III.

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.

END

FIAT MONEY INFLATION IN FRANCE is an informative book about French paper money and runaway inflation during France's revolutionary years (in the 1700's).  This historical information reveals the financial trouble brought about when un-backed paper currency was produced by the government.  Although most paper money begins with good intentions; sometimes greed, avarice, personal gain, and economic crises influence political actions.  The resulting consequences can be economic disaster resulting in devaluation (deflation) of the currency, runaway inflation of goods and services, economic upheaval, and even loss of life and property.

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