Fiat Money Inflation in France | Page 4

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