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.