FIAT MONEY

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IN FRANCE

ANDREW DICKSON WHITE

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THE FOUNDATION FOR ECONOMIC EDUCATION, INC. IRVIN6T0N-0N-NUDS0N, NEW YORK 1959

Printed in the United States of America

022849

FIAT MONEY INFLATION IN FRANCE:

Introduction	7
How It Came	23
What It Brought	63
How It Ended	95
Chronological Table	113
Footnotes	117

FIAT MONEY INFLATION IN FRANCE

Andrew Dickson White, who achieved eminence as an historian, an educator, and a diplomat, was born in Homer, New York, on November 7, 1832. He graduated from Yale in 1853, studied at the Sorbonne in Paris in 1854 and at the University of Berlin in 1855 and 1856, meanwhile serving as attache at the United States lega- tion at St. Petersburg.

He became a professor of history at the University of Michigan when he was only twenty-five. The fraternity boys, on his arrival, thought him a freshman and lugged his bags to his hotel. But his teaching proved a revela- tion. As one of his students (Charles Kendall Adams) afterwards wrote of him: "He not only instructed ... he inspired."

From his freshman days he had dreamed of an Amer- ican university more stately, more scholarly, and more free than any he had known. In 1867, with the help of an endowment from Ezra Cornell and a New York land grant, he established the present Cornell University at Ithaca, New York, and became its first president, a post which he held until 1885. He died November 4, 1918.

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White was a man of aflFairs as well as a scholar. He served as United States minister to Germany from 1879 to 1881, as minister to Russia from 1892 to 1894, and as ambassador to Germany from 1897 to 1903. In 1899, he headed the American delegation to the Hague Peace Conference and was responsible for one of its most dramatic events— the celebration by the Amer- icans of their Fourth of July by laying a laurel wreath on the tomb of Grotius, the father of international law.

The most famous of White's longer works is A History of the Warfare of Science with Theology in Christen- dom, published in two volumes in 1896.

The short essay in the following pages was bom of his lectures on the French Revolution. It was first pub- licly read before a meeting of Senators and members of the House of Representatives of both political parties at Washington on April 12, and before the Union League Club of New York on April 13, 1876. In 1912, at the age of eighty, at the request of a Canadian busi- nessman, he revised and enlarged the essay "for private circulation only." It has since been republished several times and has become a classic.

What chiefly strikes today's reader is the astonishing similarity of the arguments put forward by our own contemporary inflationists to those of the inflationists of eighteenth-century France. Not less striking, of course, is the similarity in the actual consequences of paper

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money inflation in revolutionary France and inflation everywhere in the modem world.

These parallels were, of course, intentionally under- lined by White. His essay was written not merely as a cold history, but as a lesson and a warning to his own American contemporaries. When his original lecture was read in 1876, the United States was still on a paper money standard, an inheritance from its resort to the Greenbacks during the Civil War. And though the Re- sumption Act had been passed on January 14, 1875, it was not until January 1, 1879 that gold payments were in fact resumed.

But these parallels strike us so forcibly today, not primarily because White underlined them for his hear- ers in 1876, but primarily because the course of inflation everywhere— economically, psychologically, politically, and morally— does in fact follow the same pattern.

Before we trace this pattern in more detail, we may pause to look at some connections, which White does not specifically refer to, between the fiat money infla- tion and the political chronology of the French Revolu- tion. The States-General was called to meet on May 5, 1789 by Louis XVI, but defiantly adopted the title of the National Assembly on June 17. On July 14 came the storming of the Bastille. In April of 1790 came the first issue of 400,000,000 livres in paper money, followed by successive new issues.^

1 A fuller chronology is appended at the end of White's essay in the present edition.

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when the new Assembly met in October 1791, it con- tained such extremists as Robespierre, Danton, and Marat. On August 10, 1792, the mob stormed the royal palace, slaughtered the Swiss guards, and overthrew the monarchy. The massacres of September 1792 were followed by the trial and execution of Louis XVI in January 1793, and by the Reign of Terror. On February 28, 1793, at eight o'clock in the evening (as White records), a mob of men and women in disguise began plundering the stores and shops of Paris. And on Sep- tember 29, 1793, came price-fixing— the Law of the Maximum, with its punishment of the guillotine for violators.

Now there is obviously a causal connection between these "political" and "economic policy" developments. And, as we study this, it becomes obvious that the causation was not merely one way. It was not merely the political terror that led to the monetary and price- fixing terror. The inauguration of inflation, by the ob- vious and fresh injustices that it brought about in the distribution of wealth and income, by the new burdens that it put upon underpaid labor, by causing the rise of a speculative and gambling class and the display of luxury by the new inflation-made rich, enormously in- creased envy, discontent, and resentment, and helped to accelerate and intensify the social upheaval and vio- lence. Inflation aggravates the very evils it seeks to cure.

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The most striking parallel between the events re- corded in Andrew D. White's essay and the situation in the modem world is psychological. It is the persistence of delusions. The arguments of the inflationists, then and now, are essentially the same. The inflation in revo- lutionary France was begun to pay off a debt and finance a budgetary deficit. (The immediate cause of the French Revolution, in fact, was the bankrupt state of the public treasury, which forced Louis XVI to call the States-General.) Inflation was to be the "short road to prosperity." The great want of the country was thought to be a "shortage" of the circulating medium. Merely add to the money supply, through the printing press, and all your difiBculties dissolve. What the coun- try needs is more "purchasing power." And as this remedy fdils, and quite different results follow, the sole solution of the inflationists is still more money, still more "purchasing power."

The broad pattern of all inflations, historic and mod- em, is the same. The first result is commonly the "re- covery" that the inflationists, like others, are seeking. It is not until later that its disappointing and poisonous effects become apparent. The economic reasons for this are not obscure. When there is relative stagnation in business, and unemployment, it is usually because an unbalanced and unworkable relationship has developed between prices at which goods can be sold and their

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costs of production. The main diflBcuIty, usually, is that wage-rates are too high in relation to prices. This could be cured by a readjustment of specific wage-rates, by more flexible wages and prices, by permitting compe- tition to work. The first effect of a new injection of bank credit or paper money into the system is, indeed, an apparent increase of that "purchasing power" which is so much wanted. It enables "surplus" goods to be sold at their existing prices. It enables prices of other goods to be raised to levels at which existing wage-rates can be paid and a full complement of workers hired. So it tends to restore that "full employment" so cherished, at any cost, by the modern reformer. This goal is achieved under inflation by raising prices enough to validate the existing level of wages. But what is forgotten is that the adjustment could have been made not only just as well, but much better, by a realignment of the particular wages that had got out of line. Such piecemeal adjust- ment would have restored the necessary coordination of the price-and-wage structure without the subsequent evils and crises that the inflation is bound to produce. Once "full production" and "full employment" have been restored, there is no further mixture of desired re- sults with the damage that further inflation must do. All the results of inflation from that point on are neces- sarily harmful. If it raised all prices and all wages equally (which it doesnt), it would obviously benefit no one. It would merely force everybody to be a better

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mathematician; to think in higher figures; to get more for his own work but to pay more for everybody else's; to get a higher money income but to pay higher prices.

Even on this assumption of uniformity of price and wage increases, however, there would be one great evil eflFect. The real purchasing power of savings would be constantly eroded. All savers would be cheated. This would discourage thrift. It would discourage, in short, the creation of those savings which are necessary for the investment upon which all economic progress and increase of productivity depend.

This result may be put in another way. If the rise of prices and wages were uniform, the chief economic ef- fect of inflation would be to benefit debtors at the expense of creditors. This, indeed, has been one of the main arguments for it in the past. It was a leading argu- ment for it at the time of the French Revolution. But it is a glaring fallacy, especially in modern times, to identify debtors with the poor and creditors with the rich. In the United States today the chief debtors are the stockholders of the corporations. These stockholders are found among the wealthiest classes. The creditors include the direct bondholders of these same corpora- tions (probably less wealthy, on the average, than the stockholders, for they include investors who cannot af- ford to take the stockholder's, risks). The creditors also include the holders of life insurance policies, and of government bonds, large and small. They include mil-

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lions of savings-bank depositors, made up mainly of people of moderate means.

A poor man never gets to be a big debtor. Only a rich man, or a man with a reputation of being rich, can get into that situation. It is economic nonsense today to talk of a "debtor class'* and a "creditor class" as if these rep- resented separate groups necessarily at diflFerent eco- nomic levels. Each of us is to some extent debtor, to some extent creditor. Even if it were possible to work out a statistical average, based on the net position of each of us, it is more than doubtful that the "creditors" would prove on the average to be richer than the "debt- ors"; it is much more probable that the relationship would prove to be the other way around. Nothing but injustice, discouragement of work and thrift, encour- agement of speculation and gambling, and economic disruption can follow from an effort to swindle credi- tors at the expense of debtors by a constant lowering of the purchasing power of the monetary unit.

It is a mathematical truism, in fact, that once reason- ably full employment has been achieved, by any means, any further inflation is bound to injure as many people as it profits. The gainers gain at the expense of the losers. Everyone whose product rises in price more than the average must gain at the expense of everyone whose product rises less than the average. Assuming un- changed physical production, anyone whose wage or salary advances more than the average must do so at

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the expense of everyone whose wage or salary goes up less than the average.

And inflation typically brings about just such altera- tions in the relative position of economic groups. Infla- tion always starts from a particular point. If the gov- ernment prints more money to pay for war contracts, for example, the first beneficiaries are the government contractors. The next group of beneficiaries are the workers for these contractors. The third group is com- prised of the tradesmen whom these workers patronize. Those whose incomes go up first can buy goods while prices are still low, and so gain an advantage. But others must pay higher prices for the goods they buy before their own goods or services have risen by an equivalent amount. These are the losers. So inflation disturbs and disrupts all pre-existing economic relationships.

It may be thought that, in one important aspect, the redistribution of real income and wealth brought about by modem inflations is less unjust than in inflations of the past. Some of our present inflationists even regard this redistribution as beneficent. White speaks repeatedly of the fact that in the assignat inflation "everything was enormously inflated in price except the wages of labor''

Now though this result was intensified at that time by the Law of the Maximum (which contained a provi- sion that bound workers to their jobs by empowering the government to imprison those who refused to work), it appears to have been common to the older

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inflations. This result has been changed in our time by the existence of powerful unions, many of which are able to impose "escalator" clauses in their contracts which provide not only for automatic wage increases proportionate to increases in the oflBcial cost-of-living index, but for automatic "annual improvement" in- creases on top of these. Other unions are also able, by strikes and violence, to impose wage increases that go beyond both consumer-price increases and any increase in marginal labor productivity.

This has led some academic inflationists in our time to conclude that "creeping inflation probably prevents more injustice than it creates." "Labor," as they see it, is gaining by the process. And is not any inflation bene- ficent that gives more to the "poor" and to the "under- dog"?

Such a view is superficial and false. Its initial mis- take is to treat labor as one huge monolithic lump. Ac- tually, wages in each of scores of major industries differ sharply from each other. They are changed at different times and to different degrees. Within each industry there are scores of different classifications of workers. And there are millions of unorganized or salary workers whose compensation is fixed by individual bargains. Coercive union bargaining not only raises the wages of a minority of organized labor at the expense of the greater body of unorganized labor, but it raises the wages of the union workers in more strategic positions

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at the expense of the union workers in less strategic positions. It does this by forcing up the prices of the goods that the less-advantaged workers must buy, faster than they can force up their own wages. (Net profit margins, contrary to common opinion, constitute a minor element in prices. Corporate profits after taxes in 1958, for example, were only five per cent of the national income. ) It should be mathematically obvious that in the long run wages that are raised above the average must be raised at the expense of those that are raised less than the average. And experience shows that it is the workers who are already among the highest paid who are usually able by their stronger organiza- tion to increase their advantage at the further expense of the lower-paid.

Even this does not tell the full story. The unions that succeed in raising their wages beyond the point of marginal productivity do so only at the expense of bringing about unemployment in their own ranks. Those who retain their jobs at the new higher wage do so at the expense of their colleagues who have been dropped.

The effect of all this is to put still greater political pressure on the government to resort to still further money-and-credit inflation in order to raise prices to make "full employment" possible at the higher wage rates. But where there are extensive automatic wage- escalator clauses this becomes a wild accelerative spiral

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( like that following the practically universalized escala- tor wage clauses in Germany in 1923 ) that fails to cure the unemployment and leads only to catastrophe.

All this explains why, following the first stage of a recovery (assuming that this recovery occurs), there can be no further productive stimulation from inflation, but at best a redistribution of income and wealth. A point is soon reached, however, where there is a net profit in inflation for fewer and fewer people and a net loss for more and more, until we reach a point where the profit is taken out of inflation for nearly everybody. This is because the kind of production stimulated by inflation even at the beginning is an unbalanced pro- duction (owing to the money illusions that inflation creates ) and because inflation finally encourages merely malinvestment, thriftlessness, speculation, and gambling at the expense of production itself.

White points out in his account that, after the first stimulation following the early issue of new assignats, there were periods of prostration and renewed com- plaints of "shortage of money." The economic explana- tion of this is simple. The value of money, like the value of everything else, is determined chiefly by the quantity of it in existence. The more wheat there is, the less the value of an individual bushel of wheat; the more money in circulation, the lower the purchasing power of an individual unit.

But the value of the monetary unit does not fall, con-

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trary to a common assimiption, in exact proportion to the increase in the total quantity of money in circula- tion. When the quantity is at first increased, the indi- vidual unit of money commonly loses its value much more slowly than the quantity of money increases. This means that more goods are bought v^ith the increased money supply, and we get the familiar stimulation and recovery of the first stages of an inflation. But as the supply of money continues to be increased, a fear be- gins to spread that there will be still further increases. It begins to be believed that the value of the monetary unit is going to continue to fall— that it will be less next year than this year, less next month than this month. Once such a belief has taken hold, the decline in the value of the monetary unit is anticipated. The value of the monetary unit begins to fall faster than the supply is or can be increased.

The monetary managers are from then on in a neces- sarily losing battle. The more they increase the supply of money, the more public opinion anticipates still further increases. Prices then go up more than in pro- portion to the increase in the money supply. The new increased supplies of money therefore do a smaller volume of business and have a lower total value than the previous smaller supplies of money. Then comes the characteristic complaint, which White writes about, of a "shortage of money." The more desperately the monetary managers try to offset this shortage by further

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issues of bills, the more the pubhc fears for the value of the monetary unit, the more the monetary unit falls, and the greater the shortage of money becomes. White writes, on his last pages, of the '*law of accelerating is- sue and depreciation" This is the psychological and economic explanation of that law.

Inflation, in its final stages, always ends in prostra- tion, in what modem economists call a "stabilization crisis." The explanation of this stabilization crisis is not mysterious. During the inflation, as we have just seen, prices do not respond in simple proportionality to the increase in the money supply. Some prices race beyond this, anticipating a further inflation. Even if the infla- tion is halted at some point and no deflation sets in— that is, even if the increased supply of money is merely locked where it is and not reduced— the stabilization crisis sets in because these anticipatory prices collapse. This stabilization crisis, like the drunkard's hangover, is part of the price that must be paid for every inflation- ary orgy.

The story that Andrew D. White tells is complete in itself. It carries its own moral. But just as the French of 1790 had failed to learn the lessons of the inflation of seventy years before, in John Law's time, so the present-day world has failed to learn the lesson of the assignats.

Perhaps the study of other great inflations— of John

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Law's experiments with credit in France between 1716 and 1720; of the history of our own Continental cur- rency between 1775 and 1780; of the Greenbacks of our Civil War; of the great German inflation which culmi- nated in 1923— would help to underscore and impress that lesson. Must we, from this appalling and repeated record, draw once more the despairing conclusion that the only thing man learns from history is that man learns nothing from history? Or have we still time enough, and sense enough, and courage enough, to be guided by these dreadful lessons of the past?

Henry Hazlitt New York City March 1959

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FIAT MONEY INFLATION IN FRANCE

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.^

There was a general search for some short road to prosperity: ere long the idea was set afloat that the

»For this and subsequent footnotes, see pages 117-124.

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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 ac- knowledged as among the great bankers of Europe, but his was something more than financial abihty: he had a deep feeling of patriotism and a high sense of personal honor. The difiBculties in his way were great, but he steadily endeavored to keep France faithful to those principles in monetary affairs which the general experience of modem times had found the only path to national safety. As difiBculties arose, the National Assembly drew away from him, and soon came among the members renewed suggestions of paper money: ora- tors in public meetings, at the clubs, and in the As- sembly, 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 irredeem- able paper Necker contended as best he might. He knew well to what it always had led, even when sur- rounded by the most skillful guarantees. Among those who struggled to support ideas similar to his was Ber-

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gasse, 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 in- spired. Anyone today 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 knowl- edge 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 compro- mise; and during the last months of 1789 and the first months of 1790 came discussions in the National As- sembly 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 cur- rency, but of convenient size to be used in purchasing the Church lands; besides this, they were to bear inter- est and this would tempt holders to hoard them. The Assembly thus held back from issuing smaller obliga- tions.

Remembrances of the ruin which had come from the great issues of smaller currency at an earher day were still vivid. Yet the pressure toward a popular currency

• Editor's Note: The livre was the common coin of exchange in France at the beginning of the period White describes. The franc be- came the official monetary unit in 1795. with conversion at the rate ot 8i livres to 80 francs.

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ProBledod d« It Bibiicfeca

for universal use grew stronger and stronger. The fi- nance 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 citi- zens 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 in- stead of dragging ourselves along the tortuous and ob- scure paths of fragmentary loans." It concluded by rec- ommending 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

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think that the laws of Nature had changed since previ- ous 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 num- ber 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 pos- sible only under a despotism.''

M. de la Rochefoucauld gave his opinion that "the assignats will draw specie out of the coffers where it is now hoarded.'**

On the other hand, Cazales and Maury showed that the result could only be disastrous. Never, perhaps, did a political prophecy meet with more exact fulfillment in every line than the terrible picture drawn in one of Cazales' speeches in this debate. Still the current ran stronger and stronger; Petion made a brilliant oration in favor of the report, and Necker's influence and ex- perience 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, bish- ops' palaces, and conventual buildings in the towns; these formed between one-fourth and one-third of the

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entire real property of France, and amounted in value to at least two thousand million livres. By a few sweep- ing strokes all this became the property of the nation. Never, apparently, did a government secure a more solid basis for a great financial future.*

There were two special reasons why French states- men desired speedily to sell these lands. First, a finan- cial 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 neces- sities; 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 states- men of France, or the French people, were ignorant

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of the dangers in issuing irredeemable paper money. No matter how skillfully the bright side of such a cur- rency was exhibited, all thoughtful men in France re- membered its dark side. They knew too well, from that ruinous experience, seventy years before, in John Law's time, the di£Bculties 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, sal- aries, or wages; how securely it creates on the ruins of the prosperity of all men of meager means a class of debauched speculators, the most injurious class that a nation can harbor— more injurious, indeed, than profes- sional 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 immoral- ity. 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

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authors of the most frightful catastrophe France had then experienced.'^

It was no mere attempt at theatrical display, but a natural impulse, which led a thoughtful statesman, dur- ing 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 Siey^, Bailly, Necker, Mirabeau, Talleyrand, Du Pont de Ne- mours, and a multitude of others who, in various sci- ences 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 ir- resistible. 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 en-

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lightened, 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 vir- tual mortgage on a landed domain vastly greater in value than the entire issue; that, v^ith men like Bailly, Mirabeau, and Necker at her head, she could not com- mit 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 confis- cated property of the Church for its security. The de- liberations 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, Ca- zal^s, 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 in- justice 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 inter- est to the holder at three per cent. No irredeemable cur-

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rency 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 on 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.*

As speedily as possible the notes were put into circu- lation. Unlike those issued in John Law's time, they were engraved in the best style of the art. To stimu- late 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.^

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 un- certainty and from all ruinous results of the credit sys- tem." It foretold that this issue "would bring back into the public treasury, into commerce, and into all branch- es of industry strength, abundance, and prosperity.***

Some of the arguments in this address are worth re- calling, and, among them, the following: "Paper money

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is without inherent value unless it represents some spe- cial property. Without representing some special prop- erty it is inadmissible in trade to compete with a metal- lic 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 Na- tional 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."*

But the final declaration was, perhaps, the most in- teresting. It was as follows:

**These assignats, bearing interest as they do, will soon be considered better than the coin now hoarded, and will bring it out again into circulation." The King was also induced to issue a proclamation recommend- ing that his people receive this new money without ob- jection.

All this caused great joy. Among the various utter- ances 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

[33]

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 pre- dicted by Bergasse and others, M. Sarot solemnly lays his house, garden, and furniture upon the altar of his country and oflFers to sell them for paper money alone.

There were, indeed, some gainsayers. These especial- ly appeared among the clergy, who, naturally, abhorred the confiscation of Church property. Various eccle- siastics 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 threat- ening all persons handling the new money with eternal damnation. But the great majority of the French people, who had suffered ecclesiastical oppression so long, re- garded these utterances as the wriggling of a fish on the hook, and enjoyed the sport all the better.**

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; ordi- nary expenses were met, and, a considerable part of this paper money having thus been passed from the govern- ment into the hands of the people, trade increased and

[34]

all diflBculties seemed to vanish. The anxieties of Neck- er, the prophecies of Maury and Cazales seemed proven utterly futile. And, indeed, it is quite possible that, if the national authorities had stopped with this issue, few of the financial evils which afterwards arose would have been severely felt; the four hundred millions of paper money then issued would have simply discharged the function of a similar amount of specie. But soon there came another result: times grew less easy; by the end of September, within five months after the issue of the four hundred millions in assignats, the government had spent them and was again in distress."

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 be- gan 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 them- selves had heard in the debate on the first issue of as- signats less than six months before.

At that time the opponents of paper had prophesied that, once on the downward path of inflation, the na- tion 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 is- sues whenever they desired.

[35]

The condition of opinion in the Assembly was, there- fore, chaotic: a few schemers and dreamers were loud and outspoken for paper money; many of the more shal- low 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 var- ious conflicts he had shown not only oratorical boldness, but amazing foresight. As to his real opinion on an ir- redeemable 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 modem 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

[36]

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 govern- ments emitting an irredeemable currency in other lands, at other times, might in some way at this time be ward- ed off from France/^

The question was brought up by Montesquieu's re- port on August 27, 1790. This report favored, with evi- dent 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."^^

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

[37]

time; he declared that the French nation had now be- come enhghtened 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 suflBcient to cover the national debt, and that all the national lands be exposed for sale immediately, predicting that thus prosperity would re- turn to the nation and that all classes would find this additional issue of paper money a blessing."

[38]

This speech was frequently interrupted by applause; a unanimous vote ordered it printed, and copies were spread throughout France. The impulse given by it per- meated all subsequent discussion; Gouy arose and pro- posed to liquidate the national debt of twenty-four hun- dred millions— to use his own words— "by one single op- eration, grand, simple, magnificent."^^ 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 dema- gogy bloomed forth magnificently. He advocated an ap- peal 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 dis- course 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 in- exorably in France as elsewhere; he predicted that if this new issue were made, there would come a depreci- ation 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

[39]

supply a circulating medium which will protect public morals from corruption.""

Into this debate was brought a report by Necker. He was not, indeed, the great statesman whom France es- pecially 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 en- deavored 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 spumed as a man of the past; he sent in his resignation and left France forever." 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, Hubert, Camille Desmoulins, and the whole mass of demagogues so soon to follow them to the guillotine were especially jubilant."

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

[40]

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 re- lieving 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, evi- dent 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 Mira- beau 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."^^

Boutidoux, resorting to phrasemaking, called the as- signats "wn papier terre,'' or "land converted into paper." Boislandry answered vigorously and foretold evil re-

[41]

suits. 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 in- creases prices, disturbs values, alarms capital, dimin- ishes legitimate enterprise, and so decreases the de- mand 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.'''

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 evi-

[42]

dently 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 thou- sand livres in paper— in that fact is embedded the entire question; and on account of that fact the whole system fails.""

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 Citi- zen on the Issue of Assignats, in which he gave many specious reasons why the assignats could not be de- pressed, and spoke of the argument against them as "vile clamors of people bribed to affect public opinion.

[43]

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 conserva- tive of his modem 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 landhold- ers 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

[44]

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 rep- resents 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 prop- erty 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 cries, "I would rather have a mortgage on a garden than on a kingdom!"

Other arguments of his are more demagogical. He de- clares that the only interests affected will be those of bankers and capitahsts, 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 mahgnity, the issue of paper will show that gold is not necessary, and it will then come forth." But, as a whole, the speech was bril- liant; 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

[45]

calling Mirabeau or Talleyrand to advise upon a mone- tary policy, because they had shown boldness in danger and strength in conflict, was like summoning a prize fighter to mend a watch.

In vain did Maury show that, while the first issues of John Law's paper had brought prosperity, those that followed brought misery; in vain did he quote from a book published in John Law's time, showing that Law was at first considered a patriot and friend of human- ity; 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 pre- sent 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. Bamave, fol- lowing, 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 fer- vent 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 September 29, 1790, by a vote of 508 to 423, the deed was done; a bill was passed authorizing the issue of

[46]

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.^^

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 Revo- lution is the most interesting. It begins as follows: "Citizens, the deed is done. The assignats are the key- stone of the arch. It has just been happily put in posi- tion. 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 admir- ing 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 pre- paring for fruitfulness, will demand still another crea- tion of paper money."

[47]

France was now fully committed to a policy of infla- tion; and, if there had been any question of this before, all doubts were removed now by various acts very sig- nificant as showing the exceeding diflBculty 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 fool- ish, 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 sol- emn pledge that the circulation should not go above twelve hundred millions and that all assignats re- turned to the treasury for lands should immediately be burned." Within a short time there had been received into the treasury for lands one hundred sixty mil- lion livres in paper. By the terms of the previous acts this amount of paper ought to have been retired. In-

[48]

stead of this, under the plea of necessity, the greater part of it was reissued in the form of small notes.

There was, indeed, much excuse for new issues of small notes, for, under the theory that an issue of smaller notes would drive silver out of circulation, the smallest authorized assignat was for fifty livres. To sup- ply silver and copper and hold it in circulation every- thing 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 gov- ernment melting pot all silver and gold vessels not ab- solutely 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 sil- ver, and the ratio between the two precious metals was changed from 15^/2 to 1, to UV2 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 mil- lions 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.''

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

[49]

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 es- pecially 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."

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 falls 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 depre- ciation. The first inflation bills were passed with great diflBculty, 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

[50]

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 cur- rency, whether gold, paper, leather, or any other ma- terial, derives its efiBciency from the oflficial stamp it bears, and that, this being the case, a government may relieve itself of its debts and make itself rich and pros- perous simply by means of a printing press— funda- mentally 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 ar- ticles and pamphlets throughout the country, taking this doctrine for granted. These could hardly aflFect 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.^'

The great majority of Frenchmen now became des- perate optimists, declaring that inflation is prosperity. Throughout France there came temporary good feeling.

[51]

The nation was becoming inebriated with paper money. The good feehng 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 eco- nomics, but France had now gone beyond her thought- ful statesmen and taken refuge in unwavering optimism, giving any explanation of the new difiBculties rather than the right one. A leading member of the Assembly insisted, in an elaborate speech, that the cause of de- preciation was simply the want of knowledge and of confidence among the rural population and he sug- gested 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:

[52]

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 com- mon explanation was indicated in Prudhomme's news- paper, Les Revolutions de Paris, of January 17, 1791, which declared that coin "will keep rising until the people shall have hanged a broker.'* Another popular theory was that the Bourbon family were, in some mys- terious 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 emis- saries 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 ex- ports too little." As well might he explain the fact that, when oil is mingled with water, water sinks to the bot- tom, 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 gravi- tation; the superior currency had been withdrawn be-

[53]

cause an inferior currency could be used.^* Some efforts were made to remedy this. In the municipahty 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 un- patriotic 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 fol- lowed 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, pros- perity had steadily diminished. In spite of all the paper issues, commercial activity grew more and more spas- modic. 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 prosper- ity 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 stimu- lated production and created a great activity in manu- factures, 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

[54]

the Edict of Nantes, by which rehgious bigotry had driven out of the kingdom thousands of its most skill- ful 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 an- other stopped. At one town, Lodeve, five thousand workmen were discharged from the cloth manufactor- ies. Every cause except the right one was assigned for diis. Heavy duties were put upon foreign goods; every- thing that tariffs and customhouses 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.'' 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

[55]

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 prosper- ity, as, for instance, a splendid improvement in English agriculture was undoubtedly owing to the emancipa- tion 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 vio- lent 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 ac- tivity of manufactures.

"But, for the moment, the French manufacturers de- rived great advantage from this state of things. As their products could be so cheaply paid for, orders poured in

[56]

from foreign countries to such a degree that it was often diflBcult for the manufacturers to satisfy their customers. It is easy to see that prosperity of this kind must very soon find its hmit. . . . When a further fall in the assignats took place, this prosperity would neces- sarily collapse and be succeeded by a crisis all the more destructive the more deeply men had engaged in spec- ulation under the influence of the first favorable pros- pects."**

Thus came a collapse in manufacturing and com- merce, 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."

All this breaking down of the manufactures and com- merce of the nation made fearful inroads on the greater fortunes; but upon the lesser, and upon the little prop- erties 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

[57]

embark their means in business. Enterprise received a mortal blow. Demand for labor was still further dimin- ished; and here came a new cause for 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 cir- cumstances. With the masses of the people, the pur- chase 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. "^^

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

[58]

the French people. The French are naturally thrifty; but, with such masses of money and with such uncer- tainty 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 specula- tion and gambling. With the plethora of paper currency in 1791 appeared the first evidences of that cancerous disease which always follows large issues of irredeem- able currency— a disease more permanently injurious to a nation than war, pestilence, or famine. For at the great metropolitan centers grew a luxurious, specula- tive stock-gambling body, which, like a mahgnant tumor, absorbed into itself the strength of the nation and sent out its cancerous fibers to the remotest ham- lets. 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 hving.

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 stockjobbing, 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 circum- stances, necessary?" The author also speaks of these stock gamblers as using the most insidious means to

[59]

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 sufiBcient 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.^^

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 pro- ducing classes of the country, though having in their possession more and more currency, grew lean. In the schemes and speculations put forth by stockjobbers 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 dis- tricts, which had employed a great number of work- men.

In the leading French cities now arose a luxury and license which was a greater evil even than the plunder- ing 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 pros- pect for a country when its rural population was changed into a great band of gamblers!'***

Nor was this reckless and corrupt spirit confined to

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businessmen; 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 imprison- ment and even death to establish constitutional govern- ment, 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 reg- ularly paid servant of the Royal court.^^

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 ex- ample. 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 de- press securities for stockjobbing 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 pro-

[61]

mote the purposes of certain stockjobbers. It is some comfort to know that nearly all concerned were guillo- tined for it.**

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

[62]

FIAT MONEY INFLATION IN FRANCE

Even worse than this was the breaking down of the morals of the country at large, resulting from the sud- den building up of ostentatious wealth in a few large cities, and from the gambling, speculative spirit spread- ing from these to the small towns and rural districts. From this was developed an even more disgraceful re- sult—the decay of a true sense of national good faith. The patriotism which the fear of the absolute mon- archy, 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, stockjobbing 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

[63]

and a cause of future evils. This outgrowth was a vast debtor class in the nation, directly interested in the de- preciation 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 re- quired 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 Assem- bly—first in its seats and later in more conspicuous places of public trust. Before long, the debtor class be- came a powerful body extending through all ranks of society. From the stock gambler who sat in the Assem- bly to the small land speculator in the rural districts; from the sleek inventor of canards on the Paris Ex- change to the lying stockjobber in the market town, all pressed vigorously for new issues of paper; all were

[64]

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 De- cember 1791, a report was made in the Legislative As- sembly in favor of yet another great issue of three hun- dred 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 stockjobbing is carried on with such fury, give it new power by adding so much more to the circulation?" But such high con- siderations 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 tri-

[65]

bunal and disquiet France? Fear nothing; your cur- rency 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;" 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 lim- ited the amount of circulation to fourteen hundred mil- lions, 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 de- clared that, after all, a depreciated currency is a bless-

[66]

ing; that gold and silver form an unsatisfactory stand- ard 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 there- to 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 enlight- ened inhabitants of France at the close of the eight- eenth 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 sur- face in the debates on the various new issues.^^

Within four months came another report to the As- sembly as ingenious as those preceding. It declared: **Your committee are thoroughly persuaded that the amount of the circulating medium before the Revolu- tion 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 miUion assignats do the work of two thousand millions of specie." The re- port foretells further increase in prices, but by some curious jugglery reaches a conclusion favorable to further inflation. Despite these encouragements the as-

[67]

signats nominally worth 100 livres had fallen, at the beginning of February 1792, to about 60 livres, and during that month fell to 53 livres.^®

In March, Claviere became Minister of Finance. He was especially proud of his share in the invention and advocacy of the assignats, and now pressed their crea- tion more vigorously than ever; and on April 30, 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 credi- tors 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 battle- fields.

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

[68]

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 stop- page 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 ex- ample can be seen of the truth uttered by Daniel Web- ster, that "of all the contrivances for cheating the labor- ing classes of mankind, none has been more effective than that which deludes them with paper money."^"

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

When it is remembered that there was little business to do and that the purchasing power of the livre or franc, when judged by the staple products of the coun- try, 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 circu- lation and more and more parchment notes from twenty sous to five were issued, and at last pieces of one sou,

[69]

of half a sou, and even of one-quarter of a sou were put in circulation.*^

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 esti- mate in 1793 made the value of these estates three bil- lions 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 Na- tional 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 en- gaged 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."

The consequences of these overissues now began to be more painfully evident to the people at large. Ar-

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tides of common consumption became enormously dear and prices were constantly rising. Orators in the Legislative Assembly, clubs, local meetings, and else- where now endeavored to enlighten people by assign- ing 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 in- trigues 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."

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 vic- tories and coruscations of oratory gave momentary con- fidence so that in December 1793, they rose above 50. But despite these fluctuations the downward tendency soon became more rapid than ever."

The washerwomen of Paris, finding soap so dear that they could hardly purchase it, insisted that all the mer-

[71]

chants who were endeavoring to save something of their Httle property by refusing to sell their goods for the w^retched currency with which France was flooded, should be punished with death; the women of the mar- kets 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 hun- dred million francs, to buy bread. Marat declared loud- ly that the people, by hanging shopkeepers and plun- dering stores, could easily remove the trouble.

The result was that on February 28, 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 every- thing on which they could lay their hands— cloth, cloth- ing, 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 lux- uriantly. 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.''

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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 preeminence, and first of the three v^^as the Forced Loan.

In view of the fact that the well-to-do citizens were thought to be lukewaiTn in their support of the poli- ticians 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 activ- ity of the guillotine. The results inside were new meas- ures 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 in- comes of ten thousand francs, and upon all unmarried men with incomes of six thousand francs. It was calcu- lated that these would bring into the treasury a thou- sand millions of francs.

But a difficulty was found. So many of the rich had fled 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 in- comes as low as one thousand francs-or, say, two hun-

[73]

dred 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."

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 repudia- tion 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 all that earlier issue. In vain did sundry

[74]

more thoughtful members of the Convention plead that this paper money, amounting to five hundred fifty- eight miUions of francs, bore the solemn guarantee of the nation, as well as of the King; the current was irre- sistible. All that Cambon, the great leader of finance at that time, could secure was a clause claiming to pro- tect 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 no- bility. 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 July 31, 1793, yet its futility was apparent in less than two months, when the Convention decreed that there should be is- sued 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.*^

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

[75]

of the steady rise in prices of the necessaries of hfe, had proposed a scheme by which these prices should be estabHshed 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 highhanded, it was not careless. Even statesmen of the greatest strength, hav- ing 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 states- men of that time a masterly solution of the whole diflB- culty.*^

First, the price of each article of necessity was to be fixed at one and one-third its price in 1790. Secondly, all transportation was to be added at a fixed rate per league. Thirdly, five per cent was to be added for the profit of the wholesaler. Fourthly, ten per cent was to be added for the profit of the retailer. Nothing could look more reasonable. Great was the jubilation. The report was presented and supported by Barrere— "the tiger monkey"— then in all the glory of his great ora- tions: now best known from his portrait by Macaulay. Nothing could withstand Barrere's eloquence. He in- sisted that France had been suffering from a "Monarch-

[76]

ical commerce which only sought wealth," while what she needed and what she was now to receive was a **Republican commerce—a commerce of moderate prof- its 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 commer- cial classes may arbitrarily take advantage.*'**

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.*^

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 mechandise 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 there-

[77]

fore could not sell such goods without ruin. The result was that very many went out of business, and the re- mainder 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. Manufac- tures were very generally crippled and frequently de- stroyed, and agriculture was fearfully depressed. To detect goods concealed by farmers and shopkeepers, a spy system was established with a reward to the in- former 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 anyone 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 afiFord 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 hfe.**

Involved in all these perplexities, the Convention tried to cut the Gordian knot. It decreed that any per- son selling gold or silver coin, or making any difiFerence in any transaction between paper and specie, should

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be imprisoned in irons for six years; that anyone who refused to accept a payment in assignats, or accepted assignats at a discount, should pay a fine of three thou- sand francs; and that anyone committing this crime a second time should pay a fine of six thousand francs and suffer imprisonment twenty years in irons. Later, on September 8, 1793, the penalty for such offenses was made death, with confiscation of the criminaFs prop- erty, and a reward was offered to any person informing the authorities regarding any such criminal transaction. To reach the climax of ferocity, the Convention de- creed, in May 1794, that the death penalty should be inflicted on any person convicted of "having asked, be- fore a bargain was concluded, in what money payment was to be made." Nor was this all. The great finance minister, Cambon, soon saw that the worst enemies of his policy were gold and silver. Therefore it was that, under his lead, the Convention closed the Exchange and finally, on November 13, 1793, under terrifying penal- ties, suppressed all commerce in the precious metals. About a year later came the abolition of the Maximum itself."

It is easily seen that these Maximum laws were per- fectly logical. Whenever any nation intrusts to its legis- lators the issue of a currency not based on the idea of redemption in standard coin recognized in the com- merce of civilized nations, it intrusts to them the pow-

[79]

er to raise or depress the value of every article in the possession of every citizen. Louis XIV had claimed that all property in France was his own, and that what pri- vate persons held was as much his as if it were in his coflFers. But even this assimiption is exceeded by the confiscating power exercised in a country, where, in- stead of leaving values to be measured by a standard common to the whole world, they are left to be de- pressed or raised at the whim, caprice, or interest of a body of legislators. When this power is given, the power of fixing prices is inevitably included in it."

It may be said that these measures were made neces- sary 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 contribu- tions were levied upon the subjugated countries to sup- port 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 circu- lating medium of an entire nation; keeping all values in fluctuation; discouraging enterprise; paralyzing energy; undermining sobriety; obliterating thrift; pro- moting 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

[80]

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 seUing the national real estate was like using the same implement for an oyster knife and a razor.^*

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 difiBcult to ex- amine; the French national real estate was near these centers— even in them— and easy to examine. Our na- tional real estate was unimproved and unproductive; theirs was improved and productive, its average produc- tiveness in market in ordinary times being from four to five per cent."

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 confi- dence in the stability of the new government during the greater part of the Revolution. There were disbe- hevers in the security of the assignats just as there were

[81]

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 gov- ernment lands as any people can ever have in large is- sues of government bonds. Indeed, it is certain that they had far more confidence in their lands as a secur- ity than modem nations can usually have in large is- sues of bonds obtained by payments of irredeemable paper. One simple fact, as stated by John Stuart MiD, which made assignats difiBcult to convert into real es- tate, 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 gov- ernment 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

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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 nat- ural 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 httle revival of business with the usual increase of credit.^''

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 pubhc 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 as- semblies 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 thou- sand miUions of assignats, and, of these, over twelve

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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 al- lied nations with which she was then waging a desper- ate war. As patriotism it was sublime; as finance it was deadly.^

Everything was tried. Very elaborately he devised a funding scheme which, taken in connection with his system of issues, was in eflFect 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 is- sued. All in vain. The ofiBcial tables of depreciation show that the assignats continued to fall. A forced loan, caUing in a billion of these, checked this fall, but only for a moment. The "interconvertibility scheme** be tween currency and bonds failed as dismally as the "interconvertibility scheme** between currency and land had failed."

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

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land to be mortgaged for the security of paper money.

All this vast chapter in financial folly is sometimes re- ferred 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 set- ting the fiat money system going is true; that specula- tion 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 exper- iments, which seem to us so monstrous, in order to res- cue themselves and their country from the flood which was sweeping everything to financial ruin were univer- sally 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 un- derlying 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

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throughout the nation followed this example. In obedi- ence 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 punish- able with death."

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 con- trary, 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 pro- visions 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 max- imum price for produce. But this price, large as it seemed, soon fell below the real value of produce; many

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of the farmers, therefore, raised less produce or re- frained from bringing what they had to market.^' 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.^°

The issues of paper money continued. Toward the end of 1794 seven thousand millions in assignats were in circulation." By the end of May 1795, the circula- tion 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.^^ But, curiously enough, while this depreciation was rap- idly going on, as at various other periods when depre- ciation 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 ex- ceedingly brisk trade in all kinds of permanent prop- erty. Whatever articles of permanent value certain needy people were willing to sell, certain cunning people were wiUing 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

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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 busi- ness simply indicated the disease. It was simply legal robbery of the more enthusiastic and trusting by the more coldhearted and keen. It was the "unloading" of the assignats upon the mass of the people."

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' impris- onment in chains upon persons twice convicted of buy- ing 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 circum- vent 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 com- pass. On August 1, 1795, this gold louis of 25 francs was worth in paper, 920 francs; on September 1, 1,200 francs; on November 1, 2,600 francs; on December 1, 3,050 francs. In February 1796, it was worth 7,200

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francs or one franc in gold was worth 288 francs in paper. Prices of all commodities went up nearly in pro- portion."

The writings of this period give curious details. Thi- baudeau, 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." Everything was enormously inflated in price except the wages of labor. As manu- facturers 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 oflBcial "tables of depreciation" to be used in making equitable settlements of debts, but all such machinery proved futile. On May 18, 1796, a young man complained to the National Convention that

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his elder brother, who had been acting as administra- tor 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."

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 circu- lation, this law declared that, in payment of debts, one- quarter should be added to the amount originally bor- rowed for every five hundred millions added to the circulation. In obedience to this law a man who bor- rowed two thousand francs when there were two bil- lions 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 thou- sand francs before the emissions of paper reached their final amount. This brought new evils, worse, if possible, than the old."

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 ex- clusively in the hands of the working classes, employees

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and men of small means, whose property was not large enough to invest in stores of goods or national lands.** 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 futiu-e 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 ac- cumulate or save for so uncertain a future."*®

This system in finance was accompanied by a system in pohtics no less startling, and each system tended to aggravate the other. The wild radicals, having sent to the guillotine first all the Royahsts and next all the lead- ing Repubhcans they could entrap, the various factions began sending each other to the same destination: He- bertists, 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

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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 with- out warrant of law, and in greater sums than ever. Com- plaints were made that the army 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 httle later four thousand miUions, until there had been put forth over thirty-five thousand millions.

The purchasing power of this paper having now be- come almost nothing, it was decreed, on December 22, 1795, that the whole amount issued should be limited to forty thousand millions, including all that had previ- ously 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 February 18, 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

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issued in less than six years by the Revolutionary Gov- ernment 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 catas- trophe there were in circulation close upon forty thou- sand 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 subservi- ent to these to control a government.^"

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I

FIAT MONEY INFLATION IN FRANCE

The first new expedient of the Directory was to se- cure a forced loan of six hundred milhon francs from the wealthier classes; but this was found fruitless. Om- inous 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 pro- posed; but capitalists were loath to embark in banking while the howls of the mob against all who had any- thing especially to do with money resounded in every city. At last the Directory bethought themselves of an- other 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 Con- federacy"—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

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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 anyone oflFering any amount of the mandats could at once take possession of government lands, the price of the lands to be de- termined 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 situa- tion was the fact that the government, pressed as it was by demands of all sorts, continued to issue the old as- signats 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 as- signats 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;

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just as it failed under our own Confederation in 1781; just as it failed under the Southern Confederacy during our Civil War."

To sustain this new currency the government resorted to every method that ingenuity could devise. Pamphlets suited to people of every capacity were published ex- plaining its advantages. Never was there more skillful pu£Bng. 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."

The old plan of penal measures was again pressed. Monot led oflF 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 oflPense, to four years in irons." It was also decreed that those who refused to receive the

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mandats should be fined— the first time, the exact sum which they refused; 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 con- gresses/*

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 be- ginning 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 16 another decree seemed to show that the authorities despaired of regu- lating 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

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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 as- signats 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/* 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 govern- ment should think best.

As to the bonds which the creditors of the nation were thus forced to take, they sank rapidly, as the as- signats 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 man- dats had been virtually worth nothing.

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So ended the reign of paper money in France. The twenty-five hundred miUions 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 Vi dollars

For a pound of soap 18 cents 8 dollars

For d pound of candles 18 cents 8 dollars

For one cabbage 8 cents 5Vi 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 moder- ate compared with those which were reached before the close of that year and during the year following. Perfectly authentic examples were such as the follow- ing:

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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 es- teemed 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."

From this general distress arising from the develop- ment 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, de- bauched, luxurious, speculator, contractor, and stock- gambler class, had risen above the ruins of the multi- tudes of smaller fortunes. Tallien, one of the worst demagogue "reformers," and a certain number of men hke him, had been skillful enough to become million- aires, while their dupes, who had clamored for issues of paper money, had become paupers.

The luxury and extravagance of the currency gamb- lers and their families form one of the most significant features in any picture of the social condition of that period."

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 Ma-

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dame Roland 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 close- ly 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."

The contrast between these gay creatures of the Di- rectory period and the people at large was striking. In- deed, much as the vast majority of the wealthy classes suflFered from impoverishment, the laboring classes, sal- aried 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 sub- sist mainly on daily government rations of bread at the rate of one pound per person. This was frequently un- fit 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 provi- sions could not be bought for paper money at any price.^*

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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 coun- terfeits 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 Brit- tany 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 ex- ceedingly difficult, even for experts; for the vast major- ity of the people it was impossible.

Nor was this all. At various times the insurgent roy- alists 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 RoC and large bodies of the population in the insurgent dis- tricts were forced to take these. Even as late as 1799 these notes continued to appear. ^^

The financial agony was prolonged somewhat by at- tempts to secure funds by still another "forced loan,"

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and other discredited measures; but when all was over with paper money, specie began to reappear— first in suflBcient sums to do the small amount of business which remained after the collapse. Then as the business de- mand 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 gradu- ally as it was wan ted. **

Nothing could better exemplify the saying of one of the most shrewd of modem statesmen that "there will always be money."'*

But though there soon came a degree of prosperity— as compared with the distress during the paper-money orgy— convalescence was slow. The acute sufiFering from the wreck and ruin brought by assignats, mandats, and other paper currency in process of repudiation lasted nearly ten years, but the period of recovery lasted long- er 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 threw away

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millions of lives for the Empire, to be added to the mil- lions which had been sacrificed by the Revolution.*^

Such, briefly sketched in its leading features, is the history of the most skillful, vigorous, and persistent at- tempt ever made to substitute for natural laws in fi- nance the ability of legislative bodies, and, for a stand- ard of value recognized throughout the world, a na- tional 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."

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 busi- ness. Then arose the clamor for more paper money. At first, new issues were made with great diflficulty; but, the dike once broken, the current of irredeemable cur- rency 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 dema-

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gogues 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 influ- ence to depreciate more and more the currency in which its debts were to be paid."

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 re- vival 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 pur- chasing 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 de- preciation 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,

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under the general stimulus, lagged behind. Under the universal doubt and discouragement, commerce and manufactures were checked or destroyed. As a conse- quence, 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, cloth- ing, 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 de- lighted 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 feel- ing of insecurity spread throughout the country; enter- prise 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 reluc- tant 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 ag- gravated the disease. The most ingenious evasions of

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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.** 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 eflFect was the moral development. Out of the inflation of prices grew a speculating class; and, in the complete uncer- tainty as to the future, all business became a game of chance, and all businessmen, gamblers. In city centers came a quick growth of stockjobbers 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 ex- penditure and present enjoyment. So came upon the nation the obliteration of thrift. In^UHs mania for yield- ing to present enjoyment rather than providing for fu- ture comfort were the seeds of new growths of wretch- edness: luxury, senseless and extravagant, set in. This,

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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 fash- ions in private and official business, women set fashions of extravagance in dress and living that added to the incentives to corruption. Faith in moral considerations, or even in good impulses, yielded to general distrust. National honor was thought a fiction cherished only by hypocrites. Patriotism was eaten out by cynicism.

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

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

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

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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 re- frain from the second; to refrain from the third and those following was practically impossible.

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

It ended in the complete financial, moral, and politi- cal 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 gov- ernment was bankrupt; an immense debt was unpaid. The further collection of taxes seemed impossible; the assessments were in hopeless confusion. War was going on in the East, on the Rhine, and in Italy, and civil war, in La Vendee. All the armies had long been unpaid, and the largest loan that could for the moment be effected was for a sum hardly meeting the expenses of the gov- ernment for a single day. At the first cabinet council Bonaparte was asked what he intended to do. He re- plied, "I will pay cash or pay nothing." From this time

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he conducted all his operations on this basis. He ar- ranged the assessments, funded the debt, and made payments in cash; and from this time-during all the campaigns of Marengo, Austerhtz, Jena, Eylau, Fried- land, 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 finan- cially, 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 inva- sion of the Alh'es, with war on her own soil, with a change of dynasty, and with heavy expenses for war and indemnities, France, on a specie basis, experienced no severe financial distress.

If we glance at the financial history of France, dur- ing the Franco-Prussian War, and the communist strug- gle 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 straight- forward way, and by methods sanctioned by the world's most costly experience, rather than by yielding to

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dreamers, theorists, phrase-mongers, declaimers, schem- ers, speculators, or to that sort of "Reform" which is "the last refuge of a scoundrel.""

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

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CHRONOLOGICAL TABLE

May 5

1789

An attempt to cure the bank- rupt state of the pubHc treasury caused Louis XVI to call a meet- ing of the States-General, which later amalgamated into the sin- gle-chamber National Assembly

Assignats in

circulation

(millions of

livres or

francs)

July 14	Fall of the Bastille, after several days of rioting in Paris
0C1X)BER 5	Declaration of the Rights of Man adopted by Assembly
November 2	Confiscation of church property
	1790
April	First issue of paper assignats, 400 million livres
September 29	Second issue, 800 million
	1791
June 19	Third issue, 600 million
Sefiember	New Constitution; National As- sembly dissolved and replaced by Legislative Assembly
December 17	Fourth issue, 300 milHon
	[113]

400 1,200

1,800

2,100

Assignats in circulation (millions of 77QO livres or

^'^^ francs)

April 30 Fifth issue, 300 million 2,400

France at war with Russia and Austria

June-August Riots in Paris; King dethroned

and royal family imprisoned; Revolutionary Commune takes power; more assignats 2,700

September Election of National Convention

replacing Legislative Assembly; Monarchy abolished; govern- ment by committees; political corruption

December 14 Total assignats issued to date 3,400 million; 600 million de- stroyed 2,800

1793

January 21 Louis XVI beheaded

January 31 More assignats

February-March Formation of Committee of Public Safety; rioting in Paris over high prices; Revolutionary Tribunal established; Reign of Terror begins

May 3 Price control on grains

June 22 Forced Loan decreed— a pro-

gressive income tax

August 1 Trading in specie prohibited

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3,000

Assignats in

circulation

(millions of

livres or

francs)

September 29 Law of the Maximum-price control extended to all food

October 16 Marie Antoinette beheaded—

Over 3,000 million new assig- nats issued during the year, of which 1,200 million entered cir- culation 4,200

1794

June 4 Robespierre elected president

of National Convention; thou- sands executed by decree of Revolutionary Tribunal

July 27 Robespierre beheaded; end of

Reign of Terror

December Law of Maximum repealed

Assignats in circulation at end

of year 7,000

1795

May 31 Assignats in circulation 14,000

More rioting; business and trade disrupted; shortages persist; un- certain government

July 31 Assignats in circulation 14,000

September 23 New Constitution adopted and new government formed— the Directory 35,000

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February 18

August

February

1796

Machinery, plates, and paper for printing assignats destroyed First issue of new paper notes— mandats— to displace assignats at 30:1

Mandats worth only 3 per cent of face value; about 2,500 mil- lion mandats issued altogether

1797

Legal tender qualities with- drawn from both assignats and mandats, which became worth- less after May

1798

Arbitrary government by the Directory; business disrupted; people discontented; Napoleon gaining military victories abroad

Assignats in

circulation

(millions of

livres or

francs)

40,000

1799

November 10 Napoleon comes into power— "to save the Republic"

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FOOTNOTES

I. For proof that the financial situation of France at that time was by no means hopeless, see Storch, Economic Politique, vol. iv., p. 159.

s. See Moniteur, sitting of April 10, 1790.

3. Ibid., sitting of April 15, 1790.

4. For details of this struggle, see Buchez and Roux, Histoire parle- mentaire de la R&volution franfaise, 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 While Collection of the Cornell University Library. For Bergasse's pamphlet and a mass of simi- lar publications, see the same collection. For the effect produced by them, see Challamel, Les Frartfais sous la Rhjolution; also De Gon- court, Lm Sociiti franfaise pendant la. R&uolution, etc. For the Report referred to, see Levasseur, Histoire des classes ouvrieres et de I'industrie en France de tj8g h 18 jo, Paris, 1905, 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, vol. ii, chap. I, who gives the valuation as "about four milliards." Von Sybel, Geschichte der Revolutionzeit, gives it as two milliards and Briand, La separation, etc., agrees with him. See also De Nervo, Finances franfaises, vol. ii, pp. 236- 240; also Alison, History of Europe, vol. i.

5. For striking pictures of this feeling among the younger genera- tion of Frenchmen, see Challamel, Sur la Revolution, p. 305. For gen- eral history of John Law's paper money, see Henri Martin, Histoire de France: also Blanqui, Histoire de I'iconomie politique, vol. ii, pp. 65-87; also Senior on Paper Money, sec. iii, Pt. 1; also Thiers, Histoire de Law; also Levasseur, op. cit., vol. i, chap. VL Several specimens of John Law's paper currency are to be found in the White Collection in the Cornell University Library — some numbered with enormous figures.

6. See Buchez and Roux, Histoire parle mentaire, 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, Economic Politique, vol. iv, p. 160.

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7- 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 Dewarmin, Cent ans de numismatique fran- gaise, vol. i, passim.

8. See Addresse de I'Assemblee nationale sur les emissions d'assignats monnaies, p. 5.

9. Ibid., p. 10.

10. For Sarot, see Lettre de M. Sarot, Paris, April 19, 1790. As to the sermon referred to, see Levasseur, as above, vol. i, p. 136.

11. Von Sybel, History of the French Revolution, vol. i, p. S52; also Levasseur, as above, pp. 137 and following.

12. For Mirabeau's real opinion on irredeemable pap)er, see his letter to Cerutti, in a leading article of the Moniteur; also Mdmoires de Mirabeau, vol. vii, pp. 23, 24, and elsewhere. For his pungent remarks above quoted, see Levasseur, op. cit., vol. i, p. 118.

13. See Moniteur, August 27, 1790.

14. Moniteur, August 28, 1790; also Levasseur, as above, pp. 159, et seq.

15. Par une seule operation, grande, simple, magnifique. Sec Moni- teur. The whole sounds curiously like the proposals of the Greenback- ers, regarding the American debt, some years since.

16. Moniteur, August 29, 1790.

17. See Lacretelle, Histoire de France pendant le Will siicle, vol. viii, pp. 84-87; also Thiers and Mignet.

18. See Hatin, Histoire de la Presse en France, vol. v and vi.

19. See Moniteur, Sept. 5, 6, and ao, 1790.

20. See Levasseur, vol. i, p. 142.

21. See speech in Moniteur; also in Appendix to Thiers' History of the French Revolution.

22. See Levasseur, Classes ouvri^res, etc., vol. i, p. 149.

23. See Levasseur, pp. 151 et seq. Various examples of these "confi- dence bills" are to be seen in the Cornell University Library.

24. See Levasseur, vol. i, pp. 155-156.

25. See Von Sybel, History of the Revolution, vol. i, p. 265; also Levasseur, as above, vol. i, pp. 152-160.

26. For Turgot's argument against "fiat money" theory, sec A. D. White, Seven Great Statesmen in the Warfare of Humanity with Un- reason, article on Turgot, pp. 169, et seq.

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27- See De GoncOurt, SocUtS franfaise, for other explanations; Les R&volutions de Paris, vol. ii, p. 216; Challamel, Les Frangais sous la Rhfolution; Senior, On Some Effects of Paper Money, p. 82; Biichez and Roux, Histoire parlementaire, etc., vol. x, p. 216; Aulard, Paris pendant la reaction thermidorienne, passim, and especially Rapport du bureau de surveillance, vol. ii, pp. 562, et seq. (Dec. 4-24, 1795).

28. 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.

29. See De Goncourt, Sociiti frangaise, p. 214.

30. Sec Von Sybel, History of the French Revolution, vol. i, pp. 281, 283.

31. 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 for- eign exchanges, see McLeod on Banking, p. 186.

32. See Louis Blanc, Histoire de la R&uolution frangaise, tome xii, p. 113.

33. See Extrait du registre des deliberations de la section de la bibli- othique. May 3. 1791, pp. 4, 5.

34. Von Sybel, vol. i, p. 273.

35. For general account, see Thiers' Revolution, chap, xiv; also Lacretelle, vol. viii, p. 109; also Memoirs of Mallet du Pan. For a good account of the intrigues between the court and Mirabeau and of the prices paid him, see Reeve, Democracy and Monarchy in France, vol. i, pp. 213220. For a very striking caricature published after the iron chest in the Tuileries was opened and the evidences of bribery of Mirabeau fully revealed, see Challamel, Musee, etc., vol. i, p. 341. Mira- beau 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.

36. Thiers, chap. ix.

37. For this and other evidences of steady decline in the purchasing power of the assignats, see Caron, Tableaux de Depreciation du papier- monnaie, Paris, 1909, p. 386.

38. See especially Discours de Fabre d'Eglantine, in Moniteur for August II, 1793; also debate in Moniteur of September 15, 1793; also Prudhomme's Revolutions de Paris. For arguments of much the same tenor, see vast numbers of pamphlets, newspaper articles, and speeches

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during the "Greenback Craze" — and the craze for unlimited coinage of silver — in the United States.

39. See Caron, Tableaux de Depreciation, as above, p. 386.

40. Von Sybel, vol. i, pp. 509, 510, 515; also Villeneuve Bargemont, Histoire de Veconomie politique, vol. ii, p. 213.

41. As to the purchasing power of money at that time, see Arthur Young, Travels in France during the Years ijSj, ijSS, and 1789. For notices of the small currency with examples of satirical verses written regarding it, see Challamel, Les Frangais sous la R&uolution, 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, sec Levasseur, p. 180.

42. See Levasseur, vol. i, p. 176.

43. For Chaumette's brilliant display of fictitious reasons for the de- cline, see Thiers, Shobel's translation, published by Bentley, vol. iii, p. 248.

44. For these fluctuations, see Caron. as above, p. 387.

45. One of the Forced Loan certificates will be found in the While Collection in the Library of Cornell University.

46. 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 scries perfectly photographed in the same collection, Dewarmin, Cent ans de numismatique franfaise, vol. i, pp. 143-165.

47. For statements showing the distress and disorder that forced the Convention to establish the "Maximum," see Levasseur, vol. i, pp. 188-

48. See Levasseur, as above, vol. i, pp. 195-225.

49. See specimens of these tickets in the White Collection in the Cornell Library.

50. For these condemnations to the guillotine, see the officially pub- lished trials and also the lists of the condemned, in the White Collec- tion, also the lists given daily in the Moniteur. For the spy system, sec Levasseur, vol. i, p. 194.

51. 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

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French Revolution, vol. iii, pp. ii, 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, Le Nouveau Paris, edition of 1800, chapter XLIV.

52. For a summary of the report of the Committee, with list of ar- ticles embraced under it, and for various interesting details, see Ville- neuve Bargemont, Histoire de I'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 Evolution franfaise, tome x, p. 144. For Louis XIV'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.

53. See Du Pom's arguments, as given by Levasseur.

54. Louis Blanc calls attention to this very fact in showing the supe- riority of the French assignats to the old American Continental cur- rency. See his Histoire de la Revolution frangaise, tome xii, p. gS.

55. See Sumner, as above, p. 220.

56. See Levasseur, as above, vol. i, p. 178.

57. See Cambon's Report, Aug. 15, 1793, pp. 49-60; also. Decree of Aug. 24, 179), sec. 51, chapters XCVI — CIIL Also, Tableaux de la DiprMation de papier monnaie dans le department de la Seine.

58. For the example of Metz and other authorities, see Levasseur, as above, vol. i, p. 180.

59. Sec Von Sybel, vol. iii, p. 173.

60. 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.

61. See Von Sybel, vol. iv, p. 231.

62. See Von Sybel, vol. iv, p. 330; also tables of depreciation in Moniteur; also official reports in the White Collection; also Caron's Tableaux, etc.

63. For a lifelike sketch of the way in which these exchanges of assignats for valuable property went on at periods of the rapid depre- ciation of paper, see Challamel, Les Frangais sous la Revolution, p. 309; also see Economic Politique.

64. 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

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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.

65. See Memoires de Tribaudeau, vol. ii, p. 26, also Mercier, Le Nouveau Paris, vol. ii, p. 90; for curious example of the scales of de- preciation, see the White Collection. See also extended table of com- parative values in 1790 and 1795. See Levasseur, as above, vol. i, pp. 223-224.

66. For a striking similar case in our own country, see Sumner, History of American Currency, p. 47.

67. See Villeneuve Bargemont, Histoire de I'iconomie politique, vol. ii, p. 229.

68. See Von Sybel, vol. iv, pp. 337, 338. See also for confirmation Challamel, Histoire Musie, 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.

69. See Von Sybel, vol. iv, p. 222.

70. See especially Levasseur, Histoire des classes ouvriires, etc., vol. i, pp. 219, 230, and elsewhere; also De Nervo, Finance franfaise, p. 280; also Stourm, as already cited. The exact amount of assignats in circula- tion at the final suppression is given by Derwarmin, (vol. i, p. 189), as 39'999'945'428 livres or francs.

71. For details of the mandat system very thoroughly given, sec 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 Derwarmin, 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, sec Sumner, pp. 27-31; for their failure in 1781, sec Morse, Life of Alex- ander Hamilton, vol. i, pp. 86, 87. For similar failure in Austria, sec Sumner, p. 314.

72. See Marchant, Lettre aux gens de bonne foi.

73. See Sumner, p. 44; also De Nervo, Finances frangaises, p. 282.

74. See De Nervo, Finance franfaises, p. 282; also Levasseur, vol. i, p. 236, et seq.

75. See Table from Gazette de France and extracU from other sources in Levasseur, vol. i, pp. 223-224.

76. 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

[122]

same cause in our own country in 1819. see statement from Niles's Register, in Sumner, p. 80. For the jumble of families reduced to beg- gary with families lifted into sudden wealth and for the mass of folly and misery thus minted, see Levasseur, vol. i. p. 237.

77. For Madame Tallien and luxury of the stock-gambler classes, see Challamel. Les Franfais sous la Revolution, pp. 30, 33; also De Gon- court. Les Franfais sous le Directoire. Regarding the outburst of vice in Paris and the demoralization of the police, see Levasseur, as above.

78. See Levasseur, vol. i, p. 137, et seq.

79. 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 facsimile, 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. 15s- 161. For photographic copies of Royalist assignats, etc., see also Dewarmin. ibid., pp. 198-197, etc. For a photograph of probably the last of the Royalist notes ever issued, bearing the words Pro Deo, pro Rege, pro Patria and Arm^e Catholique et Roy ale with the date 1799, and for the sum of 100 livres, see Dewarmin, vol. i, p. S04.

80. For similar expectation of a "shock," which did not occur, at the resumption of specie paymenu in Massachusetu, see Sumner, History of American Currency, p. 54.

81. See Thiers.

8t. See Levasseur, vol. i, p. 146.

83. For examples of similar effects in Russia, Austria, and Denmark, see Storch, Economic Politique, vol. iv; for similar effects in the United States, see Gouge. Paper Money and Banking in the United States; also Sumner, 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 quota- tion by Macaulay in same chapter.

84. For parallel cases in the early history of our own country, see Sumner, p. 21, and elsewhere.

85. For a review of some of these attempts with eloquent statement of their evil results, see Mimoires de Durand de Maillane, pp. 166-169.

86. For similar effect of inflated currency in enervating and under- mining trade, husbandry, manufactures, and morals in our own coun- try, see Daniel Webster, cited in Sumner, pp. 45-50. For similar effects in other countries, see Senior, Storch, Macaulay, and others already cited.

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87. For facts regarding French finance under Napoleon, I am in- debted to Hon. David A. Wells. For more recent triumphs of financial common sense in France, see Bonnet's articles, translated by the late George Walker, Esq. For general subject, see Levasseur.

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