Fiat Money Inflation in France | Page 4

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 Cazal?¨s 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 Cazal?¨s' 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