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- Fiat Money Inflation in France - 10/14 -


money was almost exclusively in the hands of the working classes, employees and men of small means, whose property was not large enough to invest in stores of goods or national lands.[69] Financiers and men of large means were shrewd enough to put as much of their property as possible into objects of permanent value. The working classes had no such foresight or skill or means. On them finally came the great crushing weight of the loss. After the first collapse came up the cries of the starving. Roads and bridges were neglected; many manufactures were given up in utter helplessness." To continue, in the words of the historian already cited: "None felt any confidence in the future in any respect; few dared to make a business investment for any length of time and it was accounted a folly to curtail the pleasures of the moment, to accumulate or save for so uncertain a future."[70]

This system in finance was accompanied by a system in politics no less startling, and each system tended to aggravate the other. The wild radicals, having sent to the guillotine first all the Royalists and next all the leading Republicans they could entrap, the various factions began sending each other to the same destination:--H├ębertists, Dantonists, with various other factions and groups, and, finally, the Robespierrists, followed each other in rapid succession. After these declaimers and phrase-mongers had thus disappeared there came to power, in October, 1795, a new government,--mainly a survival of the more scoundrelly,--the Directory. It found the country utterly impoverished and its only resource at first was to print more paper and to issue even while wet from the press. These new issues were made at last by the two great committees, with or without warrant of law, and in greater sums than ever. Complaints were made that the array of engravers and printers at the mint could not meet the demand for _assignats_--that they could produce only from sixty to seventy millions per day and that the government was spending daily from eighty to ninety millions. Four thousand millions of _francs_ were issued during one month, a little later three thousand millions, a little later four thousand millions, until there had been put forth over thirty-five thousand millions. The purchasing power of this paper having now become almost nothing, it was decreed, on the 22nd of December, 1795, that the whole amount issued should be limited to forty thousand millions, including all that had previously been put forth and that when this had been done the copper plates should be broken. Even in spite of this, additional issues were made amounting to about ten thousand millions. But on the 18th of February, 1796, at nine o'clock in the morning, in the presence of a great crowd, the machinery, plates and paper for printing _assignats_ were brought to the Place Vendome and there, on the spot where the Napoleon Column now stands, these were solemnly broken and burned.

Shortly afterward a report by Camus was made to the Assembly that the entire amount of paper money issued in less than six years by the Revolutionary Government of France had been over forty-five thousand millions of _francs_--that over six thousand millions had been annulled and burned and that at the final catastrophe there were in circulation close upon forty thousand millions. It will be readily seen that it was fully time to put an end to the system, for the gold "_louis_" of twenty-five _francs_ in specie had, in February, 1796, as we have seen, become worth 7,200 _francs_, and, at the latest quotation of all, no less than 15,000 _francs_ in paper money--that is, one franc in gold was nominally worth 600 _francs_ in paper.

Such were the results of allowing dreamers, schemers, phrase-mongers, declaimers and strong men subservient to these to control a government.[71]

III.

The first new expedient of the Directory was to secure a forced loan of six hundred million _francs_ from the wealthier classes; but this was found fruitless. Ominous it was when persons compelled to take this loan found for an _assignat_ of one hundred _francs_ only one franc was allowed. Next a National Bank was proposed; but capitalists were loath to embark in banking while the howls of the mob against all who had anything especially to do with money resounded in every city. At last the Directory bethought themselves of another expedient. This was by no means new. It had been fully tried on our continent twice before that time: and once, since--first, in our colonial period; next, during our Confederation; lastly, by the "Southern Confederacy" and here, as elsewhere, always in vain. But experience yielded to theory--plain business sense to financial metaphysics. It was determined to issue a new paper which should be "fully secured" and "as good as gold."

Pursuant to this decision it was decreed that a new paper money "fully secured and as good as gold" be issued under the name of "_mandats_." In order that these new notes should be "fully secured," choice public real estate was set apart to an amount fully equal to the nominal value of the issue, and any one offering any amount of the _mandats_ could at once take possession of government lands; the price of the lands to be determined by two experts, one named by the government and one by the buyer, and without the formalities and delays previously established in regard to the purchase of lands with _assignats_.

Perhaps the most whimsical thing in the whole situation was the fact that the government, pressed as it was by demands of all sorts, continued to issue the old _assignats_ at the same time that it was discrediting them by issuing the new _mandats_. And yet in order to make the _mandats_ "as good as gold" it was planned by forced loans and other means to reduce the quantity of _assignats_ in circulation, so that the value of each _assignat_ should be raised to one-thirtieth of the value of gold, then to make _mandats_ legal tender and to substitute them for _assignats_ at the rate of one for thirty. Never were great expectations more cruelly disappointed. Even before the _mandats_ could be issued from the press they fell to thirty-five per cent of their nominal value; from this they speedily fell to fifteen, and soon after to five per cent, and finally, in August, 1796, six months from their first issue, to three per cent. This plan failed--just as it failed in New England in 1737; just as it failed under our own Confederation in 1781; just as it failed under the Southern Confederacy during our Civil War.[72]

To sustain this new currency the government resorted to every method that ingenuity could devise. Pamphlets suited to people of every capacity were published explaining its advantages. Never was there more skillful puffing. A pamphlet signed "Marchant" and dedicated to "People of Good Faith" was widely circulated, in which Marchant took pains to show the great advantage of the _mandats_ as compared with _assignats_,--how land could be more easily acquired with them; how their security was better than with _assignats_; how they could not, by any possibility, sink in values as the _assignats_ had done. But even before the pamphlet was dry from the press the depreciation of the _mandats_ had refuted his entire argument.[73]

The old plan of penal measures was again pressed. Monot led off by proposing penalties against those who shall speak publicly against the _mandats_; Talot thought the penalties ought to be made especially severe; and finally it was enacted that any persons "who by their discourse or writing shall decry the _mandats_ shall be condemned to a fine of not less than one thousand _francs_ or more than ten thousand; and in case of a repetition of the offence, to four years in irons." It was also decreed that those who refused to receive the _mandats_ should be fined,--the first time, the exact sum which they refuse; the second time, ten times as much; and the third time, punished with two years in prison. But here, too, came in the action of those natural laws which are alike inexorable in all countries. This attempt proved futile in France just as it had proved futile less than twenty years before in America. No enactments could stop the downward tendency of this new paper "fully secured," "as good as gold"; the laws that finally govern finance are not made in conventions or congresses.[74]

From time to time various new financial juggles were tried, some of them ingenious, most of them drastic. It was decreed that all _assignats_ above the value of one hundred _francs_ should cease to circulate after the beginning of June, 1796. But this only served to destroy the last vestige of, confidence in government notes of any kind. Another expedient was seen in the decree that paper money should be made to accord with a natural and immutable standard of value and that one franc in paper should thenceforth be worth ten pounds of wheat. This also failed. On July 16th another decree seemed to show that the authorities despaired of regulating the existing currency and it was decreed that all paper, whether _mandats_ or _assignats_, should be taken at its real value, and that bargains might be made in whatever currency people chose. The real value of the _mandats_ speedily sank to about two per cent of their nominal value and the only effect of this legislation seemed to be that both _assignats_ and _mandats_ went still lower. Then from February 4 to February 14, 1797, came decrees and orders that the engraving apparatus for the _mandats_ should be destroyed as that for the _assignats_ had been, that neither _assignats_ nor _mandats_ should longer be a legal tender and that old debts to the state might be paid for a time with government paper at the rate of one per cent of their face value.[75] Then, less than three months later, it was decreed that the twenty-one billions of _assignats_ still in circulation should be annulled. Finally, on September 30, 1797, as the culmination of these and various other experiments and expedients, came an order of the Directory that the national debts should be paid two-thirds in bonds which might be used in purchasing confiscated real estate, and the remaining "Consolidated Third," as it was called, was to be placed on the "Great Book" of the national debt to be paid thenceforth as the government should think best.

As to the bonds which the creditors of the nation were thus forced to take, they sank rapidly, as the _assignats_ and _mandats_ had done, even to three per cent of their value. As to the "Consolidated Third," that was largely paid, until the coming of Bonaparte, in paper money which sank gradually to about six per cent of its face value. Since May, 1797, both _assignats_ and _mandats_ had been virtually worth nothing.

So ended the reign of paper money in France. The twenty-five hundred millions of _mandats_ went into the common heap of refuse with the previous forty-five thousand millions of _assignats_: the nation in general, rich and poor alike, was plunged into financial ruin from one end to the other.

On the prices charged for articles of ordinary use light is thrown by extracts from a table published in 1795, reduced to American coinage.

1790 1795 For a bushel of flour 40 cents 45 dollars For a bushel of oats 18 cents 10 dollars For a cartload of wood 4 dollars 500 dollars For a bushel of coal 7 cents 2 dollars For a pound of sugar 18 cents 12 1/2 dollars For a pound of soap 18 cents 8 dollars For a pound of candles 18 cents 8 dollars For one cabbage 8 cents 5 1/2 dollars For a pair of shoes 1 dollar 40 dollars For twenty-five eggs 24 cents 5 dollars


Fiat Money Inflation in France - 10/14

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