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Home -> Andrew Dickson White -> Fiat Money Inflation in France -> Chapter II

Fiat Money Inflation in France - Chapter II

1. Introduction

2. Foreword By Mr. John Mackay

3. Chapter I

4. Chapter II

5. Chapter III

6. Notes


Even worse than this was the breaking down of the morals of the
country at large, resulting from the sudden building up of
ostentatious wealth in a few large cities, and from the gambling,
speculative spirit spreading from these to the small towns and rural
districts. From this was developed an even more disgraceful
result,--the decay of a true sense of national good faith. The
patriotism which the fear of the absolute monarchy, the machinations
of the court party, the menaces of the army and the threats of all
monarchical Europe had been unable to shake was gradually
disintegrated by this same speculative, stock-jobbing habit fostered
by the superabundant currency. At the outset, in the discussions
preliminary to the first issue of paper money, Mirabeau and others who
had favored it had insisted that patriotism as well as an enlightened
self-interest, would lead the people to keep up the value of paper
money. The very opposite of this was now revealed, for there
appeared, as another outgrowth of this disease, what has always been
seen under similar circumstances. It is a result of previous, and a
cause of future evils. This outgrowth was a vast debtor class in the
nation, directly interested in the depreciation of the currency in
which they were to pay their debts. The nucleus of this class was
formed by those who had purchased the church lands from the
government. Only small payments down had been required and the
remainder was to be paid in deferred installments: an indebtedness of
a multitude of people had thus been created to the amount of hundreds
of millions. This body of debtors soon saw, of course, that their
interest was to depreciate the currency in which their debts were to
be paid; and these were speedily joined by a far more influential
class;--by that class whose speculative tendencies had been stimulated
by the abundance of paper money, and who had gone largely into debt,
looking for a rise in nominal values. Soon demagogues of the viler
sort in the political clubs began to pander to it; a little later
important persons in this debtor class were to be found intriguing in
the Assembly--first in its seats and later in more conspicuous places
of public trust. Before long, the debtor class became a powerful body
extending through all ranks of society. From the stock-gambler who
sat in the Assembly to the small land speculator in the rural
districts; from the sleek inventor of _canards_ on the Paris Exchange
to the lying stock-jobber in the market town, all pressed vigorously
for new issues of paper; all were apparently able to demonstrate to
the people that in new issues of paper lay the only chance for
national prosperity.

This great debtor class, relying on the multitude who could be
approached by superficial arguments, soon gained control. Strange as
it might seem to those who have not watched the same causes at work at
a previous period in France and at various times in other countries,
while every issue of paper money really made matters worse, a
superstition gained ground among the people at large that, if only
_enough_ paper money were issued and were more cunningly handled the
poor would be made rich. Henceforth, all opposition was futile. In
December, 1791, a report was made in the Legislative Assembly in favor
of yet another great issue of three hundred millions more of paper
money. In regard to this report Cambon said that more money was
needed but asked, "Will you, in a moment when stock-jobbing is carried
on with such fury, give it new power by adding so much more to the
circulation?" But such high considerations were now little regarded.
Dorisy declared, "There is not enough money yet in circulation; if
there were more the sales of national lands would be more rapid." And
the official report of his speech states that these words were

Dorisy then went on to insist that the government lands were worth at
least thirty-five hundred million _livres_ and said: "Why should
members ascend the tribunal and disquiet France? Fear nothing; your
currency reposes upon a sound mortgage." Then followed a
glorification of the patriotism of the French people, which, he
asserted, would carry the nation through all its difficulties.

Becquet, speaking next, declared that "The circulation is becoming
more rare every day."

On December 17, 1791, a new issue was ordered, making in all
twenty-one hundred millions authorized. Coupled with this was the
declaration that the total amount in actual circulation should never
reach more than sixteen hundred millions. Before this issue the value
of the 100 _livres_ note had fallen at Paris to about 80 _livres_;[38]
immediately afterward it fell to about 68 _livres_. What limitations
of the currency were worth may be judged from the fact that not only
had the declaration made hardly a year before, limiting the amount in
circulation to twelve hundred millions, been violated, but the
declaration, made hardly a month previous, in which the Assembly had
as solemnly limited the amount of circulation to fourteen hundred
millions, had also been repudiated.

The evils which we have already seen arising from the earlier issues
were now aggravated; but the most curious thing evolved out of all
this chaos was a _new system of political economy_. In speeches,
newspapers and pamphlets about this time, we begin to find it declared
that, after all, a depreciated currency is a blessing; that gold and
silver form an unsatisfactory standard for measuring values: that it
is a good thing to have a currency that will not go out of the kingdom
and which separates France from other nations: that thus shall
manufacturers be encouraged; that commerce with other nations may be a
curse, and hindrance thereto may be a blessing; that the laws of
political economy however applicable in other times, are not
applicable to this particular period, and, however operative in other
nations, are not now so in France; that the ordinary rules of
political economy are perhaps suited to the minions of despotism but
not to the free and enlightened inhabitants of France at the close of
the eighteenth century; that the whole state of present things, so far
from being an evil is a blessing. All these ideas, and others quite
as striking, were brought to the surface in the debates on the various
new issues.[39]

Within four months came another report to the Assembly as ingenious as
those preceding. It declared: "Your committee are thoroughly
persuaded that the amount of the circulating medium before the
Revolution was greater than that of the _assignats_ today: but at that
time the money circulated slowly and now it passes rapidly so that one
thousand million _assignats_ do the work of two thousand millions of
specie." The report foretells further increase in prices, but by some
curious jugglery reaches a conclusion favorable to further inflation.
Despite these encouragements the _assignats_ nominally worth 100
_livres_ had fallen, at the beginning of February, 1792, to about 60
_livres_, and during that month fell to 53 _livres_.[40]

In March, Clavière became minister of financ. He was especially
proud of his share in the invention and advocacy of the _assignats_,
and now pressed their creation more vigorously than ever, and on April
30th, of the same year, came the fifth great issue of paper money,
amounting to three hundred millions: at about the same time Cambon
sneered ominously at public creditors as "rich people, old financiers
and bankers." Soon payment was suspended on dues to public creditors
for all amounts exceeding ten thousand _francs_.

This was hailed by many as a measure in the interests of the poorer
classes of people, but the result was that it injured them most of
all. Henceforward, until the end of this history, capital was quietly
taken from labor and locked up in all the ways that financial
ingenuity could devise. All that saved thousands of laborers in
France from starvation was that they were drafted off into the army
and sent to be killed on foreign battlefields.

On the last day of July, 1792, came another brilliant re- port from
Fouquet, showing that the total amount of currency already issued was
about twenty-four hundred millions, but claiming that the national
lands were worth a little more than this sum. A decree was now passed
issuing three hundred millions more. By this the prices of everything
were again enhanced save one thing, and that one thing was labor.
Strange as it may at first appear, while the depreciation of the
currency had raised all products enormously in price, the stoppage of
so many manufactories and the withdrawal of capital caused wages in
the summer of 1792, after all the inflation, to be as small as they
had been four years before--viz., fifteen _sous_ per day. No more
striking example can be seen of the truth uttered by Daniel Webster,
that "of all the contrivances for cheating the laboring classes of
mankind, none has been more effective than that which deludes them
with paper-money."[41]

Issue after issue followed at intervals of a few months, until, on
December 14, 1792, we have an official statement to the effect that
thirty-five hundred millions had been put forth, of which six hundred
millions had been burned, leaving in circulation twenty-eight hundred

When it is remembered that there was little business to do and that
the purchasing power of the _livre_ or franc, when judged by the
staple products of the country, was equal to about half the present
purchasing power of our own dollar, it will be seen into what evils
France had drifted. As the mania for paper money ran its course, even
the _sous_, obtained by melting down the church bells, were more and
more driven out of circulation and more and more parchment notes from
twenty _four_ to five were issued, and at last pieces of one _sou_, of
half a _sou_ and even of one-quarter of a _sou_ were put in

But now another source of wealth was opened to the nation. There came
a confiscation of the large estates of landed proprietors who had fled
the country. An estimate in 1793 made the value of these estates
three billions of _francs_. As a consequence, the issues of paper
money were continued in increased amounts, on the old theory that they
were guaranteed by the solemn pledge of these lands belonging to the
state. Under the Legislative Assembly through the year 1792 new
issues were made virtually every month, so that at the end of January,
1793, it was more and more realized that the paper money actually in
circulation amounted close upon three thousand millions of _francs_.
All this had been issued publicly, in open sessions of the National
and Legislative Assemblies; but now under the National Convention, the
two Committees of Public Safety and of Finance began to decree new
issues privately, in secret session.

As a result, the issues became larger still, and four hundred workmen
were added to those previously engaged in furnishing this paper money,
and these were so pressed with work from six o'clock in the morning
until eight in the evening that they struck for higher wages and were

The consequences of these overissues now began to be more painfully
evident to the people at large. Articles of common consumption became
enormously dear and prices were constantly rising. Orators in the
Legislative Assembly, clubs, local meetings and elsewhere now
endeavored to enlighten people by assigning every reason for this
depreciation save the true one. They declaimed against the corruption
of the ministry, the want of patriotism among the Moderates, the
intrigues of the emigrant nobles, the hard-heartedness of the rich,
the monopolizing spirit of the merchants, the perversity of the
shopkeepers,---each and all of these as causes of the difficulty.[44]

This decline in the government paper was at first somewhat masked by
fluctuations. For at various times the value of the currency _rose_.
The victory of Jemappes and the general success of the French army
against the invaders, with the additional security offered by new
confiscations of land, caused, in November, 1792, an appreciation in
the value of the currency; the franc had stood at 57 and it rose to
about 69; but the downward tendency was soon resumed and in September,
1793, the _assignats_ had sunk below 30. Then sundry new victories
and coruscations of oratory gave momentary confidence so that in
December, 1793, they rose above 50. But despite these fluctuations
the downward tendency soon became more rapid than ever.[45]

The washerwomen of Paris, finding soap so dear that they could hardly
purchase it, insisted that all the merchants who were endeavoring to
save something of their little property by refusing to sell their
goods for the wretched currency with which France was flooded, should
be punished with death; the women of the markets and the hangers-on of
the Jacobin Club called loudly for a law "to equalize the value of
paper money and silver coin." It was also demanded that a tax be laid
especially on the rich, to the amount of four hundred million
_francs_, to buy bread. Marat declared loudly that the people, by
hanging shopkeepers and plundering stores, could easily remove the
trouble. The result was that on the 28th of February, 1793, at eight
o'clock in the evening, a mob of men and women in disguise began
plundering the stores and shops of Paris. At first they demanded only
bread; soon they insisted on coffee and rice and sugar; at last they
seized everything on which they could lay their hands--cloth,
clothing, groceries and luxuries of every kind. Two hundred such
places were plundered. This was endured for six hours and finally
order was restored only by a grant of seven million _francs_ to buy
off the mob. The new political economy was beginning to bear, its
fruits luxuriantly. A gaudy growth of it appeared at the City Hall of
Paris when, in response to the complaints of the plundered merchants,
Roux declared, in the midst of great applause, that "shopkeepers were
only giving back to the people what they had hitherto robbed them of."

The mob having thus been bought off by concessions and appeased by
oratory, the government gained time to think, and now came a series of
amazing expedients,--and yet all perfectly logical.

Three of these have gained in French history an evil pre-eminence, and
first of the three was the Forced Loan.

In view of the fact that the well-to-do citizens were thought to be
lukewarm in their support of the politicians controlling the country,
various demagogues in the National Convention, which had now succeeded
the National, Constituent and Legislative Assemblies, found ample
matter for denunciations long and loud. The result outside the
Convention was increased activity of the guillotine; the results
inside were new measures against all who had money, and on June 22,
1793, the Convention determined that there should be a Forced Loan,
secured on the confiscated lands of the emigrants and levied upon all
married men with incomes of ten thousand _francs_, and upon all
unmarried men with incomes of six thousand _francs_. It was
calculated that these would bring into the treasury a thousand
millions of _francs_. But a difficulty was found. So many of the
rich had lied or had concealed their wealth that only a fifth of the
sum required could be raised, and therefore a law was soon passed
which levied forced loans upon incomes as low as one thousand,
_francs_,--or, say, two hundred dollars of American money. This tax
was made progressive. On the smaller proprietors it was fixed at
one-tenth and on the larger, that is, on all incomes above nine
thousand _francs_, it was made one-half of the entire income. Little
if any provision was made for the repayment of this loan but the
certificates might be used for purchasing the confiscated real estate
of the church and of the nobility.[46]

But if this first expedient shows how naturally a "fiat" money system
runs into despotism, the next is no less instructive in showing how
easily it becomes repudiation and dishonor.

As we have seen, the first issue of the _assignats_,--made by the
National Assembly, bore a portrait of the king; but on the various
issues after the establishment of a republic this emblem had been
discarded. This change led to a difference in value between the
earlier and the later paper money. The wild follies of fanatics and
demagogues had led to an increasing belief that the existing state of
things could not last; that the Bourbons must ere long return; that in
such case, while a new monarch would repudiate all the vast mass of
the later paper issued by the Republic, he would recognize that first
issue bearing the face and therefore the guarantee of the king. So it
was that this first issue came to bear a higher value than those of
later date. To meet this condition of things it was now proposed to
repudiate an that earlier issue. In vain did sundry more thoughtful
members of the Convention plead that this paper money, amounting to
five hundred and fifty-eight millions of _francs_, bore the solemn
guarantee of the nation, as well as of the king; the current was
irresistible. All that Cambon, the great leader of finance at that
time, could secure was a clause claiming to protect the poor, to the
effect that this demonetization should not extend to notes below a
hundred _francs_ in value; and it was also agreed that any of the
notes, large or small, might be received in payment of taxes and for
the confiscated property of the clergy and nobility. To all the
arguments advanced against this breach of the national faith Danton,
then at the height of his power, simply declared that only aristocrats
could favor notes bearing the royal portrait, and gave forth his
famous utterance: "Imitate Nature, which watches over the preservation
of the race but has no regard for individuals." The decree was passed
on the 31st of July, 1793, yet its futility was apparent in less than
two months, when the Convention decreed that there should be issued
two thousand millions of _francs_ more in _assignats_ between the
values of ten _sous_ and four hundred _francs_, and when, before the
end of the year, five hundred millions more were authorized.[47]

The third outgrowth of the vast issue of fiat money was the _Maximum_.
As far back as November, 1792, the Terrorist associate of Robespierre,
St. Just, in view of the steady rise in prices of the necessaries of
life, had proposed a scheme by which these prices should be
established by law, at a rate proportionate to the wages of the
working classes. This plan lingered in men's minds, taking shape in
various resolutions and decrees until the whole culminated on
September 29, 1793, in the Law of the _Maximum_.

While all this legislation was high-handed, it was not careless. Even
statesmen of the greatest strength, having once been drawn into this
flood, were borne on into excesses which, a little earlier, would have
appalled them. Committees of experts were appointed to study the
whole subject of prices, and at last there were adopted the great
"four rules" which seemed to statesmen of that time a masterly
solution of the whole difficulty.[48]

_First_, the price of each article of necessity was to be fixed at one
and one-third its price in 1790. _Secondly_, all transportation was
to be added at a fixed rate per league. _Thirdly_, five per cent was
to be added for the profit of the wholesaler. _Fourthly_, ten per
cent was to be added for the profit of the retailer. Nothing could
look more reasonable. Great was the jubilation. The report was
presented and supported by Barrère,--"the tiger monkey,"--then in all
the glory of his great orations: now best known from his portrait by
Macaulay. Nothing could withstand Barrère's eloquence. He insisted
that France had been suffering from a "_Monarchical_ commerce which
only sought wealth," while what she needed and what she was now to
receive was a "_Republican_ commerce--a commerce of moderate profits
and virtuous." He exulted in the fact that "France alone enjoys such
a commerce,--that it exists in no other nation." He poured contempt
over political economy as "that science which quacks have corrupted,
which pedants have obscured and which academicians have depreciated."
France, he said, has something better, and he declared in conclusion,
"The needs of the people will no longer be spied upon in order that
the commercial classes may arbitrarily take advantage."[49]

The first result of the _Maximum_ was that every means was taken to
evade the fixed price imposed, and the farmers brought in as little
produce as they possibly could. This increased the scarcity, and the
people of the large cities were put on an allowance. Tickets were
issued authorizing the bearer to obtain at the official prices a
certain amount of bread or sugar or soap or wood or coal to cover
immediate necessities.[50]

But it was found that the _Maximum_, with its divinely revealed four
rules, could not be made to work well--even by the shrewdest devices.
In the greater part of France it could not be enforced. As to
merchandise of foreign origin or merchandise into which any foreign
product entered, the war had raised it far above the price allowed
under the first rule, namely, the price of 1790, with an addition of
one-third. Shopkeepers therefore could not sell such goods without
ruin. The result was that very many went out of business and the
remainder forced buyers to pay enormous charges under the very natural
excuse that the seller risked his life in trading at all. That this
excuse was valid is easily seen by the daily lists of those condemned
to the guillotine, in which not infrequently figure the names of men
charged with violating the _Maximum_ laws. Manufactures were very
generally crippled and frequently destroyed, and agriculture was
fearfully depressed. To detect goods concealed by farmers and
shopkeepers, a spy system was established with a reward to the
informer of one-third of the value of the goods discovered. To spread
terror, the Criminal Tribunal at Strassburg was ordered to destroy the
dwelling of any one found guilty of selling goods above the price set
by law. The farmer often found that he could not raise his products
at anything like the price required by the new law, and when he tried
to hold back his crops or cattle, alleging that he could not afford to
sell them at the prices fixed by law, they were frequently taken from
him by force and he was fortunate if paid even in the depreciated fiat
money--fortunate, indeed, if he finally escaped with his life.[51]

Involved in all these perplexities, the Convention tried to cut the
Gordian knot. It decreed that any person selling gold or silver coin,
or making any difference in any transaction between paper and specie,
should be imprisoned in irons for six years:--that any one who refused
to accept a payment in _assignats_, or accepted _assignats_ at a
discount, should pay a fine of three thousand _francs_; and that any
one committing this crime a second time should pay a fine of six
thousand _francs_ and suffer imprisonment twenty years in irons.
Later, on the 8th of September, 1793, the penalty for such offences
was made death, with confiscation of the criminal's property, and so
reward was offered to any person informing the authorities regarding
any such criminal transaction. To reach the climax of ferocity, the
Convention decreed, in May, 1794, that the death penalty should be
inflicted on any person convicted of "having asked, be- fore a bargain
was concluded, in what money payment was to be made." Nor was this
all. The great finance minister, Cambon, soon saw that the worst
enemies of his policy were gold and silver. Therefore it was that,
under his lead, the Convention closed the Exchange and finally, on
November 13, 1793, under terrifying penalties, suppressed all commerce
in the precious metals. About a year later came the abolition of the
Maximum itself.[52]

It is easily seen that these _Maximum_ laws were perfectly logical.
Whenever any nation intrusts to its legislators the issue of a
currency not based on the idea of redemption in standard coin
recognized in the commerce of civilized nations, it intrusts to them
the power to raise or depress the value of every article in the
possession of every citizen. Louis XIV had claimed that all property
in Prance was his own, and that what private persons held was as much
his as if it were in his coffers. But even this assumption is
exceeded by the confiscating power exercised in a country, where,
instead of leaving values to be measured by a standard common to the
whole world, they are left to be depressed or raised at the whim,
caprice or interest of a body of legislators. When this power is
given, the power of prices is inevitably included in it.[53]

It may be said that these measures were made necessary by the war then
going on. Nothing could be more baseless than such an objection. In
this war the French soon became generally successful. It was quickly
pushed mainly upon foreign soil. Numerous contributions were levied
upon the subjugated countries to support the French armies. The war
was one of those in which the loss, falling apparently on future
generations, first stimulates, in a sad way, trade and production.
The main cause of these evils was tampering with the circulating
medium of an entire nation; keeping all values in fluctuation;
discouraging enterprise; paralyzing energy; undermining sobriety;
obliterating thrift; promoting extravagance and exciting riot by the
issue of an irredeemable currency. The true business way of meeting
the enormous demands on France during the first years of the
Revolution had been stated by a true statesman and sound financier, Du
Pont de Nemours, at the very beginning. He had shown that using the
same paper as a circulating medium and as a means for selling the
national real estate was like using the same implement for an oyster
knife and a razor.[54]

It has been argued that the _assignats_ sank in value because they
were not well secured,--that securing them on government real estate
was as futile as if the United States had, in the financial troubles
of its early days, secured notes on its real estate. This objection
is utterly fallacious. The government lands of our country were
remote from the centers of capital and difficult to examine; the
French national real estate was near these centers--even _in_
them--and easy to examine. Our national real estate was unimproved
and unproductive; theirs was improved and productive--its average
productiveness in market in ordinary times being from four to five per

It has also been objected that the attempt to secure the _assignats_
on government real estate failed because of the general want of
confidence in the title derived by the purchasers from the new
government. Every thorough student of that period must know that this
is a misleading statement. Everything shows that the vast majority of
the French people had a fanatical confidence in the stability of the
new government during the greater part of the Revolution. There were
disbelievers in the security of the _assignats_ just as there were
disbelievers in the paper money of the United States throughout our
Civil War; but they were usually a small minority. Even granting that
there was a doubt as to investment in French lands, the French people
certainly had as much confidence in the secure possession of
government lands as any people can ever have in large issues of
government bonds: indeed, it is certain that they had far more
confidence in their lands as a security than modern nations can
usually have in large issues of bonds obtained by payments of
irredeemable paper. One simple fact, as stated by John Stuart Mill,
which made _assignats_ difficult to convert into real estate was that
the vast majority of people could not afford to make investments
outside their business; and this fact is no less fatal to any attempt
to contract large issues of irredeemable paper--save, perhaps, a bold,
statesmanlike attempt, which seizes the best time and presses every
advantage, eschewing all juggling devices and sacrificing everything
to maintain a sound currency based on standards common to the entire
financial world.

And now was seen, taking possession of the nation, that idea which
developed so easily out of the fiat money system;--the idea that the
ordinary needs of government may be legitimately met wholly by the
means of paper currency;--that taxes may be dispensed with. As a
result, it was found that the _assignat_ printing press was the one
resource left to the government, and the increase in the volume of
paper money became every day more appalling.

It will doubtless surprise many to learn that, in spite of these
evident results of too much currency, the old cry of a "scarcity of
circulating medium" was not stilled; it appeared not long after each
issue, no matter how large.

But every thoughtful student of financial history knows that this cry
always comes after such issues--nay, that it _must_ come,--because in
obedience to a natural law, the former scarcity, or rather
_insufficiency_ of currency recurs just as soon as prices become
adjusted to the new volume, and there comes some little revival of
business with the usual increase of credit.[56]

In August, 1793, appeared a new report by Cambon. No one can read it
without being struck by its mingled ability and folly. His final plan
of dealing with the public debt has outlasted all revolutions since,
but his disposition of the inflated currency came to a wretched
failure. Against Du Pont, who showed conclusively that the wild
increase of paper money was leading straight to, ruin, Cambon carried
the majority in the great assemblies and clubs by sheer audacity--the
audacity of desperation. Zeal in supporting the _assignats_ became
his religion. The National Convention which succeeded the Legislative
Assembly, issued in 1793 over three thousand millions of _assignats_,
and, of these, over twelve hundred millions were poured into the
circulation. And yet Cambon steadily insisted that the security for
the _assignat_ currency was perfect. The climax of his zeal was
reached when he counted as assets in the national treasury the
indemnities which, he declared, France was sure to receive after
future victories over the allied nations with which she was then
waging a desperate war. As patriotism, it was sublime; as finance it
was deadly.[57]

Everything was tried. Very elaborately he devised a funding scheme
which, taken in connection with his system of issues, was in effect
what in these days would be called an "_interconvertibility scheme_"
By various degrees of persuasion or force,--the guillotine looming up
in the background,--holders of _assignats_ were urged to convert them
into evidence of national debt, bearing interest at five per cent,
with the understanding that if more paper were afterward needed more
would be issued. All in vain. The official tables of depreciation
show that the _assignats_ continued to fall. A forced loan, calling
in a billion of these, checked this fall, but only for a moment. The
"_interconvertibility scheme_" between currency and bonds failed as
dismally as the "_interconvertibility scheme_" between currency and
land had failed.[58]

A more effective expedient was a law confiscating the property of all
Frenchmen who left France after July 14, 1789, and who had not
returned. This gave new land to be mortgaged for the security of
paper money.

All this vast chapter in financial folly is sometimes referred to as
if it resulted from the direct action of men utterly unskilled in
finance. This is a grave error. That wild schemers and dreamers took
a leading part in setting the fiat money system going is true; that
speculation and interested financiers made it worse is also true: but
the men who had charge of French finance during the Reign of Terror
and who made these experiments, which seem to us so monstrous, in
order to rescue themselves and their country from the flood which was
sweeping everything to financial ruin were universally recognized as
among the most skillful and honest financiers in Europe. Cambon,
especially, ranked then and ranks now as among the most expert in any
period. The disastrous results of all his courage and ability in the
attempt to stand against the deluge of paper money show how powerless
are the most skillful masters of finance to stem the tide of fiat
money calamity when once it is fairly under headway; and how useless
are all enactments which they can devise against the underlying laws
of nature.

Month after month, year after year new issues went on. Meanwhile
everything possible was done to keep up the value of paper. The city
authorities of Metz took a solemn oath that the _assignats_ should
bear the same price whether in paper or specie,--and whether in buying
or selling, and various other official bodies throughout the nation
followed this example. In obedience to those who believed with the
market women of Paris, as stated in their famous petition, that "laws
should be passed making paper money as good as gold," Couthon, in
August, 1793, had proposed and carried a law punishing any person who
should sell _assignats_ at less than their nominal value with
imprisonment for twenty years in chains, and later carried a law
making investments in foreign countries by Frenchmen punishable with

But to the surprise of the great majority of the French people, the
value of the _assignats_ was found, after the momentary spasm of fear
had passed, not to have been permanently increased by these measures:
on the contrary, this "fiat" paper persisted in obeying the natural
laws of finance and, as new issues increased, their value decreased.
Nor did the most lavish aid of nature avail. The paper money of the
nation seemed to possess a magic power to transmute prosperity into
adversity and plenty into famine. The year 1794 was exceptionally
fruitful: and yet with the autumn came scarcity of provisions and with
the winter came distress. The reason is perfectly simple. The
sequences in that whole history are absolutely logical. First, the
Assembly had inflated the currency and raised prices enormously.
Next, it had been forced to establish an arbitrary maximum price for
produce. But this price, large as it seemed, soon fell below the real
value of produce; many of the farmers, therefore, raised less produce
or refrained from bringing what they had to market.[60] But, as is
usual in such cases, the trouble was ascribed to everything rather
than the real cause, and the most severe measures were established in
all parts of the country to force farmers to bring produce to market,
millers to grind and shopkeepers to sell it.[61] The issues of paper
money continued. Toward the end of 1794 seven thousand millions in
_assignats_ were in circulation.[62] By the end of May, 1795, the
circulation was increased to ten thousand millions, at the end of
July, to fourteen thousand millions; and the value of one hundred
_francs_ in paper fell steadily, first to four _francs_ in gold, then
to three, then to two and one-half.[63] But, curiously enough, while
this depreciation was rapidly going on, as at various other periods
when depreciation was rapid, there came an apparent revival of
business. The hopes of many were revived by the fact that in spite of
the decline of paper there was an exceedingly brisk trade in all kinds
of permanent property. Whatever articles of permanent value certain
needy people were willing to sell certain cunning people were willing
to buy and to pay good prices for in _assignats_. At this, hope
revived for a time in certain quarters. But ere long it was
discovered that this was one of the most distressing results of a
natural law which is sure to come into play under such circumstances.
It was simply a feverish activity caused by the intense desire of a
large number of the shrewder class to convert their paper money into
anything and everything which they could hold and hoard until the
collapse which they foresaw should take place. This very activity in
business simply indicated the disease. It was simply legal robbery of
the more enthusiastic and trusting by the more cold-hearted and keen.
It was, the "unloading" of the _assignats_ upon the mass of the

Interesting is it to note in the midst of all this the steady action
of another simple law in finance. Prisons, guillotines, enactments
inflicting twenty years' imprisonment in chains upon persons twice
convicted of buying or selling paper money at less than its nominal
value, and death upon investors in foreign securities, were powerless.
The National Convention, fighting a world in arms and with an armed
revolt on its own soil, showed titanic power, but in its struggle to
circumvent one simple law of nature its weakness was pitiable. The
_louis d'or_ stood in the market as a monitor, noting each day, with
unerring fidelity, the decline in value of the _assignat_; a monitor
not to be bribed, not to be scared. As well might the National
Convention try to bribe or scare away the polarity of the mariner's
compass. On August 1, 1795, this gold _louis_ of 25 _francs_ was
worth in paper, 920 _francs_; on September 1st, 1,200 _francs_; on
November 1st, 2,600 _francs_; on December 1st, 3,050 _francs_. In
February, 1796, it was worth 7,200 _francs_ or one franc in gold was
worth 288 _francs_ in paper. Prices of all commodities went up nearly
in proportion.[65] The writings of this period give curious details.
Thibaudeau, in his Memoirs, speaks of sugar as 500 _francs_ a pound,
soap, 230 _francs_, candles, 140 _francs_. Mercier, in his lifelike
pictures of the French metropolis at that period, mentions 600
_francs_ as carriage hire for a single drive, and 6,000 for an entire
day. Examples from other sources are such as the following:--a
measure of flour advanced from two _francs_ in 1790, to 225 _francs_
in 1795; a pair of shoes, from five _francs_ to 200; a hat, from 14
_francs_ to 500; butter, to, 560 _francs_ a pound; a turkey, to 900
_francs_.[66] Everything was enormously inflated in price _except the
wages of labor_. As manufacturers had closed, wages had fallen, until
all that kept them up seemed to be the fact that so many laborers were
drafted off into the army. From this state of things came grievous
wrong and gross fraud. Men who had foreseen these results and had
gone into debt were of course jubilant. He who in 1790 had borrowed
10,000 _francs_ could pay his debts in 1796 for about 35 _francs_.
Laws were made to meet these abuses. As far back as 1794 a plan was
devised for publishing official "tables of depreciation" to be used in
making equitable settlements of debts, but all such machinery proved
futile. On the 18th of May, 1796, a young man complained to the
National Convention that his elder brother, who had been acting as
administrator of his deceased father's estate, had paid the heirs in
_assignats_, and that he had received scarcely one three-hundredth
part of the real value of his share.[67] To meet cases like this, a
law was passed establishing a "scale of proportion." Taking as a
standard the value of the _assignat_ when there were two billions in
circulation, this law declared that, in payment of debts, one-quarter
should be added to the amount originally borrowed for every five
hundred millions added to the circulation. In obedience to this law a
man who borrowed two thousand _francs_ when there were two billions in
circulation would have to pay his creditors twenty-five hundred
_francs_ when half a billion more were added to the currency, and over
thirty-five thousand _francs_ before the emissions of paper reached
their final amount. This brought new evils, worse, if possible, than
the old.[68]

The question will naturally be asked, _On whom did this vast
depreciation mainly fall at last_? When this currency had sunk to
about one three-hundredth part of its nominal value and, after that,
to nothing, in whose hands was the bulk of it? The answer is simple.
I shall give it in the exact words of that thoughtful historian from
whom I have already quoted: "Before the end of the year 1795 the paper
money was almost exclusively in the hands of the working classes,
employees and men of small means, whose property was not large enough
to invest in stores of goods or national lands.[69] Financiers and men
of large means were shrewd enough to put as much of their property as
possible into objects of permanent value. The working classes had no
such foresight or skill or means. On them finally came the great
crushing weight of the loss. After the first collapse came up the
cries of the starving. Roads and bridges were neglected; many
manufactures were given up in utter helplessness." To continue, in
the words of the historian already cited: "None felt any confidence in
the future in any respect; few dared to make a business investment for
any length of time and it was accounted a folly to curtail the
pleasures of the moment, to accumulate or save for so uncertain a

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

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

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

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