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Title: Fiat Money Inflation in France: How it Came, What it Brought, and
How it Ended

Author: Andrew Dickson White

Release date: November 1, 2004 [eBook #6949]
Most recently updated: March 28, 2009

Language: English

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*** START OF THE PROJECT GUTENBERG EBOOK FIAT MONEY
INFLATION IN FRANCE: HOW IT CAME, WHAT IT BROUGHT, AND
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FIAT MONEY INFLATION IN
FRANCE
How It Came, What It Brought, and How It Ended

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

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

Contents
INTRODUCTION

FOREWORD BY MR. JOHN MACKAY

FIAT MONEY INFLATION IN FRANCE

I.
II.
III
.
NOTES

FOOTNOTES

INTRODUCTION
As far back as just before our Civil War I made, in France and elsewhere, a
large collection of documents which had appeared during the French
Revolution, including newspapers, reports, speeches, pamphlets, illustrative
material of every sort, and, especially, specimens of nearly all the
Revolutionary issues of paper money,—from notes of ten thousand livres to
those of one sou.
Upon this material, mainly, was based a course of lectures then given to my
students, first at the University of Michigan and later at Cornell University,
and among these lectures, one on "Paper Money Inflation in France."
This was given simply because it showed one important line of facts in that
great struggle; and I recall, as if it were yesterday, my feeling of regret at
being obliged to bestow so much care and labor upon a subject to all
appearance so utterly devoid of practical value. I am sure that it never
occurred, either to my Michigan students or to myself, that it could ever
have any bearing on our own country. It certainly never entered into our
minds that any such folly as that exhibited in those French documents of the
eighteenth century could ever find supporters in the United States of the
nineteenth.
Some years later, when there began to be demands for large issues of paper
money in the United States, I wrought some of the facts thus collected into
a speech in the Senate of the State of New York, showing the need of
especial care in such dealings with financial necessities.
In 1876, during the "greenback craze," General Garfield and Mr. S. B.
Crittenden, both members of the House of Representatives at that time,
asked me to read a paper on the same general subject before an audience of
Senators and Representatives of both parties in Washington. This I did, and
also gave it later before an assemblage of men of business at the Union
League Club in New York.

Various editions of the paper were afterward published, among them, two or
three for campaign purposes, in the hope that they might be of use in
showing to what folly, cruelty, wrong and rain the passion for "fiat money"
may lead.
Other editions were issued at a later period, in view of the principle
involved in the proposed unlimited coinage of silver in the United States,
which was, at bottom, the idea which led to that fearful wreck of public and
private prosperity in France.
For these editions there was an added reason in the fact that the utterances
of sundry politicians at that time pointed clearly to issues of paper money
practically unlimited. These men were logical enough to see that it would
be inconsistent to stop at the unlimited issue of silver dollars which cost
really something when they could issue unlimited paper dollars which
virtually cost nothing.
In thus exhibiting facts which Bishop Butler would have recognized as
confirming his theory of "The Possible Insanity of States," it is but just to
acknowledge that the French proposal was vastly more sane than that made
in our own country. Those French issues of paper rested not merely "on the
will of a free people," but on one-third of the entire landed property of
France; on the very choicest of real property in city and country—the
confiscated estates of the Church and of the fugitive aristocracy—and on
the power to use the paper thus issued in purchasing this real property at
very low prices.
I have taken all pains to be exact, revising the whole paper in the light of
the most recent publications and giving my authority for every important
statement, and now leave the whole matter with my readers.
At the request of a Canadian friend, who has expressed a strong wish that
this work be brought down to date, I have again restudied the subject in the
light of various works which have appeared since my earlier research,—
especially Levasseur's "Histoire des classes ouvrières et de l'industrie en
France,"—one of the really great books of the twentieth century;—
Dewarmin's superb "Cent Ans de numismatique Française" and sundry
special treatises. The result has been that large additions have been made
regarding some important topics, and that various other parts of my earlier

work have been made more clear by better arrangement and supplementary
information.
ANDREW D. WHITE. Cornell University, September, 1912.

FOREWORD BY MR. JOHN MACKAY
I am greatly indebted to the generosity of Mr. Andrew D. White, the
distinguished American scholar, author and diplomatist, for permission to
print and to circulate privately a small edition of his exceedingly valuable
account of the great currency-making experiment of the French
Revolutionary Government. The work has been revised and considerably
enlarged by Mr. White for the purpose of the present issue.
The story of "Fiat Money Inflation in France" is one of great interest to
legislators, to economic students, and to all business and thinking men. It
records the most gigantic attempt ever made in the history of the world by a
government to create an inconvertible paper currency, and to maintain its
circulation at various levels of value. It also records what is perhaps the
greatest of all governmental efforts—with the possible exception of
Diocletian's—to enact and enforce a legal limit of commodity prices. Every
fetter that could hinder the will or thwart the wisdom of democracy had
been shattered, and in consequence every device and expedient that
untrammelled power and unrepressed optimism could conceive were
brought to bear. But the attempts failed. They left behind them a legacy of
moral and material desolation and woe, from which one of the most
intellectual and spirited races of Europe has suffered for a century and a
quarter, and will continue to suffer until the end of time. There are
limitations to the powers of governments and of peoples that inhere in the
constitution of things, and that neither despotisms nor democracies can
overcome.
Legislatures are as powerless to abrogate moral and economic laws as they
are to abrogate physical laws. They cannot convert wrong into right nor
divorce effect from cause, either by parliamentary majorities, or by unity of
supporting public opinion. The penalties of such legislative folly will
always be exacted by inexorable time. While these propositions may be
regarded as mere commonplaces, and while they are acknowledged in a
general way, they are in effect denied by many of the legislative
experiments and the tendencies of public opinion of the present day. The

story, therefore, of the colossal folly of France in the closing part Of the
eighteenth century and its terrible fruits, is full of instruction for all men
who think upon the problems of our own time.
From among an almost infinite variety, there are four great and fundamental
facts that clearly emerge, namely,—
(1) Notwithstanding the fact that the paper currency issued was the direct
obligation of the State, that much of it was interest bearing, and that all of it
was secured upon the finest real estate in France, and that penalties in the
way of fines, imprisonments and death were enacted from time to time to
maintain its circulation at fixed values, there was a steady depreciation in
value until it reached zero point and culminated in repudiation. The
aggregate of the issues amounted to no less than the enormous and
unthinkable sum of $9,500,000,000, and in the middle of 1797 when public
repudiation took place, there was no less than $4,200,000,000 in face value
of assignats and mandats outstanding; the loss, as always, falling mostly
upon the poor and the ignorant.
(2) In the attempt to maintain fixed values for the paper currency the
Government became involved in an equally futile attempt to maintain a
tariff of legal prices for commodities. Here again penalties of fines, of
imprisonments and of death were powerless to accomplish the end in view.
(3) An wholesale demoralisation of society took place under which thrift,
integrity, humanity, and every principle of morality were thrown into the
welter of seething chaos and cruelty.
(4) The real estate upon which the paper currency was secured represented
confiscations by the State of the lands of the Church and of the Emigrant
Noblemen. These lands were appraised, according to Mr. White's narrative
and other authorities, at $1,000,000,000. Here was a straight addition to the
State's resources of $1,000,000,000. It is ominously significant that within
one hundred years under the "Peace of Frankfort" signed on the 10th May,
1871, the French nation agreed to pay a war indemnity to victorious
Germany of exactly the same sum, namely, $1,000,000,000 in addition to
the surrender of the province of Alsace and a considerable part of Lorraine.
The great addition to the national wealth, therefore, effected by the immoral

confiscation of the lands in question disappeared with compound territorial
interest added under the visitation of relentless retribution.
Public opinion in our own country is so far sound on the question of
currency, but signs are not lacking in some lay quarters of an inclination to
sanction dangerous experiments. The doctrine of governmental regulation
of prices, has, however, made its appearance in embryo. Class
dissatisfaction is also on the increase. The confiscation of property rights
under legal forms and processes is apt to be condoned when directed
against unpopular interests and when limited to amounts that do not revolt
the conscience. The wild and terrible expression given to these insidious
principles in the havoc of the Revolution should be remembered by all. Nor
should the fact be overlooked that, as Mr. White points out on Page 6, the
National Assembly of France which originated and supported these
measures contained in its membership the ablest Frenchmen of the day.
JOHN MACKAY. Toronto General Trusts Building, Toronto, 31st March,
1914.

FIAT MONEY INFLATION IN
FRANCE
How It Came, What It Brought, and How It Ended 1

I.
Early in the year 1789 the French nation found itself in deep financial
embarrassment: there was a heavy debt and a serious deficit.
The vast reforms of that period, though a lasting blessing politically, were a
temporary evil financially. There was a general want of confidence in
business circles; capital had shown its proverbial timidity by retiring out of
sight as far as possible; throughout the land was stagnation.
Statesmanlike measures, careful watching and wise management would,
doubtless, have ere long led to a return of confidence, a reappearance of
money and a resumption of business; but these involved patience and self-
denial, and, thus far in human history, these are the rarest products of
political wisdom. Few nations have ever been able to exercise these virtues;
and France was not then one of these few. 2
There was a general search for some short road to prosperity: ere long the
idea was set afloat that the great want of the country was more of the
circulating medium; and this was speedily followed by calls for an issue of
paper money. The Minister of Finance at this period was Necker. In
financial ability he was acknowledged as among the great bankers of
Europe, but his was something more than financial ability: he had a deep
feeling of patriotism and a high sense of personal honor. The difficulties in
his way were great, but he steadily endeavored to keep France faithful to
those principles in monetary affairs which the general experience of modern
times had found the only path to national safety. As difficulties arose the
National Assembly drew away from him, and soon came among the
members renewed suggestions of paper money: orators in public meetings,
at the clubs and in the Assembly, proclaimed it a panacea—a way of
"securing resources without paying interest." Journalists caught it up and
displayed its beauties, among these men, Marat, who, in his newspaper,
"The Friend of the People," also joined the cries against Necker, picturing
him—a man of sterling honesty, who gave up health and fortune for the

sake of France—as a wretch seeking only to enrich himself from the public
purse.
Against this tendency toward the issue of irredeemable paper Necker
contended as best he might. He knew well to what it always had led, even
when surrounded by the most skillful guarantees. Among those who
struggled to support ideas similar to his was Bergasse, a deputy from Lyons,
whose pamphlets, then and later, against such issues exerted a wider
influence, perhaps, than any others: parts of them seem fairly inspired. Any
one to-day reading his prophecies of the evils sure to follow such a currency
would certainly ascribe to him a miraculous foresight, were it not so clear
that his prophetic power was due simply to a knowledge of natural laws
revealed by history. But this current in favor of paper money became so
strong that an effort was made to breast it by a compromise: and during the
last months of 1789 and the first months of 1790 came discussions in the
National Assembly looking to issues of notes based upon the landed
property of the Church,—which was to be confiscated for that purpose. But
care was to be taken; the issue was to be largely in the shape of notes of
1,000, 300 and 200 livres, too large to be used as ordinary currency, but of
convenient size to be used in purchasing the Church lands; besides this,
they were to bear interest and this would tempt holders to hoard them. The
Assembly thus held back from issuing smaller obligations.
Remembrances of the ruin which had come from the great issues of smaller
currency at an earlier day were still vivid. Yet the pressure toward a popular
currency for universal use grew stronger and stronger. The finance
committee of the Assembly reported that "the people demand a new
circulating medium"; that "the circulation of paper money is the best of
operations"; that "it is the most free because it reposes on the will of the
people"; that "it will bind the interest of the citizens to the public good."
The report appealed to the patriotism of the French people with the
following exhortation: "Let us show to Europe that we understand our own
resources; let us immediately take the broad road to our liberation instead of
dragging ourselves along the tortuous and obscure paths of fragmentary
loans." It concluded by recommending an issue of paper money carefully
guarded, to the full amount of four hundred million livres, and the argument
was pursued until the objection to smaller notes faded from view. Typical in

the debate on the whole subject, in its various phases, were the declarations
of M. Matrineau. He was loud and long for paper money, his only fear
being that the Committee had not authorized enough of it; he declared that
business was stagnant, and that the sole cause was a want of more of the
circulating medium; that paper money ought to be made a legal tender; that
the Assembly should rise above prejudices which the failures of John Law's
paper money had caused, several decades before. Like every supporter of
irredeemable paper money then or since, he seemed to think that the laws of
Nature had changed since previous disastrous issues. He said: "Paper
money under a despotism is dangerous; it favors corruption; but in a nation
constitutionally governed, which itself takes care in the emission of its
notes, which determines their number and use, that danger no longer
exists." He insisted that John Law's notes at first restored prosperity, but
that the wretchedness and ruin they caused resulted from their overissue,
and that such an overissue is possible only under a despotism. 3
M. de la Rochefoucauld gave his opinion that "the assignats will draw
specie out of the coffers where it is now hoarded. 4
On the other hand Cazalès and Maury showed that the result could only be
disastrous. Never, perhaps, did a political prophecy meet with more exact
fulfillment in every line than the terrible picture drawn in one of Cazalès'
speeches in this debate. Still the current ran stronger and stronger; Petion
made a brilliant oration in favor of the report, and Necker's influence and
experience were gradually worn away.
Mingled with the financial argument was a strong political plea. The
National Assembly had determined to confiscate the vast real property of
the French Church,—the pious accumulations of fifteen hundred years.
There were princely estates in the country, bishops' palaces and conventual
buildings in the towns; these formed between one-fourth and one-third of
the entire real property of France, and amounted in value to at least two
thousand million livres. By a few sweeping strokes all this became the
property of the nation. Never, apparently, did a government secure a more
solid basis for a great financial future. 5
There were two special reasons why French statesmen desired speedily to
sell these lands. First, a financial reason,—to obtain money to relieve the

government. Secondly, a political reason,—to get this land distributed
among the thrifty middle-classes, and so commit them to the Revolution
and to the government which gave their title.
It was urged, then, that the issue of four hundred millions of paper, (not in
the shape of interest-bearing bonds, as had at first been proposed, but in
notes small as well as large), would give the treasury something to pay out
immediately, and relieve the national necessities; that, having been put into
circulation, this paper money would stimulate business; that it would give
to all capitalists, large or small, the means for buying from the nation the
ecclesiastical real estate, and that from the proceeds of this real estate the
nation would pay its debts and also obtain new funds for new necessities:
never was theory more seductive both to financiers and statesmen.
It would be a great mistake to suppose that the statesmen of France, or the
French people, were ignorant of the dangers in issuing irredeemable paper
money. No matter how skillfully the bright side of such a currency was
exhibited, all thoughtful men in France remembered its dark side. They
knew too well, from that ruinous experience, seventy years before, in John
Law's time, the difficulties and dangers of a currency not well based and
controlled. They had then learned how easy it is to issue it; how difficult it
is to check its overissue; how seductively it leads to the absorption of the
means of the workingmen and men of small fortunes; how heavily it falls
on all those living on fixed incomes, salaries or wages; how securely it
creates on the ruins of the prosperity of all men of meagre means a class of
debauched speculators, the most injurious class that a nation can harbor,—
more injurious, indeed, than professional criminals whom the law
recognizes and can throttle; how it stimulates overproduction at first and
leaves every industry flaccid afterward; how it breaks down thrift and
develops political and social immorality. All this France had been
thoroughly taught by experience. Many then living had felt the result of
such an experiment—the issues of paper money under John Law, a man
who to this day is acknowledged one of the most ingenious financiers the
world has ever known; and there were then sitting in the National Assembly
of France many who owed the poverty of their families to those issues of
paper. Hardly a man in the country who had not heard those who issued it
cursed as the authors of the most frightful catastrophe France had then
experienced. 6

It was no mere attempt at theatrical display, but a natural impulse, which led
a thoughtful statesman, during the debate, to hold up a piece of that old
paper money and to declare that it was stained with the blood and tears of
their fathers.
And it would also be a mistake to suppose that the National Assembly,
which discussed this matter, was composed of mere wild revolutionists; no
inference could be more wide of the fact. Whatever may have been the
character of the men who legislated for France afterward, no thoughtful
student of history can deny, despite all the arguments and sneers of
reactionary statesmen and historians, that few more keen-sighted legislative
bodies have ever met than this first French Constitutional Assembly. In it
were such men as Sieyès, Bailly, Necker, Mirabeau, Talleyrand, DuPont de
Nemours and a multitude of others who, in various sciences and in the
political world, had already shown and were destined afterward to show
themselves among the strongest and shrewdest men that Europe has yet
seen.
But the current toward paper money had become irresistible. It was
constantly urged, and with a great show of force, that if any nation could
safely issue it, France was now that nation; that she was fully warned by her
severe experience under John Law; that she was now a constitutional
government, controlled by an enlightened, patriotic people,—not, as in the
days of the former issues of paper money, an absolute monarchy controlled
by politicians and adventurers; that she was able to secure every livre of her
paper money by a virtual mortgage on a landed domain vastly greater in
value than the entire issue; that, with men like Bailly, Mirabeau and Necker
at her head, she could not commit the financial mistakes and crimes from
which France had suffered under John Law, the Regent Duke of Orleans
and Cardinal Dubois.
Oratory prevailed over science and experience. In April, 1790, came the
final decree to issue four hundred millions of livres in paper money, based
upon confiscated property of the Church for its security. The deliberations
on this first decree and on the bill carrying it into effect were most
interesting; prominent in the debate being Necker, Du Pont de Nemours,
Maury, Cazalès, Petion, Bailly and many others hardly inferior. The
discussions were certainly very able; no person can read them at length in

the "Moniteur," nor even in the summaries of the parliamentary history,
without feeling that various modern historians have done wretched injustice
to those men who were then endeavoring to stand between France and ruin.
This sum—four hundred millions, so vast in those days, was issued in
assignats, which were notes secured by a pledge of productive real estate
and bearing interest to the holder at three per cent. No irredeemable
currency has ever claimed a more scientific and practical guarantee for its
goodness and for its proper action on public finances. On the one hand, it
had what the world recognized as a most practical security,—a mortgage an
productive real estate of vastly greater value than the issue. On the other
hand, as the notes bore interest, there seemed cogent reason for their being
withdrawn from circulation whenever they became redundant. 7
As speedily as possible the notes were put into circulation. Unlike those
issued in John Law's time, they were engraved in the best style of the art. To
stimulate loyalty, the portrait of the king was placed in the center; to arouse
public spirit, patriotic legends and emblems surrounded it; to stimulate
public cupidity, the amount of interest which the note would yield each day
to the holder was printed in the margin; and the whole was duly garnished
with stamps and signatures to show that it was carefully registered and
controlled. 8
To crown its work the National Assembly, to explain the advantages of this
new currency, issued an address to the French people. In this address it
spoke of the nation as "delivered by this grand means from all uncertainty
and from all ruinous results of the credit system." It foretold that this issue
"would bring back into the public treasury, into commerce and into all
branches of industry strength, abundance and prosperity." 9
Some of the arguments in this address are worth recalling, and, among
them, the following:—"Paper money is without inherent value unless it
represents some special property. Without representing some special
property it is inadmissible in trade to compete with a metallic currency,
which has a value real and independent of the public action; therefore it is
that the paper money which has only the public authority as its basis has
always caused ruin where it has been established; that is the reason why the
bank notes of 1720, issued by John Law, after having caused terrible evils,

have left only frightful memories. Therefore it is that the National Assembly
has not wished to expose you to this danger, but has given this new paper
money not only a value derived from the national authority but a value real
and immutable, a value which permits it to sustain advantageously a
competition with the precious metals themselves." 10
But the final declaration was, perhaps, the most interesting. It was as
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 recommending that his
people receive this new money without objection.
All this caused great joy. Among the various utterances of this feeling was
the letter of M. Sarot, directed to the editor of the Journal of the National
Assembly, and scattered through France. M. Sarot is hardly able to contain
himself as he anticipates the prosperity and glory that this issue of paper is
to bring to his country. One thing only vexes him, and that is the pamphlet
of M. Bergasse against the assignats; therefore it is after a long series of
arguments and protestations, in order to give a final proof of his confidence
in the paper money and his entire skepticism as to the evils predicted by
Bergasse and others, M. Sarot solemnly lays his house, garden and furniture
upon the altar of his country and offers to sell them for paper money alone.
There were, indeed, some gainsayers. These especially appeared among the
clergy, who, naturally, abhorred the confiscation of Church property.
Various ecclesiastics made speeches, some of them full of pithy and
weighty arguments, against the proposed issue of paper, and there is
preserved a sermon from one priest threatening all persons handling the
new money with eternal damnation. But the great majority of the French
people, who had suffered ecclesiastical oppression so long, regarded these
utterances as the wriggling of a fish on the hook, and enjoyed the sport all
the better. 11
The first result of this issue was apparently all that the most sanguine could
desire: the treasury was at once greatly relieved; a portion of the public debt
was paid; creditors were encouraged; credit revived; ordinary expenses
were met, and, a considerable part of this paper money having thus been

passed from the government into the hands of the people, trade increased
and all difficulties seemed to vanish. The anxieties of Necker, the
prophecies of Maury and Cazalès seemed proven utterly futile. And, indeed,
it is quite possible that, if the national authorities had stopped with this
issue, few of the financial evils which afterwards arose would have been
severely felt; the four hundred millions of paper money then issued would
have simply discharged the function of a similar amount of specie. But soon
there came another result: times grew less easy; by the end of September,
within five months after the issue of the four hundred millions in assignats,
the government had spent them and was again in distress. 12
The old remedy immediately and naturally recurred to the minds of men.
Throughout the country began a cry for another issue of paper; thoughtful
men then began to recall what their fathers had told them about the
seductive path of paper-money issues in John Law's time, and to remember
the prophecies that they themselves had heard in the debate on the first
issue of assignats less than six months before.
At that time the opponents of paper had prophesied that, once on the
downward path of inflation, the nation could not be restrained and that more
issues would follow. The supporters of the first issue had asserted that this
was a calumny; that the people were now in control and that they could and
would check these issues whenever they desired.
The condition of opinion in the Assembly was, therefore, chaotic: a few
schemers and dreamers were loud and outspoken for paper money; many of
the more shallow and easy-going were inclined to yield; the more
thoughtful endeavored to breast the current.
One man there was who could have withstood the pressure: Mirabeau. He
was the popular idol,—the great orator of the Assembly and much more
than a great orator,—he had carried the nation through some of its worst
dangers by a boldness almost godlike; in the various conflicts he had shown
not only oratorical boldness, but amazing foresight. As to his real opinion
on an irredeemable currency there can be no doubt. It was the opinion
which all true statesmen have held, before his time and since,—in his own
country, in England, in America, in every modern civilized nation. In his
letter to Cerutti, written in January, 1789, hardly six months before, he had

spoken of paper money as "A nursery of tyranny, corruption and delusion; a
veritable debauch of authority in delirium." In one of his early speeches in
the National Assembly he had called such money, when Anson covertly
suggested its issue, "a loan to an armed robber," and said of it: "that
infamous word, paper money, ought to be banished from our language." In
his private letters written at this very time, which were revealed at a later
period, he showed that he was fully aware of the dangers of inflation. But
he yielded to the pressure: partly because he thought it important to sell the
government lands rapidly to the people, and so develop speedily a large
class of small landholders pledged to stand by the government which gave
them their titles; partly, doubtless, from a love of immediate rather than of
remote applause; and, generally, in a vague hope that the severe, inexorable
laws of finance which had brought heavy punishments upon governments
emitting an irredeemable currency in other lands, at other times, might in
some way at this time, be warded off from France. 13
The question was brought up by Montesquieu's report on the 27th of
August, 1790. This report favored, with evident reluctance, an additional
issue of paper. It went on to declare that the original issue of four hundred
millions, though opposed at the beginning, had proved successful; that
assignats were economical, though they had dangers; and, as a climax,
came the declaration: "We must save the country." 14
Upon this report Mirabeau then made one of his most powerful speeches.
He confessed that he had at first feared the issue of assignats, but that he
now dared urge it; that experience had shown the issue of paper money
most serviceable; that the report proved the first issue of assignats a
success; that public affairs had come out of distress; that ruin had been
averted and credit established. He then argued that there was a difference
between paper money of the recent issue and that from which the nation had
suffered so much in John Law's time; he declared that the French nation had
now become enlightened and he added, "Deceptive subtleties can no longer
mislead patriots and men of sense in this matter." He then went on to say:
"We must accomplish that which we have begun," and declared that there
must be one more large issue of paper, guaranteed by the national lands and
by the good faith of the French nation. To show how practical the system
was he insisted that just as soon as paper money should become too
abundant it would be absorbed in rapid purchases of national lands; and he

made a very striking comparison between this self-adjusting, self-
converting system and the rains descending in showers upon the earth, then
in swelling rivers discharged into the sea, then drawn up in vapor and
finally scattered over the earth again in rapidly fertilizing showers. He
predicted that the members would be surprised at the astonishing success of
this paper money and that there would be none too much of it.
His theory grew by what it fed upon,—as the paper-money theory has
generally done. Toward the close, in a burst of eloquence, he suggested that
assignats be created to an amount sufficient to cover the national debt, and
that all the national lands be exposed for sale immediately, predicting that
thus prosperity would return to the nation and that an classes would find
this additional issue of paper money a blessing. 15
This speech was frequently interrupted by applause; a unanimous vote
ordered it printed, and copies were spread throughout France. The impulse
given by it permeated all subsequent discussion; Gouy arose and proposed
to liquidate the national debt of twenty-four hundred millions,—to use his
own words—"by one single operation, grand, simple, magnificent." 16 This
"operation" was to be the emission of twenty-four hundred millions in legal
tender notes, and a law that specie should not be accepted in purchasing
national lands. His demagogy bloomed forth magnificently. He advocated
an appeal to the people, who, to use his flattering expression, "ought alone
to give the law in a matter so interesting." The newspapers of the period, in
reporting his speech, noted it with the very significant remark, "This
discourse was loudly applauded."
To him replied Brillat-Savarin. He called attention to the depreciation of
assignats already felt. He tried to make the Assembly see that natural laws
work as inexorably in France as elsewhere; he predicted that if this new
issue were made there would come a depreciation of thirty per cent.
Singular, that the man who so fearlessly stood against this tide of unreason
has left to the world simply a reputation as the most brilliant cook that ever
existed! He was followed by the Abbe Goutes, who declared,—what seems
grotesque to those who have read the history of an irredeemable paper
currency in any country—that new issues of paper money "will supply a
circulating medium which will protect public morals from corruption." 17

Into this debate was brought a report by Necker. He was not, indeed, the
great statesman whom France especially needed at this time, of all times.
He did not recognize the fact that the nation was entering a great revolution,
but he could and did see that, come what might, there were simple
principles of finance which must be adhered to. Most earnestly, therefore,
he endeavored to dissuade the Assembly from the proposed issue;
suggesting that other means could be found for accomplishing the result,
and he predicted terrible evils. But the current was running too fast. The
only result was that Necker was spurned as a man of the past; he sent in his
resignation and left France forever. 18 The paper-money demagogues
shouted for joy at his departure; their chorus rang through the journalism of
the time. No words could express their contempt for a man who was unable
to see the advantages of filling the treasury with the issues of a printing
press. Marat, Hébert, Camille Desmoulins and the whole mass of
demagogues so soon to follow them to the guillotine were especially
jubilant. 19
Continuing the debate, Rewbell attacked Necker, saying that the assignats
were not at par because there were not yet enough of them; he insisted that
payments for public lands be received in assignats alone; and suggested that
the church bells of the kingdom be melted down into small money. Le Brun
attacked the whole scheme in the Assembly, as he had done in the
Committee, declaring that the proposal, instead of relieving the nation,
would wreck it. The papers of the time very significantly say that at this
there arose many murmurs. Chabroud came to the rescue. He said that the
issue of assignats would relieve the distress of the people and he presented
very neatly the new theory of paper money and its basis in the following
words: "The earth is the source of value; you cannot distribute the earth in a
circulating value, but this paper becomes representative of that value and it
is evident that the creditors of the nation will not be injured by taking it."
On the other hand, appeared in the leading paper, the "Moniteur," a very
thoughtful article against paper money, which sums up all by saying, "It is,
then, evident that all paper which cannot, at the will of the bearer, be
converted into specie cannot discharge the functions of money." This article
goes on to cite Mirabeau's former opinion in his letter to Cerutti, published
in 1789,—the famous opinion of paper money as "a nursery of tyranny,
corruption and delusion; a veritable debauch of authority in delirium."

Lablache, in the Assembly, quoted a saying that "paper money is the emetic
of great states." 20
Boutidoux, resorting to phrasemaking, called the assignats "un papier
terre," or "land converted into paper." Boislandry answered vigorously and
foretold evil results. Pamphlets continued to be issued,—among them, one
so pungent that it was brought into the Assembly and read there,—the truth
which it presented with great clearness being simply that doubling the
quantity of money or substitutes for money in a nation simply increases
prices, disturbs values, alarms capital, diminishes legitimate enterprise, and
so decreases the demand both for products and for labor; that the only
persons to be helped by it are the rich who have large debts to pay. This
pamphlet was signed "A Friend of the People," and was received with great
applause by the thoughtful minority in the Assembly. Du Pont de Nemours,
who had stood by Necker in the debate on the first issue of assignats, arose,
avowed the pamphlet to be his, and said sturdily that he had always voted
against the emission of irredeemable paper and always would. 21
Far more important than any other argument against inflation was the
speech of Talleyrand. He had been among the boldest and most radical
French statesmen. He it was,—a former bishop,—who, more than any
other, had carried the extreme measure of taking into the possession of the
nation the great landed estates of the Church, and he had supported the first
issue of four hundred millions. But he now adopted a judicial tone—
attempted to show to the Assembly the very simple truth that the effect of a
second issue of assignats may be different from that of the first; that the
first was evidently needed; that the second may be as injurious as the first
was useful. He exhibited various weak points in the inflation fallacies and
presented forcibly the trite truth that no laws and no decrees can keep large
issues of irredeemable paper at par with specie.
In his speech occur these words: "You can, indeed, arrange it so that the
people shall be forced to take a thousand livres in paper for a thousand
livres in specie; but you can never arrange it so that a man shall be obliged
to give a thousand livres in specie for a thousand livres in paper,—in that
fact is embedded the entire question; and on account of that fact the whole
system fails." 22

The nation at large now began to take part in the debate; thoughtful men
saw that here was the turning Point between good and evil, that the nation
stood at the parting of the ways. Most of the great commercial cities
bestirred themselves and sent up remonstrances against the new emission,
—twenty-five being opposed and seven in favor of it.
But eloquent theorists arose to glorify paper and among these, Royer, who
on September 14, 1790, put forth a pamphlet entitled "Reflections of a
patriotic Citizen on the issue of Assignats," in which he gave many specious
reasons of the why the assignats could not be depressed, and spoke of the
argument against them as "vile clamors of people bribed to affect public
opinion." He said to the National Assembly, "If it is necessary to create five
thousand millions, and more, of the paper, decree such a creation gladly."
He, too, predicted, as many others had done, a time when gold was to lose
all its value, since all exchanges would be made with this admirable,
guaranteed paper, and therefore that coin would come out from the places
where it was hoarded. He foretold prosperous times to France in case these
great issues of paper were continued and declared these "the only means to
insure happiness, glory and liberty to the French nation." Speeches like this
gave courage to a new swarm of theorists,—it began to be especially noted
that men who had never shown any ability to make or increase fortunes for
themselves abounded in brilliant plans for creating and increasing wealth
for the country at large.
Greatest force of all, on September 27, 1790, came Mirabeau's final speech.
The most sober and conservative of his modern opponents speaks of its
eloquence as "prodigious." In this the great orator dwelt first on the political
necessity involved, declaring that the most pressing need was to get the
government lands into the hands of the people, and so to commit to the
nation and against the old privileged classes the class of landholders thus
created.
Through the whole course of his arguments there is one leading point
enforced with all his eloquence and ingenuity—the excellence of the
proposed currency, its stability and its security. He declares that, being
based on the pledge of public lands and convertible into them, the notes are
better secured than if redeemable in specie; that the precious metals are
only employed in the secondary arts, while the French paper money

represents the first and most real of all property, the source of all
production, the land; that while other nations have been obliged to emit
paper money, none have ever been so fortunate as the French nation, for the
reason that none had ever before been able to give this landed security; that
whoever takes French paper money has practically a mortgage to secure it,
—and on landed property which can easily be sold to satisfy his claims,
while other nations have been able only to give a vague claim on the entire
nation. "And," he ones, "I would rather have a mortgage on a garden than
on a kingdom!"
Other arguments of his are more demagogical. He declares that the only
interests affected will be those of bankers and capitalists, but that
manufacturers will see prosperity restored to them. Some of his arguments
seem almost puerile, as when he says, "If gold has been hoarded through
timidity or malignity, the issue of paper will show that gold is not necessary,
and it will then come forth." But, as a whole, the speech was brilliant; it was
often interrupted by applause; it settled the question. People did not stop to
consider that it was the dashing speech of an orator and not the matured
judgment of a financial expert; they did not see that calling Mirabeau or
Talleyrand to advise upon a monetary policy, because they had shown
boldness in danger and strength in conflict, was like summoning a prize-
fighter to mend a 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 humanity; in vain did he hold up to the
Assembly one of Law's bills and appeal to their memories of the
wretchedness brought upon France by them; in vain did Du Pont present a
simple and really wise plan of substituting notes in the payment of the
floating debt which should not form a part of the ordinary circulating
medium; nothing could resist the eloquence of Mirabeau. Barnave,
following, insisted that "Law's paper was based upon the phantoms of the
Mississippi; ours, upon the solid basis of ecclesiastical lands," and he
proved that the assignats could not depreciate further. Prudhomme's
newspaper poured contempt over gold as security for the currency, extolled
real estate as the only true basis and was fervent in praise of the
convertibility and self-adjusting features of the proposed scheme. In spite of

all this plausibility and eloquence, a large minority stood firm to their
earlier principles; but on the 29th of September, 1790, by a vote of 508 to
423, the deed was done; a bill was passed authorizing the issue of eight
hundred millions of new assignats, but solemnly declaring that in no case
should the entire amount put in circulation exceed twelve hundred millions.
To make assurance doubly sure, it also provided that as fast as the assignats
were paid into the treasury for land they should be burned, and thus a
healthful contraction be constantly maintained. Unlike the first issue, these
new notes were to bear no interest. 23
Great were the plaudits of the nation at this relief. Among the multitudes of
pamphlets expressing this joy which have come down to us the "Friend of
the Revolution" is the most interesting. It begins as follows: "Citizens, the
deed is done. The assignats are the keystone of the arch. It has just been
happily put in position. Now I can announce to you that the Revolution is
finished and there only remain one or two important questions. All the rest
is but a matter of detail which cannot deprive us any longer of the pleasure
of admiring this important work in its entirety. The provinces and the
commercial cities which were at first alarmed at the proposal to issue so
much paper money now send expressions of their thanks; specie is coming
out to be joined with paper money. Foreigners come to us from all parts of
Europe to seek their happiness under laws which they admire; and soon
France, enriched by her new property and by the national industry which is
preparing for fruitfulness, will demand still another creation of paper
money."
France was now fully committed to a policy of inflation; and, if there had
been any question of this before, all doubts were removed now by various
acts very significant as showing the exceeding difficulty of stopping a
nation once in the full tide of a depreciating currency. The National
Assembly had from the first shown an amazing liberality to all sorts of
enterprises, wise or foolish, which were urged "for the good of the people."
As a result of these and other largesses the old cry of the "lack of a
circulating medium" broke forth again; and especially loud were the
clamors for more small bills. The cheaper currency had largely driven out
the dearer; paper had caused small silver and copper money mainly to
disappear; all sorts of notes of hand, circulating under the name of
"confidence bills," flooded France—sixty-three kinds in Paris alone. This

unguaranteed currency caused endless confusion and fraud. Different
districts of France began to issue their own assignats in small
denominations, and this action stirred the National Assembly to evade the
solemn pledge that the circulation should not go above twelve hundred
millions and that all assignats returned to the treasury for lands should
immediately be burned. 24 Within a short time there had been received into
the treasury for lands one hundred and sixty million livres in paper. By the
terms of the previous acts this amount of paper ought to have been retired.
Instead of this, under the plea of necessity, the greater part of it was
reissued in the form of small 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 supply
silver and copper and hold it in circulation everything was tried. Citizens
had been spurred on by law to send their silverware and jewels to the mint.
Even the king sent his silver and gold plate, and the churches and convents
were required by law to send to the government melting pot all silver and
gold vessels not absolutely necessary for public worship. For copper money
the church bells were melted down. But silver and even copper continued to
become more and more scarce. In the midst of all this, various juggleries
were tried, and in November, 1790, the Assembly decreed a single standard
of coinage, the chosen metal being silver, and the ratio between the two
precious metals was changed from 15 1/2 to 1, to 14 1/2 to 1—but all in
vain. It was found necessary to issue the dreaded small paper, and a
beginning was made by issuing one hundred millions in notes of five
francs, and, ere long, obedient to the universal clamor, there were issued
parchment notes for various small amounts down to a single sou. 25
Yet each of these issues, great or small, was but as a drop of cold water to a
parched throat. Although there was already a rise in prices which showed
that the amount needed for circulation had been exceeded, the cry for "more
circulating medium" was continued. The pressure for new issues became
stronger and stronger. The Parisian populace and the Jacobin Club were
especially loud in their demands for them; and, a few months later, on June
19, 1791, with few speeches, in a silence very ominous, a new issue was
made of six hundred millions more;—less than nine months after the former
great issue, with its solemn pledges to keep down the amount in circulation.

With the exception of a few thoughtful men, the whole nation again sang
paeans. 26
In this comparative ease of new issues is seen the action of a law in finance
as certain as the working of a similar law in natural philosophy. If a material
body fall from a height its velocity is accelerated, by a well-known law, in a
constantly increasing ratio: so in issues of irredeemable currency, in
obedience to the theories of a legislative body or of the people at large,
there is a natural law of rapidly increasing emission and depreciation. The
first inflation bills were passed with great difficulty, after very sturdy
resistance and by a majority of a few score out of nearly a thousand votes;
but we observe now that new inflation measures were passed more and
more easily and we shall have occasion to see the working of this same law
in a more striking degree as this history develops itself.
During the various stages of this debate there cropped up a doctrine old and
ominous. It was the same which appeared toward the end of the nineteenth
century in the United States during what became known as the "greenback
craze" and the free "silver craze." In France it had been refuted, a
generation before the Revolution, by Turgot, just as brilliantly as it was met
a hundred years later in the United States by James A. Garfield and his
compeers. This was the doctrine that all currency, whether gold, paper,
leather or any other material, derives its efficiency from the official stamp it
bears, and that, this being the case, a government may relieve itself of its
debts and make itself rich and prosperous simply by means of a printing
press:—fundamentally the theory which underlay the later American
doctrine of "fiat money."
There came mutterings and finally speeches in the Jacobin Club, in the
Assembly and in newspaper articles and pamphlets throughout the country,
taking this doctrine for granted. These could hardly affect thinking men
who bore in mind the calamities brought upon the whole people, and
especially upon the poorer classes, by this same theory as put in practice by
John Law, or as refuted by Turgot, but it served to swell the popular chorus
in favor of the issue of more assignats and plenty of them. 27
The great majority of Frenchmen now became desperate optimists,
declaring that inflation is prosperity. Throughout France there came

temporary good feeling. The nation was becoming inebriated with paper
money. The good feeling was that of a drunkard just after his draught; and it
is to be noted as a simple historical fact, corresponding to a physiological
fact, that, as draughts of paper money came faster the successive periods of
good feeling grew shorter.
Various bad signs began to appear. Immediately after each new issue came a
marked depreciation; curious it is to note the general reluctance to assign
the right reason. The decline in the purchasing power of paper money was
in obedience to the simplest laws in economics, but France had now gone
beyond her thoughtful statesmen and taken refuge in unwavering optimism,
giving any explanation of the new difficulties rather than the right one. A
leading member of the Assembly insisted, in an elaborate speech, that the
cause of depreciation was simply the want of knowledge and of confidence
among the rural population and he suggested means of enlightening them.
La Rochefoucauld proposed to issue an address to the people showing the
goodness of the currency and the absurdity of preferring coin. The address
was unanimously voted. As well might they have attempted to show that a
beverage made by mixing a quart of wine and two quarts of water would
possess all the exhilarating quality of the original, undiluted liquid.
Attention was aroused by another menacing fact;—specie disappeared more
and more. The explanations of this fact also displayed wonderful ingenuity
in finding false reasons and in evading the true one. A very common
explanation was indicated in Prudhomme's newspaper, "Les Révolutions de
Paris," of January 17, 1791, which declared that coin "will keep rising until
the people shall have hanged a broker." Another popular theory was that the
Bourbon family were, in some mysterious way, drawing off all solid money
to the chief centers of their intrigues in Germany. Comic and, at the same
time, pathetic, were evidences of the wide-spread idea that if only a goodly
number of people engaged in trade were hanged, the par value of the
assignats would be restored.
Still another favorite idea was that British emissaries were in the midst of
the people, instilling notions hostile to paper. Great efforts were made to
find these emissaries and more than one innocent person experienced the
popular wrath under the supposition that he was engaged in raising gold and
depressing paper. Even Talleyrand, shrewd as he was, insisted that the cause

was simply that the imports were too great and the exports too little. 28 As
well might he explain that fact that, when oil is mingled with water, water
sinks to the bottom, by saying that this is because the oil rises to the top.
This disappearance of specie was the result of a natural law as simple and
as sure in its action as gravitation; the superior currency had been
withdrawn because an inferior currency could be used. 29 Some efforts were
made to remedy this. In the municipality of Quilleboeuf a considerable
amount in specie having been found in the possession of a citizen, the
money was seized and sent to the Assembly. The people of that town treated
this hoarded gold as the result of unpatriotic wickedness or madness,
instead of seeing that it was but the sure result of a law working in every
land and time, when certain causes are present. Marat followed out this
theory by asserting that death was the proper penalty for persons who thus
hid their money.
Still another troublesome fact began now to appear. Though paper money
had increased in amount, prosperity had steadily diminished. In spite of all
the paper issues, commercial activity grew more and more spasmodic.
Enterprise was chilled and business became more and more stagnant.
Mirabeau, in his speech which decided the second great issue of paper, had
insisted that, though bankers might suffer, this issue would be of great
service to manufacturers and restore prosperity to them and their workmen.
The latter were for a time deluded, but were at last rudely awakened from
this delusion. The plenty of currency had at first stimulated production and
created a great activity in manufactures, but soon the markets were glutted
and the demand was diminished. In spite of the wretched financial policy of
years gone by, and especially in spite of the Revocation of the Edict of
Nantes, by which religious bigotry had driven out of the kingdom thousands
of its most skillful Protestant workmen, the manufactures of France had
before the Revolution come into full bloom. In the finer woolen goods, in
silk and satin fabrics of all sorts, in choice pottery and porcelain, in
manufactures of iron, steel, and copper, they had again taken their old
leading place upon the Continent. All the previous changes had, at the
worst, done no more than to inflict a momentary check on this highly
developed system of manufactures. But what the bigotry of Louis XIV and
the shiftlessness of Louis XV could not do in nearly a century, was
accomplished by this tampering with the currency in a few months. One

manufactory after another stopped. At one town, Lodève, five thousand
workmen were discharged from the cloth manufactories. Every cause
except the right one was assigned for this. Heavy duties were put upon
foreign goods; everything that tariffs and custom-houses could do was
done. Still the great manufactories of Normandy were closed, those of the
rest of the kingdom speedily followed, and vast numbers of workmen in all
parts of the country were thrown out of employment. 30 Nor was this the
case with the home demand alone. The foreign demand, which at first had
been stimulated, soon fell off. In no way can this be better stated than by
one of the most thoughtful historians of modern times, who says, "It is true
that at first the assignats gave the same impulse to business in the city as in
the country, but the apparent improvement had no firm foundation, even in
the towns. Whenever a great quantity of paper money is suddenly issued we
invariably see a rapid increase of trade. The great quantity of the circulating
medium sets in motion all the energies of commerce and manufactures;
capital for investment is more easily found than usual and trade perpetually
receives fresh nutriment. If this paper represents real credit, founded upon
order and legal security, from which it can derive a firm and lasting value,
such a movement may be the starting point of a great and widely-extended
prosperity, as, for instance, a splendid improvement in English agriculture
was undoubtedly owing to the emancipation of the country bankers. If on
the contrary, the new paper is of precarious value, as was clearly seen to be
the case with the French assignats as early as February, 1791, it can confer
no lasting benefits. For the moment, perhaps, business receives an impulse,
all the more violent because every one endeavors to invest his doubtful
paper in buildings, machines and goods, which, under all circumstances,
retain some intrinsic value. Such a movement was witnessed in France in
1791, and from every quarter there came satisfactory reports of the activity
of manufactures."
"But, for the moment, the French manufacturers derived great advantage
from this state of things. As their products could be so cheaply paid for,
orders poured in from foreign countries to such a degree that it was often
difficult for the manufacturers to satisfy their customers. It is easy to see
that prosperity of this kind must very soon find its limit.... When a further
fall in the assignats took place this prosperity would necessarily collapse,
and be succeeded by a crisis all the more destructive the more deeply men

had engaged in speculation under the influence of the first favorable
prospects." 31
Thus came a collapse in manufacturing and commerce, just as it had come
previously in France: just as it came at various periods in Austria, Russia,
America, and in all countries where men have tried to build up prosperity
on irredeemable paper. 32
All this breaking down of the manufactures and commerce of the nation
made fearful inroads on the greater fortunes; but upon the lesser, and upon
the little properties of the masses of the nation who relied upon their labor,
it pressed with intense severity. The capitalist could put his surplus paper
money into the government lands and await results; but the men who
needed their money from day to day suffered the worst of the misery. Still
another difficulty appeared. There had come a complete uncertainty as to
the future. Long before the close of 1791 no one knew whether a piece of
paper money representing a hundred livres would, a month later, have a
purchasing power of ninety or eighty or sixty livres. The result was that
capitalists feared to embark their means in business. Enterprise received a
mortal blow. Demand for labor was still further diminished; and here came
a new cause of calamity: for this uncertainty withered all far-reaching
undertakings. The business of France dwindled into a mere living from
hand to mouth. This state of things, too, while it bore heavily upon the
moneyed classes, was still more ruinous to those in moderate and, most of
all, to those in straitened circumstances. With the masses of the people, the
purchase of every article of supply became a speculation—a speculation in
which the professional speculator had an immense advantage over the
ordinary buyer. Says the most brilliant of apologists for French
revolutionary statesmanship, "Commerce was dead; betting took its place."
33

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

But these evils, though great, were small compared to those far more deep-
seated signs of disease which now showed themselves throughout the
country. One of these was the obliteration of thrift from the minds of the
French people. The French are naturally thrifty; but, with such masses of
money and with such uncertainty as to its future value, the ordinary motives
for saving and care diminished, And a loose luxury spread throughout the
country. A still worse outgrowth was the increase of speculation and
gambling. With the plethora of paper currency in 1791 appeared the first
evidences of that cancerous disease which always follows large issues of
irredeemable currency,—a disease more permanently injurious to a nation
than war, pestilence or famine. For at the great metropolitan centers grew a
luxurious, speculative, stock-gambling body, which, like a malignant tumor,
absorbed into itself the strength of the nation and sent out its cancerous
fibres to the remotest hamlets. At these city centers abundant wealth seemed
to be piled up: in the country at, large there grew a dislike of steady labor
and a contempt for moderate gains and simple living. In a pamphlet
published in May, 1791, we see how, in regard to this also, public opinion
was blinded. The author calls attention to the increase of gambling in values
of all sorts in these words: "What shall I say of the stock-jobbing, as
frightful as it is scandalous, which goes on in Paris under the very eyes of
our legislators,—a most terrible evil, yet, under the present circumstances,
—necessary?" The author also speaks of these stock-gamblers as using the
most insidious means to influence public opinion in favor of their measures;
and then proposes, seriously, a change in various matters of detail, thinking
that this would prove a sufficient remedy for an evil which had its roots far
down in the whole system of irredeemable currency. As well might a
physician prescribe a pimple wash for a diseased liver. 34
Now began to be seen more plainly some of the many ways in which an
inflation policy robs the working class. As these knots of plotting schemers
at the city centers were becoming bloated with sudden wealth, the
producing classes of the country, though having in their possession more
and more currency, grew lean. In the schemes and speculations put forth by
stock-jobbers and stimulated by the printing of more currency, multitudes of
small fortunes were absorbed and lost while a few swollen fortunes were
rapidly aggregated in the larger cities. This crippled a large class in the
country districts, which had employed a great number of workmen.

In the leading French cities now arose a luxury and license which was a
greater evil even than the plundering which ministered to it. In the country
the gambling spirit spread more and more. Says the same thoughtful
historian whom I have already quoted: "What a prospect for a country when
its rural population was changed into a great band of gamblers!" 35
Nor was this reckless and corrupt spirit confined to business men; it began
to break out in official circles, and public men who, a few years before, had
been thought above all possibility of taint, became luxurious, reckless,
cynical and finally corrupt. Mirabeau, himself, who, not many months
previous, had risked imprisonment and even death to establish
constitutional government, was now—at this very time—secretly receiving
heavy bribes. When, at the downfall of the monarchy a few years later, the
famous iron chest of the Tuileries was opened, there were found evidences
that, in this carnival of inflation and corruption, he had been a regularly
paid servant of the Royal court. 36 The artful plundering of the people at
large was bad enough, but worse still was this growing corruption in official
and legislative circles. Out of the speculating and gambling of the inflation
period grew luxury, and, out of this, corruption. It grew as naturally as a
fungus on a muck heap. It was first felt in business operations, but soon
began to be seen in the legislative body and in journalism. Mirabeau was,
by no means, the only example. Such members of the legislative body as
Jullien of Toulouse, Delaunay of Angers, Fabre d'Eglantine and their
disciples, were among the most noxious of those conspiring by legislative
action to raise and depress securities for stock-jobbing purposes. Bribery of
legislators followed as a matter of course, Delaunay, Jullien and Chabot
accepted a bribe of five hundred thousand livres for aiding legislation
calculated to promote the purposes of certain stock-jobbers. It is some
comfort to know that nearly all concerned were guillotined for it. 37
It is true that the number of these corrupt legislators was small, far less than
alarmists led the nation to suppose, but there were enough to cause wide-
spread distrust, cynicism and want of faith in any patriotism or any virtue.

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

the rural districts; from the sleek inventor of canards on the Paris Exchange
to the lying stock-jobber in the market town, all pressed vigorously for new
issues of paper; all were apparently able to demonstrate to the people that in
new issues of paper lay the only chance for national prosperity.
This great debtor class, relying on the multitude who could be approached
by superficial arguments, soon gained control. Strange as it might seem to
those who have not watched the same causes at work at a previous period in
France and at various times in other countries, while every issue of paper
money really made matters worse, a superstition gained ground among the
people at large that, if only enough paper money were issued and were more
cunningly handled the poor would be made rich. Henceforth, all opposition
was futile. In December, 1791, a report was made in the Legislative
Assembly in favor of yet another great issue of three hundred millions more
of paper money. In regard to this report Cambon said that more money was
needed but asked, "Will you, in a moment when stock-jobbing is carried on
with such fury, give it new power by adding so much more to the
circulation?" But such high considerations were now little regarded. Dorisy
declared, "There is not enough money yet in circulation; if there were more
the sales of national lands would be more rapid." And the official report of
his speech states that these words were applauded.
Dorisy then went on to insist that the government lands were worth at least
thirty-five hundred million livres and said: "Why should members ascend
the tribunal and disquiet France? Fear nothing; your currency reposes upon
a sound mortgage." Then followed a glorification of the patriotism of the
French people, which, he asserted, would carry the nation through all its
difficulties.
Becquet, speaking next, declared that "The circulation is becoming more
rare every day."
On December 17, 1791, a new issue was ordered, making in all twenty-one
hundred millions authorized. Coupled with this was the declaration that the
total amount in actual circulation should never reach more than sixteen
hundred millions. Before this issue the value of the 100 livres note had
fallen at Paris to about 80 livres; 38 immediately afterward it fell to about 68
livres. What limitations of the currency were worth may be judged from the

fact that not only had the declaration made hardly a year before, limiting the
amount in circulation to twelve hundred millions, been violated, but the
declaration, made hardly a month previous, in which the Assembly had as
solemnly limited the amount of circulation to fourteen hundred millions,
had also been repudiated.
The evils which we have already seen arising from the earlier issues were
now aggravated; but the most curious thing evolved out of all this chaos
was a new system of political economy. In speeches, newspapers and
pamphlets about this time, we begin to find it declared that, after all, a
depreciated currency is a blessing; that gold and silver form an
unsatisfactory standard for measuring values: that it is a good thing to have
a currency that will not go out of the kingdom and which separates France
from other nations: that thus shall manufacturers be encouraged; that
commerce with other nations may be a curse, and hindrance thereto may be
a blessing; that the laws of political economy however applicable in other
times, are not applicable to this particular period, and, however operative in
other nations, are not now so in France; that the ordinary rules of political
economy are perhaps suited to the minions of despotism but not to the free
and enlightened inhabitants of France at the close of the eighteenth century;
that the whole state of present things, so far from being an evil is a blessing.
All these ideas, and others quite as striking, were brought to the surface in
the debates on the various new issues. 39
Within four months came another report to the Assembly as ingenious as
those preceding. It declared: "Your committee are thoroughly persuaded
that the amount of the circulating medium before the Revolution was
greater than that of the assignats today: but at that time the money
circulated slowly and now it passes rapidly so that one thousand million
assignats do the work of two thousand millions of specie." The report
foretells further increase in prices, but by some curious jugglery reaches a
conclusion favorable to further inflation. Despite these encouragements the
assignats nominally worth 100 livres had fallen, at the beginning of
February, 1792, to about 60 livres, and during that month fell to 53 livres. 40
In March, Clavière became minister of finance. He was especially proud of
his share in the invention and advocacy of the assignats, and now pressed
their creation more vigorously than ever, and on April 30th, of the same

year, came the fifth great issue of paper money, amounting to three hundred
millions: at about the same time Cambon sneered ominously at public
creditors as "rich people, old financiers and bankers." Soon payment was
suspended on dues to public creditors for all amounts exceeding ten
thousand francs.
This was hailed by many as a measure in the interests of the poorer classes
of people, but the result was that it injured them most of all. Henceforward,
until the end of this history, capital was quietly taken from labor and locked
up in all the ways that financial ingenuity could devise. All that saved
thousands of laborers in France from starvation was that they were drafted
off into the army and sent to be killed on foreign battlefields.
On the last day of July, 1792, came another brilliant report from Fouquet,
showing that the total amount of currency already issued was about twenty-
four hundred millions, but claiming that the national lands were worth a
little more than this sum. A decree was now passed issuing three hundred
millions more. By this the prices of everything were again enhanced save
one thing, and that one thing was labor. Strange as it may at first appear,
while the depreciation of the currency had raised all products enormously in
price, the stoppage of so many manufactories and the withdrawal of capital
caused wages in the summer of 1792, after all the inflation, to be as small as
they had been four years before—viz., fifteen sous per day. No more
striking example can be seen of the truth uttered by Daniel Webster, that "of
all the contrivances for cheating the laboring classes of mankind, none has
been more effective than that which deludes them with paper-money." 41
Issue after issue followed at intervals of a few months, until, on December
14, 1792, we have an official statement to the effect that thirty-five hundred
millions had been put forth, of which six hundred millions had been burned,
leaving in circulation twenty-eight hundred 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 country, was equal to about half the present purchasing power of our
own dollar, it will be seen into what evils France had drifted. As the mania
for paper money ran its course, even the sous, obtained by melting down the
church bells, were more and more driven out of circulation and more and

more parchment notes from twenty four to five were issued, and at last
pieces of one sou, of half a sou and even of one-quarter of a sou were put in
circulation. 42
But now another source of wealth was opened to the nation. There came a
confiscation of the large estates of landed proprietors who had fled the
country. An estimate in 1793 made the value of these estates three billions
of francs. As a consequence, the issues of paper money were continued in
increased amounts, on the old theory that they were guaranteed by the
solemn pledge of these lands belonging to the state. Under the Legislative
Assembly through the year 1792 new issues were made virtually every
month, so that at the end of January, 1793, it was more and more realized
that the paper money actually in circulation amounted close upon three
thousand millions of francs. All this had been issued publicly, in open
sessions of the National and Legislative Assemblies; but now under the
National Convention, the two Committees of Public Safety and of Finance
began to decree new issues privately, in secret session.
As a result, the issues became larger still, and four hundred workmen were
added to those previously engaged in furnishing this paper money, and
these were so pressed with work from six o'clock in the morning until eight
in the evening that they struck for higher wages and were successful. 43
The consequences of these overissues now began to be more painfully
evident to the people at large. Articles of common consumption became
enormously dear and prices were constantly rising. Orators in the
Legislative Assembly, clubs, local meetings and elsewhere now endeavored
to enlighten people by assigning every reason for this depreciation save the
true one. They declaimed against the corruption of the ministry, the want of
patriotism among the Moderates, the intrigues of the emigrant nobles, the
hard-heartedness of the rich, the monopolizing spirit of the merchants, the
perversity of the shopkeepers,—-each and all of these as causes of the
difficulty. 44
This decline in the government paper was at first somewhat masked by
fluctuations. For at various times the value of the currency rose. The victory
of Jemappes and the general success of the French army against the
invaders, with the additional security offered by new confiscations of land,

caused, in November, 1792, an appreciation in the value of the currency; the
franc had stood at 57 and it rose to about 69; but the downward tendency
was soon resumed and in September, 1793, the assignats had sunk below
30. Then sundry new victories and coruscations of oratory gave momentary
confidence so that in December, 1793, they rose above 50. But despite these
fluctuations the downward tendency soon became more rapid than ever. 45
The washerwomen of Paris, finding soap so dear that they could hardly
purchase it, insisted that all the merchants who were endeavoring to save
something of their little property by refusing to sell their goods for the
wretched currency with which France was flooded, should be punished with
death; the women of the markets and the hangers-on of the Jacobin Club
called loudly for a law "to equalize the value of paper money and silver
coin." It was also demanded that a tax be laid especially on the rich, to the
amount of four hundred million francs, to buy bread. Marat declared loudly
that the people, by hanging shopkeepers and plundering stores, could easily
remove the trouble. The result was that on the 28th of February, 1793, at
eight o'clock in the evening, a mob of men and women in disguise began
plundering the stores and shops of Paris. At first they demanded only bread;
soon they insisted on coffee and rice and sugar; at last they seized
everything on which they could lay their hands—cloth, clothing, groceries
and luxuries of every kind. Two hundred such places were plundered. This
was endured for six hours and finally order was restored only by a grant of
seven million francs to buy off the mob. The new political economy was
beginning to bear, its fruits luxuriantly. A gaudy growth of it appeared at the
City Hall of Paris when, in response to the complaints of the plundered
merchants, Roux declared, in the midst of great applause, that "shopkeepers
were only giving back to the people what they had hitherto robbed them
of."
The mob having thus been bought off by concessions and appeased by
oratory, the government gained time to think, and now came a series of
amazing expedients,—and yet all perfectly logical.
Three of these have gained in French history an evil pre-eminence, and first
of the three was the Forced Loan.

In view of the fact that the well-to-do citizens were thought to be lukewarm
in their support of the politicians controlling the country, various
demagogues in the National Convention, which had now succeeded the
National, Constituent and Legislative Assemblies, found ample matter for
denunciations long and loud. The result outside the Convention was
increased activity of the guillotine; the results inside were new measures
against all who had money, and on June 22, 1793, the Convention
determined that there should be a Forced Loan, secured on the confiscated
lands of the emigrants and levied upon all married men with incomes of ten
thousand francs, and upon all unmarried men with incomes of six thousand
francs. It was calculated that these would bring into the treasury a thousand
millions of francs. But a difficulty was found. So many of the rich had lied
or had concealed their wealth that only a fifth of the sum required could be
raised, and therefore a law was soon passed which levied forced loans upon
incomes as low as one thousand, francs,—or, say, two hundred dollars of
American money. This tax was made progressive. On the smaller
proprietors it was fixed at one-tenth and on the larger, that is, on all incomes
above nine thousand francs, it was made one-half of the entire income.
Little if any provision was made for the repayment of this loan but the
certificates might be used for purchasing the confiscated real estate of the
church and of the nobility. 46
But if this first expedient shows how naturally a "fiat" money system runs
into despotism, the next is no less instructive in showing how easily it
becomes repudiation and dishonor.
As we have seen, the first issue of the assignats,—made by the National
Assembly, bore a portrait of the king; but on the various issues after the
establishment of a republic this emblem had been discarded. This change
led to a difference in value between the earlier and the later paper money.
The wild follies of fanatics and demagogues had led to an increasing belief
that the existing state of things could not last; that the Bourbons must ere
long return; that in such case, while a new monarch would repudiate all the
vast mass of the later paper issued by the Republic, he would recognize that
first issue bearing the face and therefore the guarantee of the king. So it was
that this first issue came to bear a higher value than those of later date. To
meet this condition of things it was now proposed to repudiate an that
earlier issue. In vain did sundry more thoughtful members of the

Convention plead that this paper money, amounting to five hundred and
fifty-eight millions of francs, bore the solemn guarantee of the nation, as
well as of the king; the current was irresistible. All that Cambon, the great
leader of finance at that time, could secure was a clause claiming to protect
the poor, to the effect that this demonetization should not extend to notes
below a hundred francs in value; and it was also agreed that any of the
notes, large or small, might be received in payment of taxes and for the
confiscated property of the clergy and nobility. To all the arguments
advanced against this breach of the national faith Danton, then at the height
of his power, simply declared that only aristocrats could favor notes bearing
the royal portrait, and gave forth his famous utterance: "Imitate Nature,
which watches over the preservation of the race but has no regard for
individuals." The decree was passed on the 31st of July, 1793, yet its futility
was apparent in less than two months, when the Convention decreed that
there should be issued two thousand millions of francs more in assignats
between the values of ten sous and four hundred francs, and when, before
the end of the year, five hundred millions more were authorized. 47
The third outgrowth of the vast issue of fiat money was the Maximum. As
far back as November, 1792, the Terrorist associate of Robespierre, St. Just,
in view of the steady rise in prices of the necessaries of life, had proposed a
scheme by which these prices should be established by law, at a rate
proportionate to the wages of the working classes. This plan lingered in
men's minds, taking shape in various resolutions and decrees until the
whole culminated on September 29, 1793, in the Law of the Maximum.
While all this legislation was high-handed, it was not careless. Even
statesmen of the greatest strength, having once been drawn into this flood,
were borne on into excesses which, a little earlier, would have appalled
them. Committees of experts were appointed to study the whole subject of
prices, and at last there were adopted the great "four rules" which seemed to
statesmen of that time a masterly solution of the whole difficulty. 48
First, the price of each article of necessity was to be fixed at one and one-
third its price in 1790. Secondly, all transportation was to be added at a
fixed rate per league. Thirdly, five per cent was to be added for the profit of
the wholesaler. Fourthly, ten per cent was to be added for the profit of the
retailer. Nothing could look more reasonable. Great was the jubilation. The

report was presented and supported by Barrère,—"the tiger monkey,"—then
in all the glory of his great orations: now best known from his portrait by
Macaulay. Nothing could withstand Barrère's eloquence. He insisted that
France had been suffering from a "Monarchical commerce which only
sought wealth," while what she needed and what she was now to receive
was a "Republican commerce—a commerce of moderate profits and
virtuous." He exulted in the fact that "France alone enjoys such a
commerce,—that it exists in no other nation." He poured contempt over
political economy as "that science which quacks have corrupted, which
pedants have obscured and which academicians have depreciated." France,
he said, has something better, and he declared in conclusion, "The needs of
the people will no longer be spied upon in order that the commercial classes
may arbitrarily take advantage." 49
The first result of the Maximum was that every means was taken to evade
the fixed price imposed, and the farmers brought in as little produce as they
possibly could. This increased the scarcity, and the people of the large cities
were put on an allowance. Tickets were issued authorizing the bearer to
obtain at the official prices a certain amount of bread or sugar or soap or
wood or coal to cover immediate necessities. 50
But it was found that the Maximum, with its divinely revealed four rules,
could not be made to work well—even by the shrewdest devices. In the
greater part of France it could not be enforced. As to merchandise of foreign
origin or merchandise into which any foreign product entered, the war had
raised it far above the price allowed under the first rule, namely, the price of
1790, with an addition of one-third. Shopkeepers therefore could not sell
such goods without ruin. The result was that very many went out of
business and the remainder forced buyers to pay enormous charges under
the very natural excuse that the seller risked his life in trading at all. That
this excuse was valid is easily seen by the daily lists of those condemned to
the guillotine, in which not infrequently figure the names of men charged
with violating the Maximum laws. Manufactures were very generally
crippled and frequently destroyed, and agriculture was fearfully depressed.
To detect goods concealed by farmers and shopkeepers, a spy system was
established with a reward to the informer of one-third of the value of the
goods discovered. To spread terror, the Criminal Tribunal at Strassburg was
ordered to destroy the dwelling of any one found guilty of selling goods

above the price set by law. The farmer often found that he could not raise
his products at anything like the price required by the new law, and when he
tried to hold back his crops or cattle, alleging that he could not afford to sell
them at the prices fixed by law, they were frequently taken from him by
force and he was fortunate if paid even in the depreciated fiat money—
fortunate, indeed, if he finally escaped with his life. 51
Involved in all these perplexities, the Convention tried to cut the Gordian
knot. It decreed that any person selling gold or silver coin, or making any
difference in any transaction between paper and specie, should be
imprisoned in irons for six years:—that any one who refused to accept a
payment in assignats, or accepted assignats at a discount, should pay a fine
of three thousand francs; and that any one committing this crime a second
time should pay a fine of six thousand francs and suffer imprisonment
twenty years in irons. Later, on the 8th of September, 1793, the penalty for
such offences was made death, with confiscation of the criminal's property,
and so reward was offered to any person informing the authorities regarding
any such criminal transaction. To reach the climax of ferocity, the
Convention decreed, in May, 1794, that the death penalty should be
inflicted on any person convicted of "having asked, before a bargain was
concluded, in what money payment was to be made." Nor was this all. The
great finance minister, Cambon, soon saw that the worst enemies of his
policy were gold and silver. Therefore it was that, under his lead, the
Convention closed the Exchange and finally, on November 13, 1793, under
terrifying penalties, suppressed all commerce in the precious metals. About
a year later came the abolition of the Maximum itself. 52
It is easily seen that these Maximum laws were perfectly logical. Whenever
any nation intrusts to its legislators the issue of a currency not based on the
idea of redemption in standard coin recognized in the commerce of civilized
nations, it intrusts to them the power to raise or depress the value of every
article in the possession of every citizen. Louis XIV had claimed that all
property in Prance was his own, and that what private persons held was as
much his as if it were in his coffers. But even this assumption is exceeded
by the confiscating power exercised in a country, where, instead of leaving
values to be measured by a standard common to the whole world, they are
left to be depressed or raised at the whim, caprice or interest of a body of

legislators. When this power is given, the power of prices is inevitably
included in it. 53
It may be said that these measures were made necessary by the war then
going on. Nothing could be more baseless than such an objection. In this
war the French soon became generally successful. It was quickly pushed
mainly upon foreign soil. Numerous contributions were levied upon the
subjugated countries to support the French armies. The war was one of
those in which the loss, falling apparently on future generations, first
stimulates, in a sad way, trade and production. The main cause of these evils
was tampering with the circulating medium of an entire nation; keeping all
values in fluctuation; discouraging enterprise; paralyzing energy;
undermining sobriety; obliterating thrift; promoting extravagance and
exciting riot by the issue of an irredeemable currency. The true business
way of meeting the enormous demands on France during the first years of
the Revolution had been stated by a true statesman and sound financier, Du
Pont de Nemours, at the very beginning. He had shown that using the same
paper as a circulating medium and as a means for selling the national real
estate was like using the same implement for an oyster knife and a razor. 54
It has been argued that the assignats sank in value because they were not
well secured,—that securing them on government real estate was as futile
as if the United States had, in the financial troubles of its early days,
secured notes on its real estate. This objection is utterly fallacious. The
government lands of our country were remote from the centers of capital
and difficult to examine; the French national real estate was near these
centers—even in them—and easy to examine. Our national real estate was
unimproved and unproductive; theirs was improved and productive—its
average productiveness in market in ordinary times being from four to five
per cent. 55
It has also been objected that the attempt to secure the assignats on
government real estate failed because of the general want of confidence in
the title derived by the purchasers from the new government. Every
thorough student of that period must know that this is a misleading
statement. Everything shows that the vast majority of the French people had
a fanatical confidence in the stability of the new government during the
greater part of the Revolution. There were disbelievers in the security of the

assignats just as there were disbelievers in the paper money of the United
States throughout our Civil War; but they were usually a small minority.
Even granting that there was a doubt as to investment in French lands, the
French people certainly had as much confidence in the secure possession of
government lands as any people can ever have in large issues of
government bonds: indeed, it is certain that they had far more confidence in
their lands as a security than modern nations can usually have in large
issues of bonds obtained by payments of irredeemable paper. One simple
fact, as stated by John Stuart Mill, which made assignats difficult to convert
into real estate was that the vast majority of people could not afford to make
investments outside their business; and this fact is no less fatal to any
attempt to contract large issues of irredeemable paper—save, perhaps, a
bold, statesmanlike attempt, which seizes the best time and presses every
advantage, eschewing all juggling devices and sacrificing everything to
maintain a sound currency based on standards common to the entire
financial world.
And now was seen, taking possession of the nation, that idea which
developed so easily out of the fiat money system;—the idea that the
ordinary needs of government may be legitimately met wholly by the means
of paper currency;—that taxes may be dispensed with. As a result, it was
found that the assignat printing press was the one resource left to the
government, and the increase in the volume of paper money became every
day more appalling.
It will doubtless surprise many to learn that, in spite of these evident results
of too much currency, the old cry of a "scarcity of circulating medium" was
not stilled; it appeared not long after each issue, no matter how large.
But every thoughtful student of financial history knows that this cry always
comes after such issues—nay, that it must come,—because in obedience to
a natural law, the former scarcity, or rather insufficiency of currency recurs
just as soon as prices become adjusted to the new volume, and there comes
some little revival of business with the usual increase of credit. 56
In August, 1793, appeared a new report by Cambon. No one can read it
without being struck by its mingled ability and folly. His final plan of
dealing with the public debt has outlasted all revolutions since, but his

disposition of the inflated currency came to a wretched failure. Against Du
Pont, who showed conclusively that the wild increase of paper money was
leading straight to, ruin, Cambon carried the majority in the great
assemblies and clubs by sheer audacity—the audacity of desperation. Zeal
in supporting the assignats became his religion. The National Convention
which succeeded the Legislative Assembly, issued in 1793 over three
thousand millions of assignats, and, of these, over twelve hundred millions
were poured into the circulation. And yet Cambon steadily insisted that the
security for the assignat currency was perfect. The climax of his zeal was
reached when he counted as assets in the national treasury the indemnities
which, he declared, France was sure to receive after future victories over
the allied nations with which she was then waging a desperate war. As
patriotism, it was sublime; as finance it was deadly. 57
Everything was tried. Very elaborately he devised a funding scheme which,
taken in connection with his system of issues, was in effect what in these
days would be called an "interconvertibility scheme" By various degrees of
persuasion or force,—the guillotine looming up in the background,—
holders of assignats were urged to convert them into evidence of national
debt, bearing interest at five per cent, with the understanding that if more
paper were afterward needed more would be issued. All in vain. The official
tables of depreciation show that the assignats continued to fall. A forced
loan, calling in a billion of these, checked this fall, but only for a moment.
The "interconvertibility scheme" between currency and bonds failed as
dismally as the "interconvertibility scheme" between currency and land had
failed. 58
A more effective expedient was a law confiscating the property of all
Frenchmen who left France after July 14, 1789, and who had not returned.
This gave new land to be mortgaged for the security of paper money.
All this vast chapter in financial folly is sometimes referred to as if it
resulted from the direct action of men utterly unskilled in finance. This is a
grave error. That wild schemers and dreamers took a leading part in setting
the fiat money system going is true; that speculation and interested
financiers made it worse is also true: but the men who had charge of French
finance during the Reign of Terror and who made these experiments, which
seem to us so monstrous, in order to rescue themselves and their country

from the flood which was sweeping everything to financial ruin were
universally recognized as among the most skillful and honest financiers in
Europe. Cambon, especially, ranked then and ranks now as among the most
expert in any period. The disastrous results of all his courage and ability in
the attempt to stand against the deluge of paper money show how powerless
are the most skillful masters of finance to stem the tide of fiat money
calamity when once it is fairly under headway; and how useless are all
enactments which they can devise against the underlying laws of nature.
Month after month, year after year new issues went on. Meanwhile
everything possible was done to keep up the value of paper. The city
authorities of Metz took a solemn oath that the assignats should bear the
same price whether in paper or specie,—and whether in buying or selling,
and various other official bodies throughout the nation followed this
example. In obedience to those who believed with the market women of
Paris, as stated in their famous petition, that "laws should be passed making
paper money as good as gold," Couthon, in August, 1793, had proposed and
carried a law punishing any person who should sell assignats at less than
their nominal value with imprisonment for twenty years in chains, and later
carried a law making investments in foreign countries by Frenchmen
punishable with death. 59
But to the surprise of the great majority of the French people, the value of
the assignats was found, after the momentary spasm of fear had passed, not
to have been permanently increased by these measures: on the contrary, this
"fiat" paper persisted in obeying the natural laws of finance and, as new
issues increased, their value decreased. Nor did the most lavish aid of
nature avail. The paper money of the nation seemed to possess a magic
power to transmute prosperity into adversity and plenty into famine. The
year 1794 was exceptionally fruitful: and yet with the autumn came scarcity
of provisions and with the winter came distress. The reason is perfectly
simple. The sequences in that whole history are absolutely logical. First, the
Assembly had inflated the currency and raised prices enormously. Next, it
had been forced to establish an arbitrary maximum price for produce. But
this price, large as it seemed, soon fell below the real value of produce;
many of the farmers, therefore, raised less produce or refrained from
bringing what they had to market. 60 But, as is usual in such cases, the
trouble was ascribed to everything rather than the real cause, and the most

severe measures were established in all parts of the country to force farmers
to bring produce to market, millers to grind and shopkeepers to sell it. 61
The issues of paper money continued. Toward the end of 1794 seven
thousand millions in assignats were in circulation. 62 By the end of May,
1795, the circulation was increased to ten thousand millions, at the end of
July, to fourteen thousand millions; and the value of one hundred francs in
paper fell steadily, first to four francs in gold, then to three, then to two and
one-half. 63 But, curiously enough, while this depreciation was rapidly
going on, as at various other periods when depreciation was rapid, there
came an apparent revival of business. The hopes of many were revived by
the fact that in spite of the decline of paper there was an exceedingly brisk
trade in all kinds of permanent property. Whatever articles of permanent
value certain needy people were willing to sell certain cunning people were
willing to buy and to pay good prices for in assignats. At this, hope revived
for a time in certain quarters. But ere long it was discovered that this was
one of the most distressing results of a natural law which is sure to come
into play under such circumstances. It was simply a feverish activity caused
by the intense desire of a large number of the shrewder class to convert their
paper money into anything and everything which they could hold and hoard
until the collapse which they foresaw should take place. This very activity
in business simply indicated the disease. It was simply legal robbery of the
more enthusiastic and trusting by the more cold-hearted and keen. It was,
the "unloading" of the assignats upon the mass of the people. 64
Interesting is it to note in the midst of all this the steady action of another
simple law in finance. Prisons, guillotines, enactments inflicting twenty
years' imprisonment in chains upon persons twice convicted of buying or
selling paper money at less than its nominal value, and death upon investors
in foreign securities, were powerless. The National Convention, fighting a
world in arms and with an armed revolt on its own soil, showed titanic
power, but in its struggle to circumvent one simple law of nature its
weakness was pitiable. The louis d'or stood in the market as a monitor,
noting each day, with unerring fidelity, the decline in value of the assignat;
a monitor not to be bribed, not to be scared. As well might the National
Convention try to bribe or scare away the polarity of the mariner's compass.
On August 1, 1795, this gold louis of 25 francs was worth in paper, 920
francs; on September 1st, 1,200 francs; on November 1st, 2,600 francs; on

December 1st, 3,050 francs. In February, 1796, it was worth 7,200 francs or
one franc in gold was worth 288 francs in paper. Prices of all commodities
went up nearly in proportion. 65 The writings of this period give curious
details. Thibaudeau, in his Memoirs, speaks of sugar as 500 francs a pound,
soap, 230 francs, candles, 140 francs. Mercier, in his lifelike pictures of the
French metropolis at that period, mentions 600 francs as carriage hire for a
single drive, and 6,000 for an entire day. Examples from other sources are
such as the following:—a measure of flour advanced from two francs in
1790, to 225 francs in 1795; a pair of shoes, from five francs to 200; a hat,
from 14 francs to 500; butter, to, 560 francs a pound; a turkey, to 900
francs. 66 Everything was enormously inflated in price except the wages of
labor. As manufacturers had closed, wages had fallen, until all that kept
them up seemed to be the fact that so many laborers were drafted off into
the army. From this state of things came grievous wrong and gross fraud.
Men who had foreseen these results and had gone into debt were of course
jubilant. He who in 1790 had borrowed 10,000 francs could pay his debts in
1796 for about 35 francs. Laws were made to meet these abuses. As far
back as 1794 a plan was devised for publishing official "tables of
depreciation" to be used in making equitable settlements of debts, but all
such machinery proved futile. On the 18th of May, 1796, a young man
complained to the National Convention that his elder brother, who had been
acting as administrator of his deceased father's estate, had paid the heirs in
assignats, and that he had received scarcely one three-hundredth part of the
real value of his share. 67 To meet cases like this, a law was passed
establishing a "scale of proportion." Taking as a standard the value of the
assignat when there were two billions in circulation, this law declared that,
in payment of debts, one-quarter should be added to the amount originally
borrowed for every five hundred millions added to the circulation. In
obedience to this law a man who borrowed two thousand francs when there
were two billions in circulation would have to pay his creditors twenty-five
hundred francs when half a billion more were added to the currency, and
over thirty-five thousand francs before the emissions of paper reached their
final amount. This brought new evils, worse, if possible, than the old. 68
The question will naturally be asked, On whom did this vast depreciation
mainly fall at last? When this currency had sunk to about one three-
hundredth part of its nominal value and, after that, to nothing, in whose

hands was the bulk of it? The answer is simple. I shall give it in the exact
words of that thoughtful historian from whom I have already quoted:
"Before the end of the year 1795 the paper money was almost exclusively
in the hands of the working classes, employees and men of small means,
whose property was not large enough to invest in stores of goods or national
lands. 69 Financiers and men of large means were shrewd enough to put as
much of their property as possible into objects of permanent value. The
working classes had no such foresight or skill or means. On them finally
came the great crushing weight of the loss. After the first collapse came up
the cries of the starving. Roads and bridges were neglected; many
manufactures were given up in utter helplessness." To continue, in the
words of the historian already cited: "None felt any confidence in the future
in any respect; few dared to make a business investment for any length of
time and it was accounted a folly to curtail the pleasures of the moment, to
accumulate or save for so uncertain a future." 70
This system in finance was accompanied by a system in politics no less
startling, and each system tended to aggravate the other. The wild radicals,
having sent to the guillotine first all the Royalists and next all the leading
Republicans they could entrap, the various factions began sending each
other to the same destination:—Hébertists, Dantonists, with various other
factions and groups, and, finally, the Robespierrists, followed each other in
rapid succession. After these declaimers and phrase-mongers had thus
disappeared there came to power, in October, 1795, a new government,—
mainly a survival of the more scoundrelly,—the Directory. It found the
country utterly impoverished and its only resource at first was to print more
paper and to issue even while wet from the press. These new issues were
made at last by the two great committees, with or without warrant of law,
and in greater sums than ever. Complaints were made that the array of
engravers and printers at the mint could not meet the demand for assignats
—that they could produce only from sixty to seventy millions per day and
that the government was spending daily from eighty to ninety millions.
Four thousand millions of francs were issued during one month, a little later
three thousand millions, a little later four thousand millions, until there had
been put forth over thirty-five thousand millions. The purchasing power of
this paper having now become almost nothing, it was decreed, on the 22nd
of December, 1795, that the whole amount issued should be limited to forty

thousand millions, including all that had previously been put forth and that
when this had been done the copper plates should be broken. Even in spite
of this, additional issues were made amounting to about ten thousand
millions. But on the 18th of February, 1796, at nine o'clock in the morning,
in the presence of a great crowd, the machinery, plates and paper for
printing assignats were brought to the Place Vendome and there, on the spot
where the Napoleon Column now stands, these were solemnly broken and
burned.
Shortly afterward a report by Camus was made to the Assembly that the
entire amount of paper money issued in less than six years by the
Revolutionary Government of France had been over forty-five thousand
millions of francs—that over six thousand millions had been annulled and
burned and that at the final catastrophe there were in circulation close upon
forty thousand millions. It will be readily seen that it was fully time to put
an end to the system, for the gold "louis" of twenty-five francs in specie
had, in February, 1796, as we have seen, become worth 7,200 francs, and,
at the latest quotation of all, no less than 15,000 francs in paper money—
that is, one franc in gold was nominally worth 600 francs in paper.
Such were the results of allowing dreamers, schemers, phrase-mongers,
declaimers and strong men subservient to these to control a government. 71

III.
The first new expedient of the Directory was to secure a forced loan of six
hundred million francs from the wealthier classes; but this was found
fruitless. Ominous it was when persons compelled to take this loan found
for an assignat of one hundred francs only one franc was allowed. Next a
National Bank was proposed; but capitalists were loath to embark in
banking while the howls of the mob against all who had anything especially
to do with money resounded in every city. At last the Directory bethought
themselves of another expedient. This was by no means new. It had been
fully tried on our continent twice before that time: and once, since—first, in
our colonial period; next, during our Confederation; lastly, by the "Southern
Confederacy" and here, as elsewhere, always in vain. But experience
yielded to theory—plain business sense to financial metaphysics. It was
determined to issue a new paper which should be "fully secured" and "as
good as gold."
Pursuant to this decision it was decreed that a new paper money "fully
secured and as good as gold" be issued under the name of "mandats." In
order that these new notes should be "fully secured," choice public real
estate was set apart to an amount fully equal to the nominal value of the
issue, and any one offering any amount of the mandats could at once take
possession of government lands; the price of the lands to be determined by
two experts, one named by the government and one by the buyer, and
without the formalities and delays previously established in regard to the
purchase of lands with assignats.
Perhaps the most whimsical thing in the whole situation was the fact that
the government, pressed as it was by demands of all sorts, continued to
issue the old assignats at the same time that it was discrediting them by
issuing the new mandats. And yet in order to make the mandats "as good as
gold" it was planned by forced loans and other means to reduce the quantity
of assignats in circulation, so that the value of each assignat should be
raised to one-thirtieth of the value of gold, then to make mandats legal
tender and to substitute them for assignats at the rate of one for thirty.

Never were great expectations more cruelly disappointed. Even before the
mandats could be issued from the press they fell to thirty-five per cent of
their nominal value; from this they speedily fell to fifteen, and soon after to
five per cent, and finally, in August, 1796, six months from their first issue,
to three per cent. This plan failed—just as it failed in New England in 1737;
just as it failed under our own Confederation in 1781; just as it failed under
the Southern Confederacy during our Civil War. 72
To sustain this new currency the government resorted to every method that
ingenuity could devise. Pamphlets suited to people of every capacity were
published explaining its advantages. Never was there more skillful puffing.
A pamphlet signed "Marchant" and dedicated to "People of Good Faith"
was widely circulated, in which Marchant took pains to show the great
advantage of the mandats as compared with assignats,—how land could be
more easily acquired with them; how their security was better than with
assignats; how they could not, by any possibility, sink in values as the
assignats had done. But even before the pamphlet was dry from the press
the depreciation of the mandats had refuted his entire argument. 73
The old plan of penal measures was again pressed. Monot led off by
proposing penalties against those who shall speak publicly against the
mandats; Talot thought the penalties ought to be made especially severe;
and finally it was enacted that any persons "who by their discourse or
writing shall decry the mandats shall be condemned to a fine of not less
than one thousand francs or more than ten thousand; and in case of a
repetition of the offence, to four years in irons." It was also decreed that
those who refused to receive the mandats should be fined,—the first time,
the exact sum which they refuse; the second time, ten times as much; and
the third time, punished with two years in prison. But here, too, came in the
action of those natural laws which are alike inexorable in all countries. This
attempt proved futile in France just as it had proved futile less than twenty
years before in America. No enactments could stop the downward tendency
of this new paper "fully secured," "as good as gold"; the laws that finally
govern finance are not made in conventions or congresses. 74
From time to time various new financial juggles were tried, some of them
ingenious, most of them drastic. It was decreed that all assignats above the
value of one hundred francs should cease to circulate after the beginning of

June, 1796. But this only served to destroy the last vestige of, confidence in
government notes of any kind. Another expedient was seen in the decree
that paper money should be made to accord with a natural and immutable
standard of value and that one franc in paper should thenceforth be worth
ten pounds of wheat. This also failed. On July 16th another decree seemed
to show that the authorities despaired of regulating the existing currency
and it was decreed that all paper, whether mandats or assignats, should be
taken at its real value, and that bargains might be made in whatever
currency people chose. The real value of the mandats speedily sank to about
two per cent of their nominal value and the only effect of this legislation
seemed to be that both assignats and mandats went still lower. Then from
February 4 to February 14, 1797, came decrees and orders that the
engraving apparatus for the mandats should be destroyed as that for the
assignats had been, that neither assignats nor mandats should longer be a
legal tender and that old debts to the state might be paid for a time with
government paper at the rate of one per cent of their face value. 75 Then,
less than three months later, it was decreed that the twenty-one billions of
assignats still in circulation should be annulled. Finally, on September 30,
1797, as the culmination of these and various other experiments and
expedients, came an order of the Directory that the national debts should be
paid two-thirds in bonds which might be used in purchasing confiscated real
estate, and the remaining "Consolidated Third," as it was called, was to be
placed on the "Great Book" of the national debt to be paid thenceforth as
the government should think best.
As to the bonds which the creditors of the nation were thus forced to take,
they sank rapidly, as the assignats and mandats had done, even to three per
cent of their value. As to the "Consolidated Third," that was largely paid,
until the coming of Bonaparte, in paper money which sank gradually to
about six per cent of its face value. Since May, 1797, both assignats and
mandats had been virtually worth nothing.
So ended the reign of paper money in France. The twenty-five hundred
millions of mandats went into the common heap of refuse with the previous
forty-five thousand millions of assignats: the nation in general, rich and
poor alike, was plunged into financial ruin from one end to the other.

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

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

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

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

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

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

The luxury and extravagance of the currency gamblers and their families
form one of the most significant features in any picture of the social
condition of that period. 77
A few years before this the leading women in French society showed a
nobility of character and a simplicity in dress worthy of Roman matrons. Of
these were Madame Boland and Madame Desmoulins; but now all was
changed. At the head of society stood Madame Tallien and others like her,
wild in extravagance, daily seeking new refinements in luxury, and
demanding of their husbands and lovers vast sums to array them and to feed
their whims. If such sums could not be obtained honestly they must be had
dishonestly. The more closely one examines that period, the more clearly he
sees that the pictures, given by Thibaudeau and Challamel and De Goncourt
are not at all exaggerated. 78
The contrast between these gay creatures of the Directory period and the
people at large was striking. Indeed much as the vast majority of the
wealthy classes suffered from impoverishment, the laboring classes,
salaried employees of all sorts, and people of fixed income and of small
means, especially in the cities, underwent yet greater distress. These were
found, as a rule, to subsist mainly on daily government rations of bread at
the rate of one pound per person. This was frequently unfit for food and was
distributed to long lines of people, men, women and children, who were at
times obliged to wait their turn even from dawn to dusk. The very rich
could, by various means, especially by bribery, obtain better bread, but only
at enormous cost. In May, 1796, the market price of good bread was, in
paper, 80 francs (16 dollars) per pound and a little later provisions could not
be bought for paper money at any price. 79
And here it may be worth mentioning that there was another financial
trouble especially vexatious. While, as we have seen, such enormous sums,
rising from twenty to forty thousand millions of francs in paper, were put in
circulation by the successive governments of the Revolution, enormous
sums had been set afloat in counterfeits by criminals and by the enemies of
France. These came not only from various parts of the French Republic but
from nearly all the surrounding nations, the main source being London.
Thence it was that Count Joseph de Puisaye sent off cargoes of false paper,
excellently engraved and printed, through ports in Brittany and other

disaffected parts of France. One seizure by General Hoche was declared by
him to exceed in nominal value ten thousand millions of francs. With the
exception of a few of these issues, detection was exceedingly difficult, even
for experts; for the vast majority of the people it was impossible.
Nor was this all. At various times the insurgent royalists in La Vendee and
elsewhere put their presses also in operation, issuing notes bearing the
Bourbon arms,—the fleur-de-lis, the portrait of the Dauphin (as Louis
XVII) with the magic legend "De Par le Roi," and large bodies of the
population in the insurgent districts were forced to take these. Even as late
as 1799 these notes continued to appear. 80
The financial agony was prolonged somewhat by attempts to secure funds
by still another "forced loan," and other discredited measures, but when all
was over with paper money, specie began to reappear—first in sufficient
sums to do the small amount of business which remained after the collapse.
Then as the business demand increased, the amount of specie flowed in
from the world at large to meet it and the nation gradually recovered from
that long paper-money debauch.
Thibaudeau, a very thoughtful observer, tells us in his Memoirs that great
fears were felt as to a want of circulating medium between the time when
paper should go out and coin should come in; but that no such want was
severely felt—that coin came in gradually as it was wanted. 81
Nothing could better exemplify the saying of one of the most shrewd of
modern statesmen that "There will always be money." 82
But though there soon came a degree of prosperity—as compared with the
distress during the paper-money orgy, convalescence was slow. The acute
suffering from the wreck and rain brought by assignats, mandats and other
paper currency in process of repudiation lasted nearly ten years, but the
period of recovery lasted longer than the generation which followed. It
required fully forty years to bring capital, industry, commerce and credit up
to their condition when the Revolution began, and demanded a "man on
horseback," who established monarchy on the ruins of the Republic and
thew away millions of lives for the Empire, to be added to the millions
which had been sacrificed by the Revolution. 83

Such, briefly sketched in its leading features, is the history of the most
skillful, vigorous and persistent attempt ever made to substitute for natural
laws in finance the ability of legislative bodies, and, for a standard of value
recognized throughout the world, a national standard devised by theorists
and manipulated by schemers. Every other attempt of the same kind in
human history, under whatever circumstances, has reached similar results in
kind if not in degree; all of them show the existence of financial laws as real
in their operation as those which hold the planets in their courses. 84
I have now presented this history in its chronological order—the order of
events: let me, in conclusion, sum it up, briefly, in its logical order,—the
order of cause and effect.
And, first, in the economic department. From the early reluctant and careful
issues of paper we saw, as an immediate result, improvement and activity in
business. Then arose the clamor for more paper money. At first, new issues
were made with great difficulty; but, the dyke once broken, the current of
irredeemable currency poured through; and, the breach thus enlarging, this
currency was soon swollen beyond control. It was urged on by speculators
for a rise in values; by demagogues who persuaded the mob that a nation,
by its simple fiat, could stamp real value to any amount upon valueless
objects. As a natural consequence a great debtor class grew rapidly, and this
class gave its influence to depreciate more and more the currency in which
its debts were to be paid. 85
The government now began, and continued by spasms to grind out still
more paper; commerce was at first stimulated by the difference in
exchange; but this cause soon ceased to operate, and commerce, having
been stimulated unhealthfully, wasted away.
Manufactures at first received a great impulse; but, ere long, this
overproduction and overstimulus proved as fatal to them as to commerce.
From time to time there was a revival of hope caused by an apparent revival
of business; but this revival of business was at last seen to be caused more
and more by the desire of far-seeing and cunning men of affairs to exchange
paper money for objects of permanent value. As to the people at large, the
classes living on fixed incomes and small salaries felt the pressure first, as

soon as the purchasing power of their fixed incomes was reduced. Soon the
great class living on wages felt it even more sadly.
Prices of the necessities of life increased: merchants were obliged to
increase them, not only to cover depreciation of their merchandise, but also
to cover their risk of loss from fluctuation; and, while the prices of products
thus rose, wages, which had at first gone up, under the general stimulus,
lagged behind. Under the universal doubt and discouragement, commerce
and manufactures were checked or destroyed. As a consequence the demand
for labor was diminished; laboring men were thrown out of employment,
and, under the operation of the simplest law of supply and demand, the
price of labor—the daily wages of the laboring class—went down until, at a
time when prices of food, clothing and various articles of consumption were
enormous, wages were nearly as low as at the time preceding the first issue
of irredeemable currency.
The mercantile classes at first thought themselves exempt from the general
misfortune. They were delighted at the apparent advance in the value of the
goods upon their shelves. But they soon found that, as they increased prices
to cover the inflation of currency and the risk from fluctuation and
uncertainty, purchases became less in amount and payments less sure; a
feeling of insecurity spread throughout the country; enterprise was
deadened and stagnation followed.
New issues of paper were then clamored for as more drams are demanded
by a drunkard. New issues only increased the evil; capitalists were all the
more reluctant to embark their money on such a sea of doubt. Workmen of
all sorts were more and more thrown out of employment. Issue after issue
of currency came; but no relief resulted save a momentary stimulus, which
aggravated the disease. The most ingenious evasions of natural laws in
finance which the most subtle theorists could contrive were tried—all in
vain; the most brilliant substitutes for those laws were tried; "self-
regulating" schemes, "interconverting" schemes—all equally vain. 86 All
thoughtful men had lost confidence. All men were waiting; stagnation
became worse and worse. At last came the collapse and then a return, by a
fearful shock, to a state of things which presented something like certainty
of remuneration to capital and labor. Then, and not till then, came the
beginning of a new era of prosperity.

Just as dependent on the law of cause and effect was the moral
development. Out of the inflation of prices grew a speculating class; and, in
the complete uncertainty as to the future, all business became a game of
chance, and all business men, gamblers. In city centers came a quick growth
of stock-jobbers and speculators; and these set a debasing fashion in
business which spread to the remotest parts of the country. Instead of
satisfaction with legitimate profits, came a passion for inordinate gains.
Then, too, as values became more and more uncertain, there was no longer
any motive for care or economy, but every motive for immediate
expenditure and present enjoyment. So came upon the nation the
obliteration of thrift. In this mania for yielding to present enjoyment rather
than providing for future comfort were the seeds of new growths of
wretchedness: luxury, senseless and extravagant, set in: this, too, spread as a
fashion. To feed it, there came cheatery in the nation at large and corruption
among officials and persons holding trusts. While men set such fashions in
private and official business, women set fashions of extravagance in dress
and living that added to the incentives to corruption. Faith in moral
considerations, or even in good impulses, yielded to general distrust.
National honor was thought a fiction cherished only by hypocrites.
Patriotism was eaten out by 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
expect, will always be the result of them until the fiat of the Almighty shall
evolve laws in the universe radically different from those which at present
obtain. 87
And, finally, as to the general development of the theory and practice which
all this history records: my subject has been Fiat Money in France; How it
came; What it brought; and How it ended.
It came by seeking a remedy for a comparatively small evil in an evil
infinitely more dangerous. To cure a disease temporary in its character, a
corrosive poison was administered, which ate out the vitals of French
prosperity.

It progressed according to a law in social physics which we may call the
"law of accelerating issue and depreciation." It was comparatively easy to
refrain from the first issue; it was exceedingly difficult to refrain from the
second; to refrain from the third and those following was practically
impossible.
It brought, as we have seen, commerce and manufactures, the mercantile
interest, the agricultural interest, to ruin. It brought on these the same
destruction which would come to a Hollander opening the dykes of the sea
to irrigate his garden in a dry summer.
It ended in the complete financial, moral and political prostration of France-
a prostration from which only a Napoleon could raise it.
But this history would be incomplete without a brief sequel, showing how
that great genius profited by all his experience. When Bonaparte took the
consulship the condition of fiscal affairs was appalling. The government
was bankrupt; an immense debt was unpaid. The further collection of taxes
seemed impossible; the assessments were in hopeless confusion. War was
going on in the East, on the Rhine, and in Italy, and civil war, in La Vendée.
All the armies had long been unpaid, and the largest loan that could for the
moment be effected was for a sum hardly meeting the expenses of the
government for a single day. At the first cabinet council Bonaparte was
asked what he intended to do. He replied, "I will pay cash or pay nothing."
From this time he conducted all his operations on this basis. He arranged
the assessments, funded the debt, and made payments in cash; and from this
time—during all the campaigns of Marengo, Austerlitz, Jena, Eylau,
Friedland, down to the Peace of Tilsit in 1807—there was but one
suspension of specie payment, and this only for a few days. When the first
great European coalition was formed against the Empire, Napoleon was
hard pressed financially, and it was proposed to resort to paper money; but
he wrote to his minister, "While I live I will never resort to irredeemable
paper." He never did, and France, under this determination, commanded all
the gold she needed. When Waterloo came, with the invasion of the Allies,
with war on her own soil, with a change of dynasty, and with heavy
expenses for war and indemnities, France, on a specie basis, experienced no
severe financial distress.

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

NOTES
Note: The White Collection at the Cornell University library mentioned in
many of the following notes is described here:
http://rmc.library.cornell.edu/collections/subjects/frrev.html
THE BANK OF NEW YORK, established in 1784, was the only Bank in
existence in the city of New York at the time of the French experiment with
fiat money.
THE BANK OF NEW YORK AND TRUST COMPANY, which celebrates
its one-hundred and fiftieth anniversary in March, 1934, considers it a
privilege to be able to distribute some copies of this scholarly article of the
late Andrew D. White. The article emphasizes the fact that the use of fiat
money in France was in its beginning a sincere effort on the part of
intelligent members of the National Assembly to stem the tide of misery
and wretchedness which had brought about the Revolution in 1789. But the
article also shows clearly that once started on a small scale, it became
utterly impossible to control the currency inflation and that after some slight
indications of improvement in conditions, the situation went from bad to
worse. In the long run, those most injured were the people whom it was
most desired to help—the laborer, the wage earner and those whose
incomes from previous savings were smallest.
ANDREW D. WHITE had a long and distinguished career as educator,
historian, economist and diplomat; his description of the events in France
that followed the experiment with fiat money is intensely interesting and
well Worth the attention of every thinking person in the United States of
1933.

FOOTNOTES:
1 (return)
[ A paper read before a meeting of
Senators and Members of the House of
Representatives of both political parties,
at Washington, April 12th, and before
the Union League Club, at New York,
April 13th, 1876, and now (1914)
revised and extended.]
2 (return)
[ For proof that the financial situation of
France at that time was by no means
hopeless, see Storch, "Economie
Politique," vol. iv, p. 159.]
3 (return)
[ See Moniteur, sitting of April 10,
1790.]
4 (return)
[ Ibid., sitting of April 15, 1790.]
5 (return)
[ For details of this struggle, see Buchez
and Roux, "Histoire Parlementaire de la
Révolution Française," vol. iii, pp. 364,
365, 404. For the wild utterances of
Marat throughout this whole history, see
the full set of his "L'ami du peuple" in
the President White Collection of the
Cornell University. For Bergasse's
pamphlet and a mass of similar
publications, see the same collection.
For the effect produced by them, see
Challamel, "Les Français sous la
Révolution"; also De Goncourt, "La
Société Française pendant la
Révolution," &c.]
For the Report referred to, see Levasseur,
"Histoire des classes ouvriès et de
l'industrie en France de 1789 à 1870,"
Paris, 1903, vol. i., chap. 6. Levasseur
(vol. 1, p. 120), a very strong
conservative in such estimates, sets the
total value of church property at two

thousand millions; other authorities put
it as high as twice that sum. See
especially Taine, liv. ii, ch. I., who gives
the valuation as "about four milliards."
Sybel, "Gesch. der Revolutionszeit,"
gives it as two milliards and Briand, "La
séparation" &c., agrees with him. See
also De Nerve, "Finances Françaises,"
vol. ii, pp. 236-240; also Alison,
"History of Europe," vol. i.]
6 (return)
[ For striking pictures of this feeling
among the younger generation of
Frenchmen, see Challamel, "Sur la
Révolution," p. 305. For general history
of John Law's paper money, see Henri
Martin, "Histoire de France"; also
Blanqui, "Histoire de l'économie
politique," vol. ii, pp. 65-87; also Senior
on "Paper Money," sec. iii, Pt. I, also
Thiers, "Histoire de Law"; also
Levasseur, op. cit. Liv. i., chap. VI.
Several specimens of John Law's paper
currency are to be found in the White
Collection in the Library of Cornell
University,—some, numbered with
enormous figures.]
7 (return)
[ See Buchez and Roux, "Histoire
Parlementaire," vol. v, p. 321, et seq.
For an argument to prove that the
assignats were, after all, not so well
secured as John Law's money, see
Storch, "Economie Politique," vol. iv, p.
160.]
8 (return)
[ For specimens of this first issue and of
nearly every other issue during the
French Revolution, see the extensive
collection of originals in the Cornell
University Library. For a virtually
complete collection of photographic
copies, see Dewamin, "Cent ans de
numismatique française," vol. i,
passim.]
9 (return)
[ See "Addresse de l'Assemblée

nationals sur lea emissions d'assignats
monnaies," p. 5.]
10 (return)
[ Ibid., p. 10.]
11 (return)
[ 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.]
12 (return)
[ Von Sybel, "History of the French
Revolution," vol. i, p. 252; also
Levasseur, as above, pp. 137 and
following.]
13 (return)
[ For Mirabeau's real opinion on
irredeemable paper, see his letter to
Cerutti, in a leading article of the
"Moniteur"; also "Mèmoires do
Mirabeau," vol. vii, pp. 23, 24 and
elsewhere. For his pungent remarks
above quoted, see Levasseur, ibid., vol.
i, p. 118.]
14 (return)
[ See "Moniteur," August 27, 1790.]
15 (return)
[ "Moniteur," August 28, 1790; also
Levasseur, as above, pp. 139 et seq.]
16 (return)
[ "Par une seule opération, grande,
simple, magnifique." See "Moniteur."
The whole sounds curiously like the
proposals of the "Greenbackers,"
regarding the American debt, some
years since.]
17 (return)
[ "Moniteur," August 29, 1790.]
18 (return)
[ See Lacretelle, "18me Siécle," vol.
viii, pp. 84-87; also Thiers and Mignet.]
19 (return)
[ See Hatin, Histoire de la Presse en
France, vols. v and vi.]

20 (return)
[ See "Moniteur," Sept. 5, 6 and 20,
1790.]
21 (return)
[ See Levasseur, vol. i, p. 142.]
22 (return)
[ See speech in "Moniteur"; also in
Appendix to Thiers' "History of the
French Revolution."]
23 (return)
[ See Levassear, "Classes ouvrières,"
etc., vol. i, p. 149.]
24 (return)
[ See Levasseur, pp. 151 et seq. Various
examples of these "confidence bills" are
to be seen in the Library of Cornell
University.]
25 (return)
[ See Levasseur, vol. i, pp. 155-156.]
26 (return)
[ See Von Sybel, "History of the
Revolution," vol. i, p. 265; also
Levasseur, as above, vol. i, pp. 152-
160.]
27 (return)
[ For Turgot's argument against "fiat
money" theory, see A. D. White, "Seven
Great Statesmen in the Warfare of
Humanity with Unreason," article on
Turgot, pp. 169, et seq.]
28 (return)
[ See De Goncourt, "Société française,"
for other explanations; "Les Révolutions
de Paris," vol. ii, p. 216; Challamel,
"Les Français sous la Révolution";
Senior, "On Some Effects of Paper
Money," p. 82; Buchez and Roux,
"Histoire Parlementaire," etc., vol. x, p.
216; Aulard, "Paris pendant la
Révolution thermidorienne," passim,
and especially "Rapport du bureau de
surveillance," vol. ii, pp. 562, et seq.
(Dec. 4-24, 1795.)]

29 (return)
[ 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.]
30 (return)
[ See De Goncourt, "Société Française,"
p. 214.]
31 (return)
[ See Von Sybel, History of the French
Revolution, vol. 1, pp. 281, 283.]
32 (return)
[ For proofs that issues of irredeemable
paper at first stimulated manufactures
and commerce in Austria and afterward
ruined them, see Storch's "Economie
politique," vol. iv, p. 223, note; and for
the same effect produced by the same
causes in Russia, see ibid., end of vol.
iv. For the same effects in America, see
Sumner's "History of American
Currency." For general statement of
effect of inconvertible issues on foreign
exchanges see McLeod on "Banking," p.
186.]
33 (return)
[ See Louis Blanc, "Histoire de la
Révolution," tome xii, p. 113.]
34 (return)
[ See "Extrait du registre des
délibérations de la section de la
bibliothèque," May 3, 1791, pp. 4, 5.]
35 (return)
[ Von Sybel, vol. i, p. 273.]
36 (return)
[ For general account, see Thiers'
"Révolution," chap. xiv; also Lacretelle,
vol. viii, p. 109; also "Memoirs of
Mallet du Pan." For a good account of
the intrigues between the court and
Mirabeau and of the prices paid him, see
Reeve, "Democracy and Monarchy in
France," vol. i, pp. 213-220. For a very
striking caricature published after the
iron chest in the Tuileries was opened

and the evidences of bribery of
Mirabeau fully revealed, see Challamel,
"Musée," etc. Vol. i, p. 341, is
represented as a skeleton sitting on a
pile of letters, holding the French crown
in one hand and a purse of gold in the
other.]
37 (return)
[ Thiers, chap. ix.]
38 (return)
[ For this and other evidences of steady
decline in the purchasing power of the
assignats, see Caron, "Tableaux de
Dépréciation du papier-monnaie," Paris,
1909, p. 386.]
39 (return)
[ See especially "Discours de Fabre
d'Eglantine," in "Moniteur" for August
11, 1793; also debate in "Moniteur" of
September 15, 1793; also Prudhomme's
"Révolutions de Paris." For arguments
of much the same tenor, see vast
numbers of pamphlets, newspaper
articles and speeches during the
"Greenback Craze,"—and the craze for
unlimited coinage of silver,—in the
United States.]
40 (return)
[ See Caron, "Tableaux de
Dépréciation," as above, p. 386.]
41 (return)
[ Von Sybel, vol. i, pp. 509, 510, 515;
also Villeneuve Bargemont, "Histoire de
l'Economie Politique," vol. ii, p. 213.]
42 (return)
[ As to the purchasing power of money
at that time, see Arthur Young, "Travels
in France during the Years 1787, 1788
and 1789." For notices of the small
currency with examples of satirical
verses written regarding it, see
Challamel, "Les français sous la
Révolution," pp. 307, 308. See also
Mercier, "Le Nouveau Paris," edition of
1800, chapter ccv., entitled "Parchemin
Monnaie." A series of these petty notes

will be found in the White collection of
the Cornell University Library. They are
very dirty and much worn, but being
printed on parchment, remain perfectly
legible. For issue of quarter-"sou"
pieces see Levasseur, p. 180.]
43 (return)
[ See Levasseur, vol. i, p. 176.]
44 (return)
[ For Chaumette's brilliant display of
fictitious reasons for the decline see
Thiers, Shoberl's translation, published
by Bentley, vol. iii, p. 248.]
45 (return)
[ For these fluctuations, see Caron, as
above, p. 387.]
46 (return)
[ One of the Forced Loan certificates
will be found in the White Collection in
the Library of Cornell University.]
47 (return)
[ For details of these transactions, see
Levasseur, as above, vol. i, chap. 6, pp.
181, et seq. Original specimens of these
notes, bearing the portrait of Louis XVI
will be found in the Cornell University
Library (White Collection) and for the
whole series perfectly photographed in
the same collection, Dewarmin, "Cent
ans de numismatique française," vol. i,
pp. 143-165.]
48 (return)
[ For statements showing the distress
and disorder that forced the Convention
to establish the "Maximum" see
Levasseur, vol. i, pp. 188-193.]
49 (return)
[ See Levasseur, as above, vol. i, pp.
195-225.]
50 (return)
[ See specimens of these tickets in the
White Collection in the Cornell
Library.]

51 (return)
[ For these condemnations to the
guillotine see the officially published
trials and also the lists of the
condemned, in the White Collection,
also the lists given daily in the
"Moniteur." For the spy system, see
Levasseur, vol. i, p. 194.]
52 (return)
[ See Levasseur, as above, vol. i, p. 186.
For an argument to show that the
Convention was led into this Draconian
legislation, not by necessity, but by its
despotic tendencies, see Von Sybel's
"History of the French Revolution," vol.
iii, pp. 11, 12. For general statements of
theories underlying the "Maximum," see
Thiers; for a very interesting picture, by
an eye-witness, of the absurdities and
miseries it caused, see Mercier,
"Nouveau Paris," edition of 1800,
chapter XLIV.]
53 (return)
[ For a summary of the report of the
Committee, with list of articles
embraced under it, and for various
interesting details, see Villeneuve
Bargemont, "Histoire de l'Economie
Politique," vol. ii, pp. 213-239; also
Levasseur, as above. For curious
examples of severe penalties for very
slight infringements on the law on the
subject, see Louis Blanc, "Histoire de la
Révolution française," tome x, p. 144.
For Louis XIVth's claim see "Memoirs
of Louis XIV for the Instruction of the
Dauphin."]
For a simple exposition of the way in which the
exercise of this power became simply
confiscation of all private property in
France, see Mallet Du Pan's "Memoirs,"
London, 1852, vol. ii, p. 14.]
54 (return)
[ See Du Pont's arguments, as given by
Levasseur.]
55 (return)
[ Louis Blanc calls attention to this very

fact in showing the superiority of the
French assignats to the old American
Continental currency, See his "Histoire
de la Révolution française," tome xii, p.
98.]
56 (return)
[ See Sumner, as above, p. 220.]
57 (return)
[ See Levasseur, as above, vol. i, p.
178.]
58 (return)
[ See Cambon's "Report," Aug. 15,
1793, pp. 49-60; also, "Decree of Aug.
24, 1793," sec. 31, chapters XCVI-CIII.
Also, "Tableaux de la dépréciation de
papier monnaie dans le department de la
Seine."]
59 (return)
[ For the example of Metz and other
authorities, see Levasseur, as above, vol.
i, p. 180.]
60 (return)
[ See Von Sybel, vol. iii, p. 173.]
61 (return)
[ 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.]
62 (return)
[ See Von Sybel, vol. iv, p. 231.]
63 (return)
[ See Von Sybel, vol. iv, p. 330; also
tables of depreciation in "Moniteur";
also official reports in the White
Collection; also Caron's "Tables," etc.]
64 (return)
[ For a lifelike sketch of the way in
which these exchanges of assignats for
valuable property went on at periods of
the rapid depreciation of paper, see
Challamel, "Les français sous la
Révolution," p. 309; also Say,
"Economic Politique."]

65 (return)
[ For a very complete table of the
depreciation from day to day, see
"Supplement to the Moniteur" of
October 2, 1797; also Caron, as above.
For the market prices of the louis d'or at
the first of every month, as the collapse
approached, see Montgaillard. See also
"Official Lists" in the White Collection.
For a table showing the steady rise of
the franc in gold during a single week,
from 251 to 280 francs, see Dewarmin,
as above, vol. i, p. 136.]
66 (return)
[ See "Mèmoires de Thibaudeau," vol.
ii, p. 26, also Mercier, "Lo Nouveau
Paris," vol. ii, p. 90; for curious example
of the scales of depreciation see the
White Collection. See also extended
table of comparative values in 1790 and
1795. See Levasseur, as above, vol. i,
pp. 223-4.]
67 (return)
[ For a striking similar case in our own
country, see Sumner, "History of
American Currency," p. 47.]
68 (return)
[ See Villeneuve Bargemont, "Histoire
de l'économie politique," vol. ii, p. 229.]
69 (return)
[ See Von Sybel, vol. iv, pp. 337, 338.
See also for confirmation Challamel,
"Histoire Musée," vol. ii, p. 179. For a
thoughtful statement of the reasons why
such paper was not invested in lands by
men of moderate means, and
workingmen, see Mill, "Political
Economy," vol. ii, pp. 81, 82.]
70 (return)
[ See Von Sybel, vol. iv, p. 222.]
71 (return)
[ See especially Levasseur, "Histoire des
classes ouvrières," etc. vol. i, pp. 219,
230 and elsewhere; also De Nervo,
"Finance française," p. 280; also
Stourm, as already cited. The exact

amount of assignats in circulation at the
final suppression is given by Dowarmin,
(vol. i, p. 189), as 39,999,945,428 livres
or francs.]
72 (return)
[ For details of the mandat system very
thoroughly given, see Thiers' "History
of the French Revolution," Bentley's
edition, vol. iv, pp. 410-412. For the
issue of assignats and mandats at the
same time, see Dewarmin, vol. i, p. 136;
also Levasseur, vol. i, pp. 230-257. For
an account of "new tenor bills" in
America and their failure in 1737, see
Summer, pp. 27-31; for their failure in
1781, see Morse, "Life of Alexander
Hamilton," vol. i, pp. 86, 87. For similar
failure in Austria, see Summer, p. 314.]
73 (return)
[ See Marchant, "Lettre aux gens de
bonne foi."]
74 (return)
[ See Summer, p. 44; also De Nervo,
"Finances françaises," p. 282.]
75 (return)
[ See De Nervo, "Finances françaises,"
p. 282; also Levasseur, vol. i, p. 236 et
seq.]
76 (return)
[ See Table from "Gazette de France"
and extracts from other sources in
Levasseur, vol. i, pp. 223-4.]
77 (return)
[ Among the many striking accounts of
the debasing effects of "inflation" upon
France under the Directory perhaps the
best is that of Lacretelle, vol. xiii, pp.
32-36. For similar effect, produced by
the same cause in our own country in
1819, see statement from Niles'
"Register," in Sumner, p. 80. For the
jumble of families reduced to beggary
with families lifted into sudden wealth
and for the mass of folly and misery
thus mingled, see Levassour, vol. i, p.
237.]

78 (return)
[ For Madame Tallien and luxury of the
stock-gambler classes, see Challamel,
"Les français sous la Révolution," pp.
30, 33; also De Goncourt, "Les français
sous le Directoire." Regarding the
outburst of vice in Paris and the
demoralization of the police, see
Levasseur, as above.]
79 (return)
[ See Levasseur, Vol. i, p. 237, et seq.]
80 (return)
[ For specimens of counterfeit assignats,
see the White Collection in the Cornell
University Library, but for the great
series of various issues of them in fac-
simile, also for detective warnings and
attempted descriptions of many varieties
of them, and for the history of their
Issue, see especially Dewarmin, vol. i,
pp. 152-161. For photographic copies of
Royalist assignats, etc., see also
Dewarmin, ibid., pp. 192-197, etc. For a
photograph of probably the last of the
Royalist notes ever issued, bearing the
words "Pro Deo, pro Rege, pro Patria"
and "Armée Catholique et Royale" with
the date 1799, and for the sum of 100
livres, see Dewarmin, vol. i, p. 204.]
81 (return)
[ For similar expectation of a "shock,"
which did not occur, at the resumption
of specie payments in Massachusetts,
see Sumner, "History of American
Currency," p. 34.]
82 (return)
[ See Thiers.]
83 (return)
[ See Levasseur, vol. i, p. 246.]
84 (return)
[ For examples of similar effects in
Russia, Austria and Denmark, see
Storch, "Economie Politique," vol. iv;
for similar effects in the United States,
see Gouge, "Paper Money and Banking
in the United States," also Summer,

"History of American Currency." For
working out of the same principles in
England, depicted in a masterly way, see
Macaulay, "History of England," chap.
xxi; and for curious exhibition of the
same causes producing same results in
ancient Greece, see a curious quotation
by Macaulay in same chapter.]
85 (return)
[ For parallel cases in the early history
of our own country, see Sumner, p. 21,
and elsewhere.]
86 (return)
[ For a review of some of these
attempts, with eloquent statement of
their evil results, see "Mémoires de
Durand de Maillane," pp. 166-169.]
87 (return)
[ For similar effect of inflated currency
in enervating and undermining trade,
husbandry, manufactures and morals in
our own country, see Daniel Webster,
cited in Sumner, pp. 45-50. For similar
effects in other countries, see Senior,
Storch, Macaulay and others already
cited.]
88 (return)
[ For facts regarding French finance
under Napoleon I am indebted to Hon.
David A. Wells. For more recent
triumphs of financial commonsense in
France, see Bonnet's articles, translated
by the late George Walker, Esq. For
general subject, see Levasseur.]

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