Fiat Money Inflation in France | Page 5

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 matter how skillfully the bright side of such a
currency was exhibited, all thoughtful men in France remembered its
dark side. They knew too well, from that ruinous experience, seventy
years before, in John Law's time, the difficulties and dangers of a
currency not well based and controlled. They had then learned how
easy it is to issue it; how difficult it is to check its overissue; how
seductively it leads to the absorption of the means of the workingmen
and men of small fortunes; how heavily it falls on all those living on
fixed incomes, salaries or wages; how securely it creates on the ruins of
the prosperity of all men of meagre means a class of debauched
speculators, the most injurious class that a nation can harbor,--more
injurious, indeed, than professional criminals whom the law recognizes
and can throttle; how it stimulates overproduction at first and leaves
every industry flaccid afterward; how it breaks down thrift and
develops political and social immorality. All this France had been
thoroughly taught by experience. Many then living had felt the result of
such an experiment--the issues of paper money under John Law, a man
who to this day is acknowledged one of the most ingenious financiers
the world has ever known; and there were then sitting in the National
Assembly of France many who owed the poverty of their families to
those issues of paper. Hardly a man in the country who had not heard
those who issued it cursed as the authors of the most frightful
catastrophe France had then experienced.[6]
It was no mere attempt at theatrical display, but a natural impulse,
which led a thoughtful statesman, during the debate, to hold up a piece
of that old paper money and to declare that it was stained with the
blood and tears of their fathers.
And it would also be a mistake to suppose that the National Assembly,
which discussed this matter, was composed of mere wild revolutionists;
no inference could be more wide of the fact. Whatever may have been
the character of the men who legislated for France afterward, no
thoughtful student of history can deny, despite all the arguments and
sneers of reactionary statesmen and historians, that few more
keen-sighted legislative bodies have ever met than this first French
Constitutional Assembly. In it were such men as Sieyès, Bailly,
Necker, Mirabeau, Talleyrand, DuPont de Nemours and a multitude of
others who, in various sciences and in the political world, had already

shown and were destined afterward to show themselves among the
strongest and shrewdest men that Europe has yet seen.
But the current toward paper money had become irresistible. It was
constantly urged, and with a great show of force, that if any nation
could safely issue it, France was now that nation; that she was fully
warned by her severe experience under John Law; that she was now a
constitutional government, controlled by an enlightened, patriotic
people,--not, as in the days of the former issues of paper money, an
absolute monarchy controlled by politicians and adventurers; that she
was able to secure every livre of her paper money by a virtual mortgage
on a landed domain vastly greater in value than the entire issue; that,
with men like Bailly, Mirabeau and Necker at her head, she could not
commit the financial mistakes and crimes from which France had
suffered under John Law, the Regent Duke of Orleans and Cardinal
Dubois.
Oratory prevailed over science and experience. In April, 1790, came
the final decree to issue four hundred millions of livres in paper money,
based upon confiscated property of the Church for its security. The
deliberations on this first decree and on the bill carrying it into effect
were most interesting; prominent in the debate being Necker, Du Pont
de Nemours, Maury, Cazalès, Petion, Bailly and many others hardly
inferior. The discussions were certainly very able; no person can read
them at length in the "Moniteur," nor even in the summaries of the
parliamentary history, without feeling that various modern historians
have done wretched injustice to those men who were then endeavoring
to stand between France and ruin.
This sum--four hundred millions, so vast in those days, was issued in
_assignats_, which were notes secured by a pledge of productive real
estate and bearing interest to the holder at three per cent. No
irredeemable currency has ever claimed a more scientific and practical
guarantee for its goodness and for its proper action on public finances.