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Title: Fiat Money Inflation in France: How it Came, What it Brought, and How it Ended
Author: White, Andrew Dickson, 1832-1918
Language: English
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How It Came, What It Brought, and How It Ended

by Andrew Dickson White, LL.D., Ph.D., D.C.L.

Late President and Professor of History at Cornell University; Sometime
United States Minister to Russia and Ambassador to Germany; Author of "A
History of the Warfare of Science with Theology," etc.


As far back as just before our Civil War I made, in France and
elsewhere, a large collection of documents which had appeared during the
French Revolution, including newspapers, reports, speeches, pamphlets,
illustrative material of every sort, and, especially, specimens of
nearly all the Revolutionary issues of paper money,--from notes of ten
thousand _livres_ to those of one _sou_.

Upon this material, mainly, was based a course of lectures then given
to my students, first at the University of Michigan and later at Cornell
University, and among these lectures, one on "Paper Money Inflation in

This was given simply because it showed one important line of facts in
that great struggle; and I recall, as if it were yesterday, my feeling
of regret at being obliged to bestow so much care and labor upon a
subject to all appearance so utterly devoid of practical value. I
am sure that it never occurred, either to my Michigan students or to
myself, that it could ever have any bearing on our own country. It
certainly never entered into our minds that any such folly as that
exhibited in those French documents of the eighteenth century could ever
find supporters in the United States of the nineteenth.

Some years later, when there began to be demands for large issues of
paper money in the United States, I wrought some of the facts thus
collected into a speech in the Senate of the State of New York, showing
the need of especial care in such dealings with financial necessities.

In 1876, during the "greenback craze," General Garfield and Mr. S. B.
Crittenden, both members of the House of Representatives at that time,
asked me to read a paper on the same general subject before an audience
of Senators and Representatives of both parties in Washington. This I
did, and also gave it later before an assemblage of men of business at
the Union League Club in New York.

Various editions of the paper were afterward published, among them, two
or three for campaign purposes, in the hope that they might be of use
in showing to what folly, cruelty, wrong and rain the passion for "fiat
money" may lead.

Other editions were issued at a later period, in view of the principle
involved in the proposed unlimited coinage of silver in the United
States, which was, at bottom, the idea which led to that fearful wreck
of public and private prosperity in France.

For these editions there was an added reason in the fact that the
utterances of sundry politicians at that time pointed clearly to issues
of paper money practically unlimited. These men were logical enough
to see that it would be inconsistent to stop at the unlimited issue
of silver dollars which cost really something when they could issue
unlimited paper dollars which virtually cost nothing.

In thus exhibiting facts which Bishop Butler would have recognized as
confirming his theory of "The Possible Insanity of States," it is but
just to acknowledge that the French proposal was vastly more sane than
that made in our own country. Those French issues of paper rested not
merely "on the will of a free people," but on one-third of the entire
landed property of France; on the very choicest of real property in city
and country--the confiscated estates of the Church and of the fugitive
aristocracy--and on the power to use the paper thus issued in purchasing
this real property at very low prices.

I have taken all pains to be exact, revising the whole paper in the
light of the most recent publications and giving my authority for every
important statement, and now leave the whole matter with my readers.

At the request of a Canadian friend, who has expressed a strong wish
that this work be brought down to date, I have again restudied the
subject in the light of various works which have appeared since
my earlier research,--especially Levasseur's "Histoire des classes
ouvrières et de l'industrie en France,"--one of the really great books
of the twentieth century;--Dewarmin's superb "Cent Ans de numismatique
Française" and sundry special treatises. The result has been that
large additions have been made regarding some important topics, and
that various other parts of my earlier work have been made more clear by
better arrangement and supplementary information.

ANDREW D. WHITE. Cornell University, September, 1912.


I am greatly indebted to the generosity of Mr. Andrew D. White, the
distinguished American scholar, author and diplomatist, for permission
to print and to circulate privately a small edition of his exceedingly
valuable account of the great currency-making experiment of the French
Revolutionary Government. The work has been revised and considerably
enlarged by Mr. White for the purpose of the present issue.

The story of "Fiat Money Inflation in France" is one of great interest
to legislators, to economic students, and to all business and thinking
men. It records the most gigantic attempt ever made in the history of
the world by a government to create an inconvertible paper currency, and
to maintain its circulation at various levels of value. It also records
what is perhaps the greatest of all governmental efforts--with the
possible exception of Diocletian's--to enact and enforce a legal limit
of commodity prices. Every fetter that could hinder the will or thwart
the wisdom of democracy had been shattered, and in consequence every
device and expedient that untrammelled power and unrepressed optimism
could conceive were brought to bear. But the attempts failed. They left
behind them a legacy of moral and material desolation and woe, from
which one of the most intellectual and spirited races of Europe has
suffered for a century and a quarter, and will continue to suffer until
the end of time. There are limitations to the powers of governments and
of peoples that inhere in the constitution of things, and that neither
despotisms nor democracies can overcome.

Legislatures are as powerless to abrogate moral and economic laws as
they are to abrogate physical laws. They cannot convert wrong into right
nor divorce effect from cause, either by parliamentary majorities, or
by unity of supporting public opinion. The penalties of such
legislative folly will always be exacted by inexorable time. While these
propositions may be regarded as mere commonplaces, and while they are
acknowledged in a general way, they are in effect denied by many of
the legislative experiments and the tendencies of public opinion of the
present day. The story, therefore, of the colossal folly of France in
the closing part Of the eighteenth century and its terrible fruits, is
full of instruction for all men who think upon the problems of our own

From among an almost infinite variety, there are four great and
fundamental facts that clearly emerge, namely,--

(1) Notwithstanding the fact that the paper currency issued was the
direct obligation of the State, that much of it was interest bearing,
and that all of it was secured upon the finest real estate in France,
and that penalties in the way of fines, imprisonments and death were
enacted from time to time to maintain its circulation at fixed values,
there was a steady depreciation in value until it reached zero point and
culminated in repudiation. The aggregate of the issues amounted to no
less than the enormous and unthinkable sum of $9,500,000,000, and in
the middle of 1797 when public repudiation took place, there was no
less than $4,200,000,000 in face value of _assignats_ and _mandats_
outstanding; the loss, as always, falling mostly upon the poor and the

(2) In the attempt to maintain fixed values for the paper currency the
Government became involved in an equally futile attempt to maintain a
tariff of legal prices for commodities. Here again penalties of fines,
of imprisonments and of death were powerless to accomplish the end in

(3) An wholesale demoralisation of society took place under which
thrift, integrity, humanity, and every principle of morality were thrown
into the welter of seething chaos and cruelty.

(4) The real estate upon which the paper currency was secured
represented confiscations by the State of the lands of the Church and
of the Emigrant Noblemen. These lands were appraised, according to Mr.
White's narrative and other authorities, at $1,000,000,000. Here was
a straight addition to the State's resources of $1,000,000,000. It is
ominously significant that within one hundred years under the "Peace of
Frankfort" signed on the 10th May, 1871, the French nation agreed to pay
a war indemnity to victorious Germany of exactly the same sum, namely,
$1,000,000,000 in addition to the surrender of the province of Alsace
and a considerable part of Lorraine. The great addition to the national
wealth, therefore, effected by the immoral confiscation of the lands in
question disappeared with compound territorial interest added under the
visitation of relentless retribution.

Public opinion in our own country is so far sound on the question
of currency, but signs are not lacking in some lay quarters of
an inclination to sanction dangerous experiments. The doctrine of
governmental regulation of prices, has, however, made its appearance in
embryo. Class dissatisfaction is also on the increase. The confiscation
of property rights under legal forms and processes is apt to be condoned
when directed against unpopular interests and when limited to amounts
that do not revolt the conscience. The wild and terrible expression
given to these insidious principles in the havoc of the Revolution
should be remembered by all. Nor should the fact be overlooked that, as
Mr. White points out on Page 6, the National Assembly of France which
originated and supported these measures contained in its membership the
ablest Frenchmen of the day.

JOHN MACKAY. Toronto General Trusts Building, Toronto, 31st March, 1914.


How It Came, What It Brought, and How It Ended [1]


Early in the year 1789 the French nation found itself in deep financial
embarrassment: there was a heavy debt and a serious deficit.

The vast reforms of that period, though a lasting blessing politically,
were a temporary evil financially. There was a general want of
confidence in business circles; capital had shown its proverbial
timidity by retiring out of sight as far as possible; throughout the
land was stagnation.

Statesmanlike measures, careful watching and wise management would,
doubtless, have ere long led to a return of confidence, a reappearance
of money and a resumption of business; but these involved patience
and self-denial, and, thus far in human history, these are the rarest
products of political wisdom. Few nations have ever been able to
exercise these virtues; and France was not then one of these few. [2]

There was a general search for some short road to prosperity: ere long
the idea was set afloat that the great want of the country was more of
the circulating medium; and this was speedily followed by calls for an
issue of paper money. The Minister of Finance at this period was Necker.
In financial ability he was acknowledged as among the great bankers of
Europe, but his was something more than financial ability: he had a
deep feeling of patriotism and a high sense of personal honor. The
difficulties in his way were great, but he steadily endeavored to
keep France faithful to those principles in monetary affairs which the
general experience of modern times had found the only path to national
safety. As difficulties arose the National Assembly drew away from him,
and soon came among the members renewed suggestions of paper money:
orators in public meetings, at the clubs and in the Assembly, proclaimed
it a panacea--a way of "securing resources without paying interest."
Journalists caught it up and displayed its beauties, among these men,
Marat, who, in his newspaper, "The Friend of the People," also joined
the cries against Necker, picturing him--a man of sterling honesty, who
gave up health and fortune for the sake of France--as a wretch seeking
only to enrich himself from the public purse.

Against this tendency toward the issue of irredeemable paper Necker
contended as best he might. He knew well to what it always had led,
even when surrounded by the most skillful guarantees. Among those who
struggled to support ideas similar to his was Bergasse, a deputy from
Lyons, whose pamphlets, then and later, against such issues exerted a
wider influence, perhaps, than any others: parts of them seem fairly
inspired. Any one to-day reading his prophecies of the evils sure to
follow such a currency would certainly ascribe to him a miraculous
foresight, were it not so clear that his prophetic power was due simply
to a knowledge of natural laws revealed by history. But this current in
favor of paper money became so strong that an effort was made to breast
it by a compromise: and during the last months of 1789 and the first
months of 1790 came discussions in the National Assembly looking to
issues of notes based upon the landed property of the Church,--which was
to be confiscated for that purpose. But care was to be taken; the issue
was to be largely in the shape of notes of 1,000, 300 and 200 _livres_,
too large to be used as ordinary currency, but of convenient size to
be used in purchasing the Church lands; besides this, they were to bear
interest and this would tempt holders to hoard them. The Assembly thus
held back from issuing smaller obligations.

Remembrances of the ruin which had come from the great issues of smaller
currency at an earlier day were still vivid. Yet the pressure toward
a popular currency for universal use grew stronger and stronger. The
finance committee of the Assembly reported that "the people demand a new
circulating medium"; that "the circulation of paper money is the best of
operations"; that "it is the most free because it reposes on the will
of the people"; that "it will bind the interest of the citizens to the
public good."

The report appealed to the patriotism of the French people with the
following exhortation: "Let us show to Europe that we understand our
own resources; let us immediately take the broad road to our liberation
instead of dragging ourselves along the tortuous and obscure paths of
fragmentary loans." It concluded by recommending an issue of paper money
carefully guarded, to the full amount of four hundred million _livres_,
and the argument was pursued until the objection to smaller notes faded
from view. Typical in the debate on the whole subject, in its various
phases, were the declarations of M. Matrineau. He was loud and long for
paper money, his only fear being that the Committee had not authorized
enough of it; he declared that business was stagnant, and that the sole
cause was a want of more of the circulating medium; that paper money
ought to be made a legal tender; that the Assembly should rise above
prejudices which the failures of John Law's paper money had caused,
several decades before. Like every supporter of irredeemable paper money
then or since, he seemed to think that the laws of Nature had changed
since previous disastrous issues. He said: "Paper money under
a despotism is dangerous; it favors corruption; but in a nation
constitutionally governed, which itself takes care in the emission of
its notes, which determines their number and use, that danger no longer
exists." He insisted that John Law's notes at first restored prosperity,
but that the wretchedness and ruin they caused resulted from their
overissue, and that such an overissue is possible only under a
despotism. [3]

M. de la Rochefoucauld gave his opinion that "the _assignats_ will draw
specie out of the coffers where it is now hoarded. [4]

On the other hand Cazalès and Maury showed that the result could only
be disastrous. Never, perhaps, did a political prophecy meet with more
exact fulfillment in every line than the terrible picture drawn in one
of Cazalès' speeches in this debate. Still the current ran stronger and
stronger; Petion made a brilliant oration in favor of the report, and
Necker's influence and experience were gradually worn away.

Mingled with the financial argument was a strong political plea. The
National Assembly had determined to confiscate the vast real property
of the French Church,--the pious accumulations of fifteen hundred
years. There were princely estates in the country, bishops' palaces and
conventual buildings in the towns; these formed between one-fourth and
one-third of the entire real property of France, and amounted in value
to at least two thousand million _livres_. By a few sweeping strokes
all this became the property of the nation. Never, apparently, did a
government secure a more solid basis for a great financial future. [5]

There were two special reasons why French statesmen desired speedily to
sell these lands. First, a financial reason,--to obtain money to
relieve the government. Secondly, a political reason,--to get this land
distributed among the thrifty middle-classes, and so commit them to the
Revolution and to the government which gave their title.

It was urged, then, that the issue of four hundred millions of paper,
(not in the shape of interest-bearing bonds, as had at first been
proposed, but in notes small as well as large), would give the treasury
something to pay out immediately, and relieve the national necessities;
that, having been put into circulation, this paper money would stimulate
business; that it would give to all capitalists, large or small, the
means for buying from the nation the ecclesiastical real estate, and
that from the proceeds of this real estate the nation would pay its
debts and also obtain new funds for new necessities: never was theory
more seductive both to financiers and statesmen.

It would be a great mistake to suppose that the statesmen of France, or
the French people, were ignorant of the dangers in issuing irredeemable
paper money. No matter how skillfully the bright side of such a currency
was exhibited, all thoughtful men in France remembered its dark side.
They knew too well, from that ruinous experience, seventy years before,
in John Law's time, the difficulties and dangers of a currency not well
based and controlled. They had then learned how easy it is to issue it;
how difficult it is to check its overissue; how seductively it leads to
the absorption of the means of the workingmen and men of small fortunes;
how heavily it falls on all those living on fixed incomes, salaries or
wages; how securely it creates on the ruins of the prosperity of all
men of meagre means a class of debauched speculators, the most
injurious class that a nation can harbor,--more injurious, indeed, than
professional criminals whom the law recognizes and can throttle; how
it stimulates overproduction at first and leaves every industry flaccid
afterward; how it breaks down thrift and develops political and social
immorality. All this France had been thoroughly taught by experience.
Many then living had felt the result of such an experiment--the issues
of paper money under John Law, a man who to this day is acknowledged
one of the most ingenious financiers the world has ever known; and there
were then sitting in the National Assembly of France many who owed the
poverty of their families to those issues of paper. Hardly a man in the
country who had not heard those who issued it cursed as the authors of
the most frightful catastrophe France had then experienced. [6]

It was no mere attempt at theatrical display, but a natural impulse,
which led a thoughtful statesman, during the debate, to hold up a piece
of that old paper money and to declare that it was stained with the
blood and tears of their fathers.

And it would also be a mistake to suppose that the National Assembly,
which discussed this matter, was composed of mere wild revolutionists;
no inference could be more wide of the fact. Whatever may have been the
character of the men who legislated for France afterward, no thoughtful
student of history can deny, despite all the arguments and sneers
of reactionary statesmen and historians, that few more keen-sighted
legislative bodies have ever met than this first French Constitutional
Assembly. In it were such men as Sieyès, Bailly, Necker, Mirabeau,
Talleyrand, DuPont de Nemours and a multitude of others who, in various
sciences and in the political world, had already shown and were destined
afterward to show themselves among the strongest and shrewdest men that
Europe has yet seen.

But the current toward paper money had become irresistible. It was
constantly urged, and with a great show of force, that if any nation
could safely issue it, France was now that nation; that she was fully
warned by her severe experience under John Law; that she was now a
constitutional government, controlled by an enlightened, patriotic
people,--not, as in the days of the former issues of paper money, an
absolute monarchy controlled by politicians and adventurers; that
she was able to secure every _livre_ of her paper money by a virtual
mortgage on a landed domain vastly greater in value than the entire
issue; that, with men like Bailly, Mirabeau and Necker at her head, she
could not commit the financial mistakes and crimes from which France had
suffered under John Law, the Regent Duke of Orleans and Cardinal Dubois.

Oratory prevailed over science and experience. In April, 1790, came the
final decree to issue four hundred millions of _livres_ in paper money,
based upon confiscated property of the Church for its security. The
deliberations on this first decree and on the bill carrying it into
effect were most interesting; prominent in the debate being Necker, Du
Pont de Nemours, Maury, Cazalès, Petion, Bailly and many others hardly
inferior. The discussions were certainly very able; no person can read
them at length in the "Moniteur," nor even in the summaries of the
parliamentary history, without feeling that various modern historians
have done wretched injustice to those men who were then endeavoring to
stand between France and ruin.

This sum--four hundred millions, so vast in those days, was issued in
_assignats_, which were notes secured by a pledge of productive
real estate and bearing interest to the holder at three per cent. No
irredeemable currency has ever claimed a more scientific and practical
guarantee for its goodness and for its proper action on public finances.
On the one hand, it had what the world recognized as a most practical
security,--a mortgage an productive real estate of vastly greater value
than the issue. On the other hand, as the notes bore interest, there
seemed cogent reason for their being withdrawn from circulation whenever
they became redundant. [7]

As speedily as possible the notes were put into circulation. Unlike
those issued in John Law's time, they were engraved in the best style
of the art. To stimulate loyalty, the portrait of the king was placed
in the center; to arouse public spirit, patriotic legends and emblems
surrounded it; to stimulate public cupidity, the amount of interest
which the note would yield each day to the holder was printed in the
margin; and the whole was duly garnished with stamps and signatures to
show that it was carefully registered and controlled. [8]

To crown its work the National Assembly, to explain the advantages
of this new currency, issued an address to the French people. In this
address it spoke of the nation as "delivered by this grand means from
all uncertainty and from all ruinous results of the credit system." It
foretold that this issue "would bring back into the public treasury,
into commerce and into all branches of industry strength, abundance and
prosperity." [9]

Some of the arguments in this address are worth recalling, and, among
them, the following:--"Paper money is without inherent value unless
it represents some special property. Without representing some special
property it is inadmissible in trade to compete with a metallic
currency, which has a value real and independent of the public action;
therefore it is that the paper money which has only the public authority
as its basis has always caused ruin where it has been established; that
is the reason why the bank notes of 1720, issued by John Law, after
having caused terrible evils, have left only frightful memories.
Therefore it is that the National Assembly has not wished to expose
you to this danger, but has given this new paper money not only a value
derived from the national authority but a value real and immutable, a
value which permits it to sustain advantageously a competition with the
precious metals themselves." [10]

But the final declaration was, perhaps, the most interesting. It was as

"These _assignats_, bearing interest as they do, will soon be considered
better than the coin now hoarded, and will bring it out again into
circulation." The king was also induced to issue a proclamation
recommending that his people receive this new money without objection.

All this caused great joy. Among the various utterances of this feeling
was the letter of M. Sarot, directed to the editor of the Journal of the
National Assembly, and scattered through France. M. Sarot is hardly able
to contain himself as he anticipates the prosperity and glory that this
issue of paper is to bring to his country. One thing only vexes him, and
that is the pamphlet of M. Bergasse against the _assignats_; therefore
it is after a long series of arguments and protestations, in order to
give a final proof of his confidence in the paper money and his entire
skepticism as to the evils predicted by Bergasse and others, M. Sarot
solemnly lays his house, garden and furniture upon the altar of his
country and offers to sell them for paper money alone.

There were, indeed, some gainsayers. These especially appeared among the
clergy, who, naturally, abhorred the confiscation of Church property.
Various ecclesiastics made speeches, some of them full of pithy and
weighty arguments, against the proposed issue of paper, and there is
preserved a sermon from one priest threatening all persons handling the
new money with eternal damnation. But the great majority of the French
people, who had suffered ecclesiastical oppression so long, regarded
these utterances as the wriggling of a fish on the hook, and enjoyed the
sport all the better. [11]

The first result of this issue was apparently all that the most sanguine
could desire: the treasury was at once greatly relieved; a portion of
the public debt was paid; creditors were encouraged; credit revived;
ordinary expenses were met, and, a considerable part of this paper
money having thus been passed from the government into the hands of
the people, trade increased and all difficulties seemed to vanish. The
anxieties of Necker, the prophecies of Maury and Cazalès seemed proven
utterly futile. And, indeed, it is quite possible that, if the national
authorities had stopped with this issue, few of the financial evils
which afterwards arose would have been severely felt; the four hundred
millions of paper money then issued would have simply discharged the
function of a similar amount of specie. But soon there came another
result: times grew less easy; by the end of September, within five
months after the issue of the four hundred millions in _assignats_, the
government had spent them and was again in distress. [12]

The old remedy immediately and naturally recurred to the minds of
men. Throughout the country began a cry for another issue of paper;
thoughtful men then began to recall what their fathers had told them
about the seductive path of paper-money issues in John Law's time, and
to remember the prophecies that they themselves had heard in the debate
on the first issue of _assignats_ less than six months before.

At that time the opponents of paper had prophesied that, once on the
downward path of inflation, the nation could not be restrained and that
more issues would follow. The supporters of the first issue had asserted
that this was a calumny; that the people were now in control and that
they could and would check these issues whenever they desired.

The condition of opinion in the Assembly was, therefore, chaotic: a few
schemers and dreamers were loud and outspoken for paper money; many
of the more shallow and easy-going were inclined to yield; the more
thoughtful endeavored to breast the current.

One man there was who could have withstood the pressure: Mirabeau. He
was the popular idol,--the great orator of the Assembly and much more
than a great orator,--he had carried the nation through some of its
worst dangers by a boldness almost godlike; in the various conflicts he
had shown not only oratorical boldness, but amazing foresight. As to his
real opinion on an irredeemable currency there can be no doubt. It was
the opinion which all true statesmen have held, before his time and
since,--in his own country, in England, in America, in every modern
civilized nation. In his letter to Cerutti, written in January, 1789,
hardly six months before, he had spoken of paper money as "A nursery of
tyranny, corruption and delusion; a veritable debauch of authority in
delirium." In one of his early speeches in the National Assembly he had
called such money, when Anson covertly suggested its issue, "a loan
to an armed robber," and said of it: "that infamous word, paper money,
ought to be banished from our language." In his private letters written
at this very time, which were revealed at a later period, he showed that
he was fully aware of the dangers of inflation. But he yielded to the
pressure: partly because he thought it important to sell the government
lands rapidly to the people, and so develop speedily a large class of
small landholders pledged to stand by the government which gave them
their titles; partly, doubtless, from a love of immediate rather than
of remote applause; and, generally, in a vague hope that the severe,
inexorable laws of finance which had brought heavy punishments upon
governments emitting an irredeemable currency in other lands, at other
times, might in some way at this time, be warded off from France. [13]

The question was brought up by Montesquieu's report on the 27th
of August, 1790. This report favored, with evident reluctance, an
additional issue of paper. It went on to declare that the original issue
of four hundred millions, though opposed at the beginning, had proved
successful; that _assignats_ were economical, though they had dangers;
and, as a climax, came the declaration: "We must save the country." [14]

Upon this report Mirabeau then made one of his most powerful speeches.
He confessed that he had at first feared the issue of _assignats_, but
that he now dared urge it; that experience had shown the issue of
paper money most serviceable; that the report proved the first issue
of _assignats_ a success; that public affairs had come out of distress;
that ruin had been averted and credit established. He then argued that
there was a difference between paper money of the recent issue and
that from which the nation had suffered so much in John Law's time; he
declared that the French nation had now become enlightened and he added,
"Deceptive subtleties can no longer mislead patriots and men of sense in
this matter." He then went on to say: "We must accomplish that which
we have begun," and declared that there must be one more large issue
of paper, guaranteed by the national lands and by the good faith of the
French nation. To show how practical the system was he insisted that
just as soon as paper money should become too abundant it would be
absorbed in rapid purchases of national lands; and he made a very
striking comparison between this self-adjusting, self-converting system
and the rains descending in showers upon the earth, then in swelling
rivers discharged into the sea, then drawn up in vapor and finally
scattered over the earth again in rapidly fertilizing showers. He
predicted that the members would be surprised at the astonishing success
of this paper money and that there would be none too much of it.

His theory grew by what it fed upon,--as the paper-money theory has
generally done. Toward the close, in a burst of eloquence, he suggested
that _assignats_ be created to an amount sufficient to cover the
national debt, and that all the national lands be exposed for sale
immediately, predicting that thus prosperity would return to the nation
and that an classes would find this additional issue of paper money a
blessing. [15]

This speech was frequently interrupted by applause; a unanimous vote
ordered it printed, and copies were spread throughout France. The
impulse given by it permeated all subsequent discussion; Gouy arose
and proposed to liquidate the national debt of twenty-four hundred
millions,--to use his own words--"by one single operation, grand,
simple, magnificent." [16] This "operation" was to be the emission of
twenty-four hundred millions in legal tender notes, and a law that
specie should not be accepted in purchasing national lands. His demagogy
bloomed forth magnificently. He advocated an appeal to the people, who,
to use his flattering expression, "ought alone to give the law in a
matter so interesting." The newspapers of the period, in reporting his
speech, noted it with the very significant remark, "This discourse was
loudly applauded."

To him replied Brillat-Savarin. He called attention to the depreciation
of _assignats_ already felt. He tried to make the Assembly see that
natural laws work as inexorably in France as elsewhere; he predicted
that if this new issue were made there would come a depreciation of
thirty per cent. Singular, that the man who so fearlessly stood against
this tide of unreason has left to the world simply a reputation as
the most brilliant cook that ever existed! He was followed by the Abbe
Goutes, who declared,--what seems grotesque to those who have read
the history of an irredeemable paper currency in any country--that
new issues of paper money "will supply a circulating medium which will
protect public morals from corruption." [17]

Into this debate was brought a report by Necker. He was not, indeed,
the great statesman whom France especially needed at this time, of all
times. He did not recognize the fact that the nation was entering a
great revolution, but he could and did see that, come what might,
there were simple principles of finance which must be adhered to. Most
earnestly, therefore, he endeavored to dissuade the Assembly from
the proposed issue; suggesting that other means could be found for
accomplishing the result, and he predicted terrible evils. But the
current was running too fast. The only result was that Necker was
spurned as a man of the past; he sent in his resignation and left
France forever. [18] The paper-money demagogues shouted for joy at his
departure; their chorus rang through the journalism of the time. No
words could express their contempt for a man who was unable to see the
advantages of filling the treasury with the issues of a printing press.
Marat, Hébert, Camille Desmoulins and the whole mass of demagogues so
soon to follow them to the guillotine were especially jubilant. [19]

Continuing the debate, Rewbell attacked Necker, saying that the
_assignats_ were not at par because there were not yet enough of them;
he insisted that payments for public lands be received in _assignats_
alone; and suggested that the church bells of the kingdom be melted down
into small money. Le Brun attacked the whole scheme in the Assembly, as
he had done in the Committee, declaring that the proposal, instead
of relieving the nation, would wreck it. The papers of the time very
significantly say that at this there arose many murmurs. Chabroud came
to the rescue. He said that the issue of _assignats_ would relieve the
distress of the people and he presented very neatly the new theory of
paper money and its basis in the following words: "The earth is the
source of value; you cannot distribute the earth in a circulating value,
but this paper becomes representative of that value and it is evident
that the creditors of the nation will not be injured by taking it." On
the other hand, appeared in the leading paper, the "Moniteur," a very
thoughtful article against paper money, which sums up all by saying,
"It is, then, evident that all paper which cannot, at the will of the
bearer, be converted into specie cannot discharge the functions of
money." This article goes on to cite Mirabeau's former opinion in his
letter to Cerutti, published in 1789,--the famous opinion of paper money
as "a nursery of tyranny, corruption and delusion; a veritable debauch
of authority in delirium." Lablache, in the Assembly, quoted a saying
that "paper money is the emetic of great states." [20]

Boutidoux, resorting to phrasemaking, called the _assignats_ _"un papier
terre,"_ or "land converted into paper." Boislandry answered vigorously
and foretold evil results. Pamphlets continued to be issued,--among
them, one so pungent that it was brought into the Assembly and read
there,--the truth which it presented with great clearness being simply
that doubling the quantity of money or substitutes for money in a nation
simply increases prices, disturbs values, alarms capital, diminishes
legitimate enterprise, and so decreases the demand both for products
and for labor; that the only persons to be helped by it are the rich
who have large debts to pay. This pamphlet was signed "A Friend of the
People," and was received with great applause by the thoughtful minority
in the Assembly. Du Pont de Nemours, who had stood by Necker in the
debate on the first issue of _assignats_, arose, avowed the pamphlet to
be his, and said sturdily that he had always voted against the emission
of irredeemable paper and always would. [21]

Far more important than any other argument against inflation was the
speech of Talleyrand. He had been among the boldest and most radical
French statesmen. He it was,--a former bishop,--who, more than any
other, had carried the extreme measure of taking into the possession of
the nation the great landed estates of the Church, and he had supported
the first issue of four hundred millions. But he now adopted a judicial
tone--attempted to show to the Assembly the very simple truth that the
effect of a second issue of _assignats_ may be different from that of
the first; that the first was evidently needed; that the second may be
as injurious as the first was useful. He exhibited various weak points
in the inflation fallacies and presented forcibly the trite truth that
no laws and no decrees can keep large issues of irredeemable paper at
par with specie.

In his speech occur these words: "You can, indeed, arrange it so that
the people shall be forced to take a thousand _livres_ in paper for a
thousand _livres_ in specie; but you can never arrange it so that a man
shall be obliged to give a thousand _livres_ in specie for a thousand
_livres_ in paper,--in that fact is embedded the entire question; and on
account of that fact the whole system fails." [22]

The nation at large now began to take part in the debate; thoughtful
men saw that here was the turning Point between good and evil, that the
nation stood at the parting of the ways. Most of the great commercial
cities bestirred themselves and sent up remonstrances against the new
emission,--twenty-five being opposed and seven in favor of it.

But eloquent theorists arose to glorify paper and among these, Royer,
who on September 14, 1790, put forth a pamphlet entitled "Reflections of
a patriotic Citizen on the issue of _Assignats_," in which he gave many
specious reasons of the why the _assignats_ could not be depressed, and
spoke of the argument against them as "vile clamors of people bribed
to affect public opinion." He said to the National Assembly, "If it
is necessary to create five thousand millions, and more, of the paper,
decree such a creation gladly." He, too, predicted, as many others had
done, a time when gold was to lose all its value, since all exchanges
would be made with this admirable, guaranteed paper, and therefore that
coin would come out from the places where it was hoarded. He foretold
prosperous times to France in case these great issues of paper were
continued and declared these "the only means to insure happiness, glory
and liberty to the French nation." Speeches like this gave courage to
a new swarm of theorists,--it began to be especially noted that men who
had never shown any ability to make or increase fortunes for themselves
abounded in brilliant plans for creating and increasing wealth for the
country at large.

Greatest force of all, on September 27, 1790, came Mirabeau's final
speech. The most sober and conservative of his modern opponents speaks
of its eloquence as "prodigious." In this the great orator dwelt first
on the political necessity involved, declaring that the most pressing
need was to get the government lands into the hands of the people, and
so to commit to the nation and against the old privileged classes the
class of landholders thus created.

Through the whole course of his arguments there is one leading point
enforced with all his eloquence and ingenuity--the excellence of the
proposed currency, its stability and its security. He declares that,
being based on the pledge of public lands and convertible into them, the
notes are better secured than if redeemable in specie; that the precious
metals are only employed in the secondary arts, while the French paper
money represents the first and most real of all property, the source of
all production, the land; that while other nations have been obliged to
emit paper money, none have ever been so fortunate as the French nation,
for the reason that none had ever before been able to give this landed
security; that whoever takes French paper money has practically a
mortgage to secure it,--and on landed property which can easily be sold
to satisfy his claims, while other nations have been able only to give a
vague claim on the entire nation. "And," he ones, "I would rather have a
mortgage on a garden than on a kingdom!"

Other arguments of his are more demagogical. He declares that the only
interests affected will be those of bankers and capitalists, but
that manufacturers will see prosperity restored to them. Some of his
arguments seem almost puerile, as when he says, "If gold has been
hoarded through timidity or malignity, the issue of paper will show that
gold is not necessary, and it will then come forth." But, as a whole,
the speech was brilliant; it was often interrupted by applause; it
settled the question. People did not stop to consider that it was the
dashing speech of an orator and not the matured judgment of a financial
expert; they did not see that calling Mirabeau or Talleyrand to advise
upon a monetary policy, because they had shown boldness in danger and
strength in conflict, was like summoning a prize-fighter to mend a

In vain did Maury show that, while the first issues of John Law's paper
had brought prosperity, those that followed brought misery; in vain did
he quote from a book published in John Law's time, showing that Law was
at first considered a patriot and friend of humanity; in vain did he
hold up to the Assembly one of Law's bills and appeal to their memories
of the wretchedness brought upon France by them; in vain did Du Pont
present a simple and really wise plan of substituting notes in the
payment of the floating debt which should not form a part of the
ordinary circulating medium; nothing could resist the eloquence of
Mirabeau. Barnave, following, insisted that "Law's paper was based
upon the phantoms of the Mississippi; ours, upon the solid basis of
ecclesiastical lands," and he proved that the _assignats_ could not
depreciate further. Prudhomme's newspaper poured contempt over gold as
security for the currency, extolled real estate as the only true basis
and was fervent in praise of the convertibility and self-adjusting
features of the proposed scheme. In spite of all this plausibility and
eloquence, a large minority stood firm to their earlier principles; but
on the 29th of September, 1790, by a vote of 508 to 423, the deed was
done; a bill was passed authorizing the issue of eight hundred millions
of new _assignats_, but solemnly declaring that in no case should the
entire amount put in circulation exceed twelve hundred millions. To make
assurance doubly sure, it also provided that as fast as the _assignats_
were paid into the treasury for land they should be burned, and thus a
healthful contraction be constantly maintained. Unlike the first issue,
these new notes were to bear no interest. [23]

Great were the plaudits of the nation at this relief. Among the
multitudes of pamphlets expressing this joy which have come down to us
the "Friend of the Revolution" is the most interesting. It begins as
follows: "Citizens, the deed is done. The _assignats_ are the keystone
of the arch. It has just been happily put in position. Now I can
announce to you that the Revolution is finished and there only remain
one or two important questions. All the rest is but a matter of detail
which cannot deprive us any longer of the pleasure of admiring this
important work in its entirety. The provinces and the commercial cities
which were at first alarmed at the proposal to issue so much paper money
now send expressions of their thanks; specie is coming out to be joined
with paper money. Foreigners come to us from all parts of Europe to seek
their happiness under laws which they admire; and soon France, enriched
by her new property and by the national industry which is preparing for
fruitfulness, will demand still another creation of paper money."

France was now fully committed to a policy of inflation; and, if there
had been any question of this before, all doubts were removed now by
various acts very significant as showing the exceeding difficulty of
stopping a nation once in the full tide of a depreciating currency. The
National Assembly had from the first shown an amazing liberality to all
sorts of enterprises, wise or foolish, which were urged "for the good of
the people." As a result of these and other largesses the old cry of the
"lack of a circulating medium" broke forth again; and especially loud
were the clamors for more small bills. The cheaper currency had largely
driven out the dearer; paper had caused small silver and copper money
mainly to disappear; all sorts of notes of hand, circulating under the
name of "confidence bills," flooded France--sixty-three kinds in Paris
alone. This unguaranteed currency caused endless confusion and fraud.
Different districts of France began to issue their own _assignats_ in
small denominations, and this action stirred the National Assembly to
evade the solemn pledge that the circulation should not go above twelve
hundred millions and that all _assignats_ returned to the treasury for
lands should immediately be burned. [24] Within a short time there had
been received into the treasury for lands one hundred and sixty million
_livres_ in paper. By the terms of the previous acts this amount of
paper ought to have been retired. Instead of this, under the plea of
necessity, the greater part of it was reissued in the form of small

There was, indeed, much excuse for new issues of small notes, for, under
the theory that an issue of smaller notes would drive silver out of
circulation, the smallest authorized _assignat_ was for fifty _livres_.
To supply silver and copper and hold it in circulation everything was
tried. Citizens had been spurred on by law to send their silverware and
jewels to the mint. Even the king sent his silver and gold plate, and
the churches and convents were required by law to send to the government
melting pot all silver and gold vessels not absolutely necessary for
public worship. For copper money the church bells were melted down. But
silver and even copper continued to become more and more scarce. In the
midst of all this, various juggleries were tried, and in November, 1790,
the Assembly decreed a single standard of coinage, the chosen metal
being silver, and the ratio between the two precious metals was
changed from 15 1/2 to 1, to 14 1/2 to 1--but all in vain. It was found
necessary to issue the dreaded small paper, and a beginning was made by
issuing one hundred millions in notes of five _francs_, and, ere long,
obedient to the universal clamor, there were issued parchment notes for
various small amounts down to a single _sou_. [25]

Yet each of these issues, great or small, was but as a drop of cold
water to a parched throat. Although there was already a rise in prices
which showed that the amount needed for circulation had been exceeded,
the cry for "more circulating medium" was continued. The pressure for
new issues became stronger and stronger. The Parisian populace and the
Jacobin Club were especially loud in their demands for them; and, a few
months later, on June 19, 1791, with few speeches, in a silence very
ominous, a new issue was made of six hundred millions more;--less than
nine months after the former great issue, with its solemn pledges
to keep down the amount in circulation. With the exception of a few
thoughtful men, the whole nation again sang paeans. [26]

In this comparative ease of new issues is seen the action of a law
in finance as certain as the working of a similar law in natural
philosophy. If a material body fall from a height its velocity is
accelerated, by a well-known law, in a constantly increasing ratio: so
in issues of irredeemable currency, in obedience to the theories of a
legislative body or of the people at large, there is a natural law of
rapidly increasing emission and depreciation. The first inflation bills
were passed with great difficulty, after very sturdy resistance and by
a majority of a few score out of nearly a thousand votes; but we observe
now that new inflation measures were passed more and more easily and
we shall have occasion to see the working of this same law in a more
striking degree as this history develops itself.

During the various stages of this debate there cropped up a doctrine
old and ominous. It was the same which appeared toward the end of the
nineteenth century in the United States during what became known as the
"greenback craze" and the free "silver craze." In France it had
been refuted, a generation before the Revolution, by Turgot, just as
brilliantly as it was met a hundred years later in the United States
by James A. Garfield and his compeers. This was the doctrine that all
currency, whether gold, paper, leather or any other material, derives
its efficiency from the official stamp it bears, and that, this being
the case, a government may relieve itself of its debts and make itself
rich and prosperous simply by means of a printing press:--fundamentally
the theory which underlay the later American doctrine of "fiat money."

There came mutterings and finally speeches in the Jacobin Club, in the
Assembly and in newspaper articles and pamphlets throughout the country,
taking this doctrine for granted. These could hardly affect thinking
men who bore in mind the calamities brought upon the whole people,
and especially upon the poorer classes, by this same theory as put in
practice by John Law, or as refuted by Turgot, but it served to swell
the popular chorus in favor of the issue of more _assignats_ and plenty
of them. [27]

The great majority of Frenchmen now became desperate optimists,
declaring that inflation is prosperity. Throughout France there came
temporary good feeling. The nation was becoming inebriated with paper
money. The good feeling was that of a drunkard just after his draught;
and it is to be noted as a simple historical fact, corresponding to a
physiological fact, that, as draughts of paper money came faster the
successive periods of good feeling grew shorter.

Various bad signs began to appear. Immediately after each new issue came
a marked depreciation; curious it is to note the general reluctance to
assign the right reason. The decline in the purchasing power of paper
money was in obedience to the simplest laws in economics, but France had
now gone beyond her thoughtful statesmen and taken refuge in unwavering
optimism, giving any explanation of the new difficulties rather than the
right one. A leading member of the Assembly insisted, in an elaborate
speech, that the cause of depreciation was simply the want of knowledge
and of confidence among the rural population and he suggested means of
enlightening them. La Rochefoucauld proposed to issue an address to
the people showing the goodness of the currency and the absurdity of
preferring coin. The address was unanimously voted. As well might they
have attempted to show that a beverage made by mixing a quart of wine
and two quarts of water would possess all the exhilarating quality of
the original, undiluted liquid.

Attention was aroused by another menacing fact;--specie disappeared
more and more. The explanations of this fact also displayed wonderful
ingenuity in finding false reasons and in evading the true one. A
very common explanation was indicated in Prudhomme's newspaper, "Les
Révolutions de Paris," of January 17, 1791, which declared that coin
"will keep rising until the people shall have hanged a broker." Another
popular theory was that the Bourbon family were, in some mysterious way,
drawing off all solid money to the chief centers of their intrigues in
Germany. Comic and, at the same time, pathetic, were evidences of the
wide-spread idea that if only a goodly number of people engaged in trade
were hanged, the par value of the _assignats_ would be restored.

Still another favorite idea was that British emissaries were in the
midst of the people, instilling notions hostile to paper. Great efforts
were made to find these emissaries and more than one innocent person
experienced the popular wrath under the supposition that he was engaged
in raising gold and depressing paper. Even Talleyrand, shrewd as he was,
insisted that the cause was simply that the imports were too great and
the exports too little. [28] As well might he explain that fact that,
when oil is mingled with water, water sinks to the bottom, by saying
that this is because the oil rises to the top. This disappearance of
specie was the result of a natural law as simple and as sure in its
action as gravitation; the superior currency had been withdrawn because
an inferior currency could be used. [29] Some efforts were made to remedy
this. In the municipality of Quilleboeuf a considerable amount in specie
having been found in the possession of a citizen, the money was seized
and sent to the Assembly. The people of that town treated this hoarded
gold as the result of unpatriotic wickedness or madness, instead of
seeing that it was but the sure result of a law working in every land
and time, when certain causes are present. Marat followed out this
theory by asserting that death was the proper penalty for persons who
thus hid their money.

Still another troublesome fact began now to appear. Though paper money
had increased in amount, prosperity had steadily diminished. In spite of
all the paper issues, commercial activity grew more and more spasmodic.
Enterprise was chilled and business became more and more stagnant.
Mirabeau, in his speech which decided the second great issue of paper,
had insisted that, though bankers might suffer, this issue would be of
great service to manufacturers and restore prosperity to them and their
workmen. The latter were for a time deluded, but were at last rudely
awakened from this delusion. The plenty of currency had at first
stimulated production and created a great activity in manufactures, but
soon the markets were glutted and the demand was diminished. In spite of
the wretched financial policy of years gone by, and especially in spite
of the Revocation of the Edict of Nantes, by which religious bigotry
had driven out of the kingdom thousands of its most skillful Protestant
workmen, the manufactures of France had before the Revolution come into
full bloom. In the finer woolen goods, in silk and satin fabrics of all
sorts, in choice pottery and porcelain, in manufactures of iron, steel,
and copper, they had again taken their old leading place upon the
Continent. All the previous changes had, at the worst, done no more
than to inflict a momentary check on this highly developed system of
manufactures. But what the bigotry of Louis XIV and the shiftlessness
of Louis XV could not do in nearly a century, was accomplished by this
tampering with the currency in a few months. One manufactory after
another stopped. At one town, Lodève, five thousand workmen were
discharged from the cloth manufactories. Every cause except the right
one was assigned for this. Heavy duties were put upon foreign goods;
everything that tariffs and custom-houses could do was done. Still the
great manufactories of Normandy were closed, those of the rest of the
kingdom speedily followed, and vast numbers of workmen in all parts of
the country were thrown out of employment. [30] Nor was this the case
with the home demand alone. The foreign demand, which at first had been
stimulated, soon fell off. In no way can this be better stated than by
one of the most thoughtful historians of modern times, who says, "It is
true that at first the _assignats_ gave the same impulse to business
in the city as in the country, but the apparent improvement had no firm
foundation, even in the towns. Whenever a great quantity of paper money
is suddenly issued we invariably see a rapid increase of trade. The
great quantity of the circulating medium sets in motion all the energies
of commerce and manufactures; capital for investment is more easily
found than usual and trade perpetually receives fresh nutriment. If this
paper represents real credit, founded upon order and legal security,
from which it can derive a firm and lasting value, such a movement may
be the starting point of a great and widely-extended prosperity, as, for
instance, a splendid improvement in English agriculture was undoubtedly
owing to the emancipation of the country bankers. If on the contrary,
the new paper is of precarious value, as was clearly seen to be the case
with the French _assignats_ as early as February, 1791, it can confer no
lasting benefits. For the moment, perhaps, business receives an impulse,
all the more violent because every one endeavors to invest his doubtful
paper in buildings, machines and goods, which, under all circumstances,
retain some intrinsic value. Such a movement was witnessed in France
in 1791, and from every quarter there came satisfactory reports of the
activity of manufactures."

"But, for the moment, the French manufacturers derived great advantage
from this state of things. As their products could be so cheaply paid
for, orders poured in from foreign countries to such a degree that it
was often difficult for the manufacturers to satisfy their customers.
It is easy to see that prosperity of this kind must very soon find
its limit.... When a further fall in the _assignats_ took place this
prosperity would necessarily collapse, and be succeeded by a crisis
all the more destructive the more deeply men had engaged in speculation
under the influence of the first favorable prospects." [31]

Thus came a collapse in manufacturing and commerce, just as it had come
previously in France: just as it came at various periods in Austria,
Russia, America, and in all countries where men have tried to build up
prosperity on irredeemable paper. [32]

All this breaking down of the manufactures and commerce of the nation
made fearful inroads on the greater fortunes; but upon the lesser, and
upon the little properties of the masses of the nation who relied upon
their labor, it pressed with intense severity. The capitalist could put
his surplus paper money into the government lands and await results; but
the men who needed their money from day to day suffered the worst of
the misery. Still another difficulty appeared. There had come a complete
uncertainty as to the future. Long before the close of 1791 no one knew
whether a piece of paper money representing a hundred _livres_ would,
a month later, have a purchasing power of ninety or eighty or sixty
_livres_. The result was that capitalists feared to embark their means
in business. Enterprise received a mortal blow. Demand for labor was
still further diminished; and here came a new cause of calamity: for
this uncertainty withered all far-reaching undertakings. The business
of France dwindled into a mere living from hand to mouth. This state of
things, too, while it bore heavily upon the moneyed classes, was
still more ruinous to those in moderate and, most of all, to those in
straitened circumstances. With the masses of the people, the purchase of
every article of supply became a speculation--a speculation in which
the professional speculator had an immense advantage over the ordinary
buyer. Says the most brilliant of apologists for French revolutionary
statesmanship, "Commerce was dead; betting took its place." [33]

Nor was there any compensating advantage to the mercantile classes. The
merchant was forced to add to his ordinary profit a sum sufficient to
cover probable or possible fluctuations in value, and while prices of
products thus went higher, the wages of labor, owing to the number of
workmen who were thrown out of employment, went lower.

But these evils, though great, were small compared to those far more
deep-seated signs of disease which now showed themselves throughout the
country. One of these was the _obliteration of thrift_ from the minds
of the French people. The French are naturally thrifty; but, with such
masses of money and with such uncertainty as to its future value, the
ordinary motives for saving and care diminished, And a loose luxury
spread throughout the country. A still worse outgrowth was the increase
of speculation and gambling. With the plethora of paper currency in
1791 appeared the first evidences of that cancerous disease which
always follows large issues of irredeemable currency,--a disease more
permanently injurious to a nation than war, pestilence or famine. For
at the great metropolitan centers grew a luxurious, speculative,
stock-gambling body, which, like a malignant tumor, absorbed into itself
the strength of the nation and sent out its cancerous fibres to the
remotest hamlets. At these city centers abundant wealth seemed to be
piled up: in the country at, large there grew a dislike of steady labor
and a contempt for moderate gains and simple living. In a pamphlet
published in May, 1791, we see how, in regard to this also, public
opinion was blinded. The author calls attention to the increase of
gambling in values of all sorts in these words: "What shall I say of the
stock-jobbing, as frightful as it is scandalous, which goes on in Paris
under the very eyes of our legislators,--a most terrible evil, yet,
under the present circumstances,--necessary?" The author also speaks
of these stock-gamblers as using the most insidious means to influence
public opinion in favor of their measures; and then proposes, seriously,
a change in various matters of detail, thinking that this would prove a
sufficient remedy for an evil which had its roots far down in the whole
system of irredeemable currency. As well might a physician prescribe a
pimple wash for a diseased liver. [34]

Now began to be seen more plainly some of the many ways in which an
inflation policy robs the working class. As these knots of plotting
schemers at the city centers were becoming bloated with sudden wealth,
the producing classes of the country, though having in their possession
more and more currency, grew lean. In the schemes and speculations put
forth by stock-jobbers and stimulated by the printing of more currency,
multitudes of small fortunes were absorbed and lost while a few swollen
fortunes were rapidly aggregated in the larger cities. This crippled a
large class in the country districts, which had employed a great number
of workmen.

In the leading French cities now arose a luxury and license which was
a greater evil even than the plundering which ministered to it. In
the country the gambling spirit spread more and more. Says the same
thoughtful historian whom I have already quoted: "What a prospect for
a country when its rural population was changed into a great band of
gamblers!" [35]

Nor was this reckless and corrupt spirit confined to business men; it
began to break out in official circles, and public men who, a few
years before, had been thought above all possibility of taint, became
luxurious, reckless, cynical and finally corrupt. Mirabeau, himself,
who, not many months previous, had risked imprisonment and even death
to establish constitutional government, was now--at this very
time--secretly receiving heavy bribes. When, at the downfall of the
monarchy a few years later, the famous iron chest of the Tuileries was
opened, there were found evidences that, in this carnival of inflation
and corruption, he had been a regularly paid servant of the Royal
court. [36] The artful plundering of the people at large was bad enough,
but worse still was this growing corruption in official and legislative
circles. Out of the speculating and gambling of the inflation period
grew luxury, and, out of this, corruption. It grew as naturally as a
fungus on a muck heap. It was first felt in business operations,
but soon began to be seen in the legislative body and in journalism.
Mirabeau was, by no means, the only example. Such members of the
legislative body as Jullien of Toulouse, Delaunay of Angers, Fabre
d'Eglantine and their disciples, were among the most noxious of those
conspiring by legislative action to raise and depress securities for
stock-jobbing purposes. Bribery of legislators followed as a matter of
course, Delaunay, Jullien and Chabot accepted a bribe of five hundred
thousand _livres_ for aiding legislation calculated to promote the
purposes of certain stock-jobbers. It is some comfort to know that
nearly all concerned were guillotined for it. [37]

It is true that the number of these corrupt legislators was small, far
less than alarmists led the nation to suppose, but there were enough to
cause wide-spread distrust, cynicism and want of faith in any patriotism
or any virtue.


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

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

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

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

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

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

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

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

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

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

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

When it is remembered that there was little business to do and that
the purchasing power of the _livre_ or franc, when judged by the staple
products of the country, was equal to about half the present purchasing
power of our own dollar, it will be seen into what evils France had
drifted. As the mania for paper money ran its course, even the _sous_,
obtained by melting down the church bells, were more and more driven out
of circulation and more and more parchment notes from twenty _four_ to
five were issued, and at last pieces of one _sou_, of half a _sou_ and
even of one-quarter of a _sou_ were put in circulation. [42]

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

As a result, the issues became larger still, and four hundred workmen
were added to those previously engaged in furnishing this paper money,
and these were so pressed with work from six o'clock in the morning
until eight in the evening that they struck for higher wages and were
successful. [43]

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

It has been argued that the _assignats_ sank in value because they were
not well secured,--that securing them on government real estate was as
futile as if the United States had, in the financial troubles of its
early days, secured notes on its real estate. This objection is utterly
fallacious. The government lands of our country were remote from the
centers of capital and difficult to examine; the French national real
estate was near these centers--even _in_ them--and easy to examine.
Our national real estate was unimproved and unproductive; theirs
was improved and productive--its average productiveness in market in
ordinary times being from four to five per cent. [55]

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

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

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

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

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

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

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

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

Month after month, year after year new issues went on. Meanwhile
everything possible was done to keep up the value of paper. The city
authorities of Metz took a solemn oath that the _assignats_ should bear
the same price whether in paper or specie,--and whether in buying
or selling, and various other official bodies throughout the nation
followed this example. In obedience to those who believed with the
market women of Paris, as stated in their famous petition, that "laws
should be passed making paper money as good as gold," Couthon, in
August, 1793, had proposed and carried a law punishing any person
who should sell _assignats_ at less than their nominal value with
imprisonment for twenty years in chains, and later carried a law making
investments in foreign countries by Frenchmen punishable with death. [59]

But to the surprise of the great majority of the French people, the
value of the _assignats_ was found, after the momentary spasm of fear
had passed, not to have been permanently increased by these measures: on
the contrary, this "fiat" paper persisted in obeying the natural laws of
finance and, as new issues increased, their value decreased. Nor did the
most lavish aid of nature avail. The paper money of the nation seemed to
possess a magic power to transmute prosperity into adversity and plenty
into famine. The year 1794 was exceptionally fruitful: and yet with the
autumn came scarcity of provisions and with the winter came distress.
The reason is perfectly simple. The sequences in that whole history are
absolutely logical. First, the Assembly had inflated the currency and
raised prices enormously. Next, it had been forced to establish an
arbitrary maximum price for produce. But this price, large as it
seemed, soon fell below the real value of produce; many of the farmers,
therefore, raised less produce or refrained from bringing what they had
to market. [60] But, as is usual in such cases, the trouble was ascribed
to everything rather than the real cause, and the most severe measures
were established in all parts of the country to force farmers to bring
produce to market, millers to grind and shopkeepers to sell it. [61] The
issues of paper money continued. Toward the end of 1794 seven thousand
millions in _assignats_ were in circulation. [62] By the end of May,
1795, the circulation was increased to ten thousand millions, at the
end of July, to fourteen thousand millions; and the value of one hundred
_francs_ in paper fell steadily, first to four _francs_ in gold, then to
three, then to two and one-half. [63] But, curiously enough, while this
depreciation was rapidly going on, as at various other periods when
depreciation was rapid, there came an apparent revival of business. The
hopes of many were revived by the fact that in spite of the decline of
paper there was an exceedingly brisk trade in all kinds of permanent
property. Whatever articles of permanent value certain needy people were
willing to sell certain cunning people were willing to buy and to pay
good prices for in _assignats_. At this, hope revived for a time in
certain quarters. But ere long it was discovered that this was one of
the most distressing results of a natural law which is sure to come into
play under such circumstances. It was simply a feverish activity caused
by the intense desire of a large number of the shrewder class to convert
their paper money into anything and everything which they could hold and
hoard until the collapse which they foresaw should take place. This very
activity in business simply indicated the disease. It was simply legal
robbery of the more enthusiastic and trusting by the more cold-hearted
and keen. It was, the "unloading" of the _assignats_ upon the mass of
the people. [64]

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

The question will naturally be asked, _On whom did this vast
depreciation mainly fall at last_? When this currency had sunk to
about one three-hundredth part of its nominal value and, after that,
to nothing, in whose hands was the bulk of it? The answer is simple. I
shall give it in the exact words of that thoughtful historian from whom
I have already quoted: "Before the end of the year 1795 the paper money
was almost exclusively in the hands of the working classes, employees
and men of small means, whose property was not large enough to invest in
stores of goods or national lands. [69] Financiers and men of large means
were shrewd enough to put as much of their property as possible into
objects of permanent value. The working classes had no such foresight
or skill or means. On them finally came the great crushing weight of the
loss. After the first collapse came up the cries of the starving. Roads
and bridges were neglected; many manufactures were given up in utter
helplessness." To continue, in the words of the historian already cited:
"None felt any confidence in the future in any respect; few dared to
make a business investment for any length of time and it was accounted a
folly to curtail the pleasures of the moment, to accumulate or save for
so uncertain a future." [70]

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

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

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


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

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

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

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

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

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

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

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

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

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

But these prices about the middle of 1795 were moderate compared with
those which were reached before the close of that year and during the
year following. Perfectly authentic examples were such as the following:

     A pound of bread        9 dollars
     A bushel of potatoes   40 dollars
     A pound of candles     40 dollars
     A cartload of wood    250 dollars

So much for the poorer people. Typical of those esteemed wealthy may be
mentioned a manufacturer of hardware who, having retired from business
in 1790 with 321,000 _livres_, found his property in 1796 worth 14,000
_francs_. [76]

For this general distress arising from the development and collapse of
"fiat" money in France, there was, indeed, one exception. In Paris and
a few of the other great cities, men like Tallien, of the heartless,
debauched, luxurious, speculator, contractor and stock-gambler class,
had risen above the ruins of the multitudes of smaller fortunes.
Tallien, one of the worst demagogue "reformers," and a certain number
of men like him, had been skillful enough to become millionaires, while
their dupes, who had clamored for issues of paper money, had become

The luxury and extravagance of the currency gamblers and their families
form one of the most significant features in any picture of the social
condition of that period. [77]

A few years before this the leading women in French society showed a
nobility of character and a simplicity in dress worthy of Roman matrons.
Of these were Madame Boland and Madame Desmoulins; but now all was
changed. At the head of society stood Madame Tallien and others like
her, wild in extravagance, daily seeking new refinements in luxury, and
demanding of their husbands and lovers vast sums to array them and to
feed their whims. If such sums could not be obtained honestly they must
be had dishonestly. The more closely one examines that period, the more
clearly he sees that the pictures, given by Thibaudeau and Challamel and
De Goncourt are not at all exaggerated. [78]

The contrast between these gay creatures of the Directory period and the
people at large was striking. Indeed much as the vast majority of the
wealthy classes suffered from impoverishment, the laboring classes,
salaried employees of all sorts, and people of fixed income and of small
means, especially in the cities, underwent yet greater distress. These
were found, as a rule, to subsist mainly on daily government rations of
bread at the rate of one pound per person. This was frequently unfit
for food and was distributed to long lines of people, men, women and
children, who were at times obliged to wait their turn even from dawn
to dusk. The very rich could, by various means, especially by bribery,
obtain better bread, but only at enormous cost. In May, 1796, the market
price of good bread was, in paper, 80 _francs_ (16 dollars) per pound
and a little later provisions could not be bought for paper money at any
price. [79]

And here it may be worth mentioning that there was another financial
trouble especially vexatious. While, as we have seen, such enormous
sums, rising from twenty to forty thousand millions of _francs_ in
paper, were put in circulation by the successive governments of the
Revolution, enormous sums had been set afloat in counterfeits by
criminals and by the enemies of France. These came not only from
various parts of the French Republic but from nearly all the surrounding
nations, the main source being London. Thence it was that Count Joseph
de Puisaye sent off cargoes of false paper, excellently engraved and
printed, through ports in Brittany and other disaffected parts of
France. One seizure by General Hoche was declared by him to exceed in
nominal value ten thousand millions of _francs_. With the exception of
a few of these issues, detection was exceedingly difficult, even for
experts; for the vast majority of the people it was impossible.

Nor was this all. At various times the insurgent royalists in La Vendee
and elsewhere put _their_ presses also in operation, issuing notes
bearing the Bourbon arms,--the _fleur-de-lis_, the portrait of the
Dauphin (as Louis XVII) with the magic legend "_De Par le Roi_," and
large bodies of the population in the insurgent districts were _forced_
to take these. Even as late as 1799 these notes continued to appear. [80]

The financial agony was prolonged somewhat by attempts to secure funds
by still another "forced loan," and other discredited measures, but
when all was over with paper money, specie began to reappear--first in
sufficient sums to do the small amount of business which remained after
the collapse. Then as the business demand increased, the amount of
specie flowed in from the world at large to meet it and the nation
gradually recovered from that long paper-money debauch.

Thibaudeau, a very thoughtful observer, tells us in his Memoirs that
great fears were felt as to a want of circulating medium between the
time when paper should go out and coin should come in; but that no
such want was severely felt--that coin came in gradually as it was
wanted. [81]

Nothing could better exemplify the saying of one of the most shrewd of
modern statesmen that "There will always be money." [82]

But though there soon came a degree of prosperity--as compared with the
distress during the paper-money orgy, convalescence was slow. The acute
suffering from the wreck and rain brought by _assignats_, _mandats_ and
other paper currency in process of repudiation lasted nearly ten years,
but the period of recovery lasted longer than the generation which
followed. It required fully forty years to bring capital, industry,
commerce and credit up to their condition when the Revolution began, and
demanded a "man on horseback," who established monarchy on the ruins of
the Republic and thew away millions of lives for the Empire, to be added
to the millions which had been sacrificed by the Revolution. [83]

Such, briefly sketched in its leading features, is the history of the
most skillful, vigorous and persistent attempt ever made to substitute
for natural laws in finance the ability of legislative bodies, and, for
a standard of value recognized throughout the world, a national standard
devised by theorists and manipulated by schemers. Every other attempt
of the same kind in human history, under whatever circumstances, has
reached similar results in kind if not in degree; all of them show the
existence of financial laws as real in their operation as those which
hold the planets in their courses. [84]

I have now presented this history in its chronological order--the order
of events: let me, in conclusion, sum it up, briefly, in its _logical_
order,--the order of cause and effect.

And, first, in the economic department. From the early reluctant and
careful issues of paper we saw, as an immediate result, improvement and
activity in business. Then arose the clamor for more paper money. At
first, new issues were made with great difficulty; but, the dyke once
broken, the current of irredeemable currency poured through; and, the
breach thus enlarging, this currency was soon swollen beyond control.
It was urged on by speculators for a rise in values; by demagogues who
persuaded the mob that a nation, by its simple fiat, could stamp real
value to any amount upon valueless objects. As a natural consequence a
great debtor class grew rapidly, and this class gave its influence to
depreciate more and more the currency in which its debts were to be
paid. [85]

The government now began, and continued by spasms to grind out still
more paper; commerce was at first stimulated by the difference in
exchange; but this cause soon ceased to operate, and commerce, having
been stimulated unhealthfully, wasted away.

Manufactures at first received a great impulse; but, ere long, this
overproduction and overstimulus proved as fatal to them as to commerce.
From time to time there was a revival of hope caused by an apparent
revival of business; but this revival of business was at last seen to
be caused more and more by the desire of far-seeing and cunning men of
affairs to exchange paper money for objects of permanent value. As
to the people at large, the classes living on fixed incomes and small
salaries felt the pressure first, as soon as the purchasing power of
their fixed incomes was reduced. Soon the great class living on wages
felt it even more sadly.

Prices of the necessities of life increased: merchants were obliged to
increase them, not only to cover depreciation of their merchandise, but
also to cover their risk of loss from fluctuation; and, while the prices
of products thus rose, wages, which had at first gone up, under
the general stimulus, lagged behind. Under the universal doubt and
discouragement, commerce and manufactures were checked or destroyed.
As a consequence the demand for labor was diminished; laboring men were
thrown out of employment, and, under the operation of the simplest
law of supply and demand, the price of labor--the daily wages of the
laboring class--went down until, at a time when prices of food, clothing
and various articles of consumption were enormous, wages were nearly as
low as at the time preceding the first issue of irredeemable currency.

The mercantile classes at first thought themselves exempt from the
general misfortune. They were delighted at the apparent advance in the
value of the goods upon their shelves. But they soon found that, as they
increased prices to cover the inflation of currency and the risk
from fluctuation and uncertainty, purchases became less in amount
and payments less sure; a feeling of insecurity spread throughout the
country; enterprise was deadened and stagnation followed.

New issues of paper were then clamored for as more drams are demanded by
a drunkard. New issues only increased the evil; capitalists were all the
more reluctant to embark their money on such a sea of doubt. Workmen of
all sorts were more and more thrown out of employment. Issue after issue
of currency came; but no relief resulted save a momentary stimulus,
which aggravated the disease. The most ingenious evasions of natural
laws in finance which the most subtle theorists could contrive were
tried--all in vain; the most brilliant substitutes for those laws were
tried; "self-regulating" schemes, "interconverting" schemes--all
equally vain. [86] All thoughtful men had lost confidence. All men were
_waiting_; stagnation became worse and worse. At last came the collapse
and then a return, by a fearful shock, to a state of things which
presented something like certainty of remuneration to capital and labor.
Then, and not till then, came the beginning of a new era of prosperity.

Just as dependent on the law of cause and effect was the _moral_
development. Out of the inflation of prices grew a speculating class;
and, in the complete uncertainty as to the future, all business became
a game of chance, and all business men, gamblers. In city centers came a
quick growth of stock-jobbers and speculators; and these set a debasing
fashion in business which spread to the remotest parts of the country.
Instead of satisfaction with legitimate profits, came a passion for
inordinate gains. Then, too, as values became more and more uncertain,
there was no longer any motive for care or economy, but every motive for
immediate expenditure and present enjoyment. So came upon the nation
the _obliteration of thrift_. In this mania for yielding to present
enjoyment rather than providing for future comfort were the seeds of
new growths of wretchedness: luxury, senseless and extravagant, set in:
this, too, spread as a fashion. To feed it, there came cheatery in
the nation at large and corruption among officials and persons holding
trusts. While men set such fashions in private and official business,
women set fashions of extravagance in dress and living that added to the
incentives to corruption. Faith in moral considerations, or even in
good impulses, yielded to general distrust. National honor was thought
a fiction cherished only by hypocrites. Patriotism was eaten out by

Thus was the history of France logically developed in obedience to
natural laws; such has, to a greater or less degree, always been the
result of irredeemable paper, created according to the whim or interest
of legislative assemblies rather than based upon standards of value
permanent in their nature and agreed upon throughout the entire world.
Such, we may fairly expect, will always be the result of them until
the fiat of the Almighty shall evolve laws in the universe radically
different from those which at present obtain. [87]

And, finally, as to the general development of the theory and practice
which all this history records: my subject has been Fiat Money in
France; How it came; What it brought; and How it ended.

It came by seeking a remedy for a comparatively small evil in an evil
infinitely more dangerous. To cure a disease temporary in its character,
a corrosive poison was administered, which ate out the vitals of French

It progressed according to a law in social physics which we may call
the "_law of accelerating issue and depreciation._" It was comparatively
easy to refrain from the first issue; it was exceedingly difficult to
refrain from the second; to refrain from the third and those following
was practically impossible.

It brought, as we have seen, commerce and manufactures, the mercantile
interest, the agricultural interest, to ruin. It brought on these the
same destruction which would come to a Hollander opening the dykes of
the sea to irrigate his garden in a dry summer.

It ended in the complete financial, moral and political prostration of
France-a prostration from which only a Napoleon could raise it.

But this history would be incomplete without a brief sequel, showing how
that great genius profited by all his experience. When Bonaparte took
the consulship the condition of fiscal affairs was appalling. The
government was bankrupt; an immense debt was unpaid. The further
collection of taxes seemed impossible; the assessments were in hopeless
confusion. War was going on in the East, on the Rhine, and in Italy, and
civil war, in La Vendée. All the armies had long been unpaid, and the
largest loan that could for the moment be effected was for a sum hardly
meeting the expenses of the government for a single day. At the first
cabinet council Bonaparte was asked what he intended to do. He replied,
"I will pay cash or pay nothing." From this time he conducted all his
operations on this basis. He arranged the assessments, funded the debt,
and made payments in cash; and from this time--during all the campaigns
of Marengo, Austerlitz, Jena, Eylau, Friedland, down to the Peace of
Tilsit in 1807--there was but one suspension of specie payment, and this
only for a few days. When the first great European coalition was formed
against the Empire, Napoleon was hard pressed financially, and it was
proposed to resort to paper money; but he wrote to his minister, "While
I live I will never resort to irredeemable paper." He never did, and
France, under this determination, commanded all the gold she needed.
When Waterloo came, with the invasion of the Allies, with war on her
own soil, with a change of dynasty, and with heavy expenses for war and
indemnities, France, on a specie basis, experienced no severe financial

If we glance at the financial history of France during the
Franco-Prussian War and the Communist struggle, in which a far more
serious pressure was brought upon French finances than our own recent
Civil War put upon American finance, and yet with no national stagnation
or distress, but with a steady progress in prosperity, we shall see
still more clearly the advantage of meeting a financial crisis in an
honest and straightforward way, and by methods sanctioned by the world's
most costly experience, rather than by yielding to dreamers, theorists,
phrase-mongers, declaimers, schemers, speculators or to that sort of,
"Reform" which is "the last refuge of a scoundrel." [88]

There is a lesson in all this which it behooves every thinking man to


Note: The White Collection at the Cornell University library mentioned
in many of the following notes is described here:


THE BANK OF NEW YORK, established in 1784, was the only Bank in
existence in the city of New York at the time of the French experiment
with fiat money.

THE BANK OF NEW YORK AND TRUST COMPANY, which celebrates its one-hundred
and fiftieth anniversary in March, 1934, considers it a privilege to
be able to distribute some copies of this scholarly article of the late
Andrew D. White. The article emphasizes the fact that the use of fiat
money in France was in its beginning a sincere effort on the part of
intelligent members of the National Assembly to stem the tide of misery
and wretchedness which had brought about the Revolution in 1789. But the
article also shows clearly that once started on a small scale, it became
utterly impossible to control the currency inflation and that after some
slight indications of improvement in conditions, the situation went from
bad to worse. In the long run, those most injured were the people whom
it was most desired to help--the laborer, the wage earner and those
whose incomes from previous savings were smallest.

ANDREW D. WHITE had a long and distinguished career as educator,
historian, economist and diplomat; his description of the events
in France that followed the experiment with fiat money is intensely
interesting and well Worth the attention of every thinking person in the
United States of 1933.


[Footnote 1: A paper read before a meeting of Senators and Members of
the House of Representatives of both political parties, at Washington,
April 12th, and before the Union League Club, at New York, April 13th,
1876, and now (1914) revised and extended.]

[Footnote 2: For proof that the financial situation of France at that
time was by no means hopeless, see Storch, "Economie Politique," vol.
iv, p. 159.]

[Footnote 3: See Moniteur, sitting of April 10, 1790.]

[Footnote 4: Ibid., sitting of April 15, 1790.]

[Footnote 5: For details of this struggle, see Buchez and Roux,
"Histoire Parlementaire de la Révolution Française," vol. iii, pp.
364, 365, 404. For the wild utterances of Marat throughout this whole
history, see the full set of his "L'ami du peuple" in the President
White Collection of the Cornell University. For Bergasse's pamphlet and
a mass of similar publications, see the same collection. For the effect
produced by them, see Challamel, "Les Français sous la Révolution";
also De Goncourt, "La Société Française pendant la Révolution," &c.]

For the Report referred to, see Levasseur, "Histoire des classes
ouvriès et de l'industrie en France de 1789 à 1870," Paris, 1903, vol.
i., chap. 6. Levasseur (vol. 1, p. 120), a very strong conservative in
such estimates, sets the total value of church property at two thousand
millions; other authorities put it as high as twice that sum. See
especially Taine, liv. ii, ch. I., who gives the valuation as "about
four milliards." Sybel, "Gesch. der Revolutionszeit," gives it as two
milliards and Briand, "La séparation" &c., agrees with him. See also De
Nerve, "Finances Françaises," vol. ii, pp. 236-240; also Alison,
"History of Europe," vol. i.]

[Footnote 6: For striking pictures of this feeling among the younger
generation of Frenchmen, see Challamel, "Sur la Révolution," p. 305.
For general history of John Law's paper money, see Henri Martin,
"Histoire de France"; also Blanqui, "Histoire de l'économie politique,"
vol. ii, pp. 65-87; also Senior on "Paper Money," sec. iii, Pt. I, also
Thiers, "Histoire de Law"; also Levasseur, op. cit. Liv. i., chap. VI.
Several specimens of John Law's paper currency are to be found in the
White Collection in the Library of Cornell University,--some, numbered
with enormous figures.]

[Footnote 7: See Buchez and Roux, "Histoire Parlementaire," vol. v, p.
321, et seq. For an argument to prove that the _assignats_ were, after
all, not so well secured as John Law's money, see Storch, "Economie
Politique," vol. iv, p. 160.]

[Footnote 8: For specimens of this first issue and of nearly every other
issue during the French Revolution, see the extensive collection of
originals in the Cornell University Library. For a virtually complete
collection of photographic copies, see Dewamin, "Cent ans de
numismatique française," vol. i, passim.]

[Footnote 9: See "Addresse de l'Assemblée nationals sur lea emissions
_d'assignats_ monnaies," p. 5.]

[Footnote 10: Ibid., p. 10.]

[Footnote 11: For Sarot, see "Lettre de M. Sarot," Paris, April 19,
1790. As to the sermon referred to see Levasseur as above, vol. i, p.

[Footnote 12: Von Sybel, "History of the French Revolution," vol. i, p.
252; also Levasseur, as above, pp. 137 and following.]

[Footnote 13: For Mirabeau's real opinion on irredeemable paper, see his
letter to Cerutti, in a leading article of the "Moniteur"; also
"Mèmoires do Mirabeau," vol. vii, pp. 23, 24 and elsewhere. For his
pungent remarks above quoted, see Levasseur, ibid., vol. i, p. 118.]

[Footnote 14: See "Moniteur," August 27, 1790.]

[Footnote 15: "Moniteur," August 28, 1790; also Levasseur, as above, pp.
139 _et seq_.]

[Footnote 16: "Par une seule opération, grande, simple, magnifique."
See "Moniteur." The whole sounds curiously like the proposals of the
"Greenbackers," regarding the American debt, some years since.]

[Footnote 17: "Moniteur," August 29, 1790.]

[Footnote 18: See Lacretelle, "18me Siécle," vol. viii, pp. 84-87; also
Thiers and Mignet.]

[Footnote 19: See Hatin, Histoire de la Presse en France, vols. v and

[Footnote 20: See "Moniteur," Sept. 5, 6 and 20, 1790.]

[Footnote 21: See Levasseur, vol. i, p. 142.]

[Footnote 22: See speech in "Moniteur"; also in Appendix to Thiers'
"History of the French Revolution."]

[Footnote 23: See Levassear, "Classes ouvrières," etc., vol. i, p.

[Footnote 24: See Levasseur, pp. 151 et seq. Various examples of these
"confidence bills" are to be seen in the Library of Cornell University.]

[Footnote 25: See Levasseur, vol. i, pp. 155-156.]

[Footnote 26: See Von Sybel, "History of the Revolution," vol. i, p.
265; also Levasseur, as above, vol. i, pp. 152-160.]

[Footnote 27: For Turgot's argument against "fiat money" theory, see A.
D. White, "Seven Great Statesmen in the Warfare of Humanity with
Unreason," article on Turgot, pp. 169, et seq.]

[Footnote 28: See De Goncourt, "Société française," for other
explanations; "Les Révolutions de Paris," vol. ii, p. 216; Challamel,
"Les Français sous la Révolution"; Senior, "On Some Effects of Paper
Money," p. 82; Buchez and Roux, "Histoire Parlementaire," etc., vol. x,
p. 216; Aulard, "Paris pendant la Révolution thermidorienne," _passim_,
and especially "Rapport du bureau de surveillance," vol. ii, pp. 562, et
seq. (Dec. 4-24, 1795.)]

[Footnote 29: For statements and illustration of the general action of
this law, see Sumner, "History of American Currency," pp. 157, 158; also
Jevons, on "Money," p. 80.]

[Footnote 30: See De Goncourt, "Société Française," p. 214.]

[Footnote 31: See Von Sybel, History of the French Revolution, vol. 1,
pp. 281, 283.]

[Footnote 32: For proofs that issues of irredeemable paper at first
stimulated manufactures and commerce in Austria and afterward ruined
them, see Storch's "Economie politique," vol. iv, p. 223, note; and for
the same effect produced by the same causes in Russia, see ibid., end of
vol. iv. For the same effects in America, see Sumner's "History of
American Currency." For general statement of effect of inconvertible
issues on foreign exchanges see McLeod on "Banking," p. 186.]

[Footnote 33: See Louis Blanc, "Histoire de la Révolution," tome xii,
p. 113.]

[Footnote 34: See "Extrait du registre des délibérations de la section
de la bibliothèque," May 3, 1791, pp. 4, 5.]

[Footnote 35: Von Sybel, vol. i, p. 273.]

[Footnote 36: For general account, see Thiers' "Révolution," chap. xiv;
also Lacretelle, vol. viii, p. 109; also "Memoirs of Mallet du Pan." For
a good account of the intrigues between the court and Mirabeau and of
the prices paid him, see Reeve, "Democracy and Monarchy in France," vol.
i, pp. 213-220. For a very striking caricature published after the iron
chest in the Tuileries was opened and the evidences of bribery of
Mirabeau fully revealed, see Challamel, "Musée," etc. Vol. i, p. 341,
is represented as a skeleton sitting on a pile of letters, holding the
French crown in one hand and a purse of gold in the other.]

[Footnote 37: Thiers, chap. ix.]

[Footnote 38: For this and other evidences of steady decline in the
purchasing power of the _assignats_, see Caron, "Tableaux de
Dépréciation du papier-monnaie," Paris, 1909, p. 386.]

[Footnote 39: See especially "Discours de Fabre d'Eglantine," in
"Moniteur" for August 11, 1793; also debate in "Moniteur" of September
15, 1793; also Prudhomme's "Révolutions de Paris." For arguments of
much the same tenor, see vast numbers of pamphlets, newspaper articles
and speeches during the "Greenback Craze,"--and the craze for unlimited
coinage of silver,--in the United States.]

[Footnote 40: See Caron, "Tableaux de Dépréciation," as above, p.

[Footnote 41: Von Sybel, vol. i, pp. 509, 510, 515; also Villeneuve
Bargemont, "Histoire de l'Economie Politique," vol. ii, p. 213.]

[Footnote 42: As to the purchasing power of money at that time, see
Arthur Young, "Travels in France during the Years 1787, 1788 and 1789."
For notices of the small currency with examples of satirical verses
written regarding it, see Challamel, "Les français sous la
Révolution," pp. 307, 308. See also Mercier, "Le Nouveau Paris,"
edition of 1800, chapter ccv., entitled "Parchemin Monnaie." A series of
these petty notes will be found in the White collection of the Cornell
University Library. They are very dirty and much worn, but being printed
on parchment, remain perfectly legible. For issue of quarter-"_sou_"
pieces see Levasseur, p. 180.]

[Footnote 43: See Levasseur, vol. i, p. 176.]

[Footnote 44: For Chaumette's brilliant display of fictitious reasons
for the decline see Thiers, Shoberl's translation, published by Bentley,
vol. iii, p. 248.]

[Footnote 45: For these fluctuations, see Caron, as above, p. 387.]

[Footnote 46: One of the Forced Loan certificates will be found in the
White Collection in the Library of Cornell University.]

[Footnote 47: For details of these transactions, see Levasseur, as
above, vol. i, chap. 6, pp. 181, et seq. Original specimens of these
notes, bearing the portrait of Louis XVI will be found in the Cornell
University Library (White Collection) and for the whole series perfectly
photographed in the same collection, Dewarmin, "Cent ans de numismatique
française," vol. i, pp. 143-165.]

[Footnote 48: For statements showing the distress and disorder that
forced the Convention to establish the "_Maximum_" see Levasseur, vol.
i, pp. 188-193.]

[Footnote 49: See Levasseur, as above, vol. i, pp. 195-225.]

[Footnote 50: See specimens of these tickets in the White Collection in
the Cornell Library.]

[Footnote 51: For these condemnations to the guillotine see the
officially published trials and also the lists of the condemned, in the
White Collection, also the lists given daily in the "Moniteur." For the
spy system, see Levasseur, vol. i, p. 194.]

[Footnote 52: See Levasseur, as above, vol. i, p. 186. For an argument
to show that the Convention was led into this Draconian legislation, not
by necessity, but by its despotic tendencies, see Von Sybel's "History
of the French Revolution," vol. iii, pp. 11, 12. For general statements
of theories underlying the "_Maximum_," see Thiers; for a very
interesting picture, by an eye-witness, of the absurdities and miseries
it caused, see Mercier, "Nouveau Paris," edition of 1800, chapter XLIV.]

[Footnote 53: For a summary of the report of the Committee, with list of
articles embraced under it, and for various interesting details, see
Villeneuve Bargemont, "Histoire de l'Economie Politique," vol. ii, pp.
213-239; also Levasseur, as above. For curious examples of severe
penalties for very slight infringements on the law on the subject, see
Louis Blanc, "Histoire de la Révolution française," tome x, p. 144.
For Louis XIVth's claim see "Memoirs of Louis XIV for the Instruction of
the Dauphin."]

For a simple exposition of the way in which the exercise of this power
became simply confiscation of all private property in France, see Mallet
Du Pan's "Memoirs," London, 1852, vol. ii, p. 14.]

[Footnote 54: See Du Pont's arguments, as given by Levasseur.]

[Footnote 55: Louis Blanc calls attention to this very fact in showing
the superiority of the French _assignats_ to the old American
Continental currency, See his "Histoire de la Révolution française,"
tome xii, p. 98.]

[Footnote 56: See Sumner, as above, p. 220.]

[Footnote 57: See Levasseur, as above, vol. i, p. 178.]

[Footnote 58: See Cambon's "Report," Aug. 15, 1793, pp. 49-60; also,
"Decree of Aug. 24, 1793," sec. 31, chapters XCVI-CIII. Also, "Tableaux
de la dépréciation de papier monnaie dans le department de la Seine."]

[Footnote 59: For the example of Metz and other authorities, see
Levasseur, as above, vol. i, p. 180.]

[Footnote 60: See Von Sybel, vol. iii, p. 173.]

[Footnote 61: See Thiers; also, for curious details of measures taken to
compel farmers and merchants, see Senior, Lectures on "Results of Paper
Money," pp. 86, 87.]

[Footnote 62: See Von Sybel, vol. iv, p. 231.]

[Footnote 63: See Von Sybel, vol. iv, p. 330; also tables of
depreciation in "Moniteur"; also official reports in the White
Collection; also Caron's "Tables," etc.]

[Footnote 64: For a lifelike sketch of the way in which these exchanges
of _assignats_ for valuable property went on at periods of the rapid
depreciation of paper, see Challamel, "Les français sous la
Révolution," p. 309; also Say, "Economic Politique."]

[Footnote 65: For a very complete table of the depreciation from day to
day, see "Supplement to the Moniteur" of October 2, 1797; also Caron, as
above. For the market prices of the _louis d'or_ at the first of every
month, as the collapse approached, see Montgaillard. See also "Official
Lists" in the White Collection. For a table showing the steady rise of
the franc in gold during a single week, from 251 to 280 _francs_, see
Dewarmin, as above, vol. i, p. 136.]

[Footnote 66: See "Mèmoires de Thibaudeau," vol. ii, p. 26, also
Mercier, "Lo Nouveau Paris," vol. ii, p. 90; for curious example of the
scales of depreciation see the White Collection. See also extended table
of comparative values in 1790 and 1795. See Levasseur, as above, vol. i,
pp. 223-4.]

[Footnote 67: For a striking similar case in our own country, see
Sumner, "History of American Currency," p. 47.]

[Footnote 68: See Villeneuve Bargemont, "Histoire de l'économie
politique," vol. ii, p. 229.]

[Footnote 69: See Von Sybel, vol. iv, pp. 337, 338. See also for
confirmation Challamel, "Histoire Musée," vol. ii, p. 179. For a
thoughtful statement of the reasons why such paper was not invested in
lands by men of moderate means, and workingmen, see Mill, "Political
Economy," vol. ii, pp. 81, 82.]

[Footnote 70: See Von Sybel, vol. iv, p. 222.]

[Footnote 71: See especially Levasseur, "Histoire des classes
ouvrières," etc. vol. i, pp. 219, 230 and elsewhere; also De Nervo,
"Finance française," p. 280; also Stourm, as already cited. The exact
amount of _assignats_ in circulation at the final suppression is given
by Dowarmin, (vol. i, p. 189), as 39,999,945,428 _livres_ or _francs_.]

[Footnote 72: For details of the mandat system very thoroughly given,
see Thiers' "History of the French Revolution," Bentley's edition, vol.
iv, pp. 410-412. For the issue of _assignats_ and _mandats_ at the same
time, see Dewarmin, vol. i, p. 136; also Levasseur, vol. i, pp. 230-257.
For an account of "new tenor bills" in America and their failure in
1737, see Summer, pp. 27-31; for their failure in 1781, see Morse, "Life
of Alexander Hamilton," vol. i, pp. 86, 87. For similar failure in
Austria, see Summer, p. 314.]

[Footnote 73: See Marchant, "Lettre aux gens de bonne foi."]

[Footnote 74: See Summer, p. 44; also De Nervo, "Finances françaises,"
p. 282.]

[Footnote 75: See De Nervo, "Finances françaises," p. 282; also
Levasseur, vol. i, p. 236 et seq.]

[Footnote 76: See Table from "Gazette de France" and extracts from other
sources in Levasseur, vol. i, pp. 223-4.]

[Footnote 77: Among the many striking accounts of the debasing effects
of "inflation" upon France under the Directory perhaps the best is that
of Lacretelle, vol. xiii, pp. 32-36. For similar effect, produced by the
same cause in our own country in 1819, see statement from Niles'
"Register," in Sumner, p. 80. For the jumble of families reduced to
beggary with families lifted into sudden wealth and for the mass of
folly and misery thus mingled, see Levassour, vol. i, p. 237.]

[Footnote 78: For Madame Tallien and luxury of the stock-gambler
classes, see Challamel, "Les français sous la Révolution," pp. 30, 33;
also De Goncourt, "Les français sous le Directoire." Regarding the
outburst of vice in Paris and the demoralization of the police, see
Levasseur, as above.]

[Footnote 79: See Levasseur, Vol. i, p. 237, et seq.]

[Footnote 80: For specimens of counterfeit _assignats_, see the White
Collection in the Cornell University Library, but for the great series
of various issues of them in fac-simile, also for detective warnings and
attempted descriptions of many varieties of them, and for the history of
their Issue, see especially Dewarmin, vol. i, pp. 152-161. For
photographic copies of Royalist _assignats_, etc., see also Dewarmin,
ibid., pp. 192-197, etc. For a photograph of probably the last of the
Royalist notes ever issued, bearing the words "Pro Deo, pro Rege, pro
Patria" and "Armée Catholique et Royale" with the date 1799, and for
the sum of 100 _livres_, see Dewarmin, vol. i, p. 204.]

[Footnote 81: For similar expectation of a "shock," which did not occur,
at the resumption of specie payments in Massachusetts, see Sumner,
"History of American Currency," p. 34.]

[Footnote 82: See Thiers.]

[Footnote 83: See Levasseur, vol. i, p. 246.]

[Footnote 84: For examples of similar effects in Russia, Austria and
Denmark, see Storch, "Economie Politique," vol. iv; for similar effects
in the United States, see Gouge, "Paper Money and Banking in the United
States," also Summer, "History of American Currency." For working out of
the same principles in England, depicted in a masterly way, see
Macaulay, "History of England," chap. xxi; and for curious exhibition of
the same causes producing same results in ancient Greece, see a curious
quotation by Macaulay in same chapter.]

[Footnote 85: For parallel cases in the early history of our own
country, see Sumner, p. 21, and elsewhere.]

[Footnote 86: For a review of some of these attempts, with eloquent
statement of their evil results, see "Mémoires de Durand de Maillane,"
pp. 166-169.]

[Footnote 87: For similar effect of inflated currency in enervating and
undermining trade, husbandry, manufactures and morals in our own
country, see Daniel Webster, cited in Sumner, pp. 45-50. For similar
effects in other countries, see Senior, Storch, Macaulay and others
already cited.]

[Footnote 88: For facts regarding French finance under Napoleon I am
indebted to Hon. David A. Wells. For more recent triumphs of financial
commonsense in France, see Bonnet's articles, translated by the late
George Walker, Esq. For general subject, see Levasseur.]

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