on this basis. manly way, and by methods sanctioned by He arranged the assessments, funded the the world's most costly experience, rather debt, and made every payment in cash; and than by yielding to the schemes of speculafrom this time-during all the campaigns of tors, or to the dreams of theorists involved Marengo, Austerlitz, Jena, Eylau, Friedland, in financial metaphysics.l down to the Peace of Tilsit in 180 —there There is a lesson in all this which it bewas but one suspension of specie payment, hooves every thinking man to ponder. and this only for a few days. When the first great European coalition was formed against greturoe o ws formd a t 1 For facts regarding French finance under the the empire, Napioleon was hard pressed finanthe. emie aplo wsh peemperor, I am indebted to Hon. David A. Wells. cially, and it was proposed to resort to pa"- For the recent triumph of financial common-sense per-money; but he wrote to his minister, in France, see Bonnet's articles, translated by "While I live I will never resort to irre- George Walker, Esq. THE END.