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]