Fiat Money Inflation in France | Page 6

On the one hand, it had what the world recognized as a most practical
security,--a mortgage an productive real estate of vastly greater value
than the issue. On the other hand, as the notes bore interest, there
seemed cogent reason for their being withdrawn from circulation
whenever they became redundant.[7]
As speedily as possible the notes were put into circulation. Unlike those

issued in John Law's time, they were engraved in the best style of the
art. To stimulate loyalty, the portrait of the king was placed in the
center; to arouse public spirit, patriotic legends and emblems
surrounded it; to stimulate public cupidity, the amount of interest which
the note would yield each day to the holder was printed in the margin;
and the whole was duly garnished with stamps and signatures to show
that it was carefully registered and controlled.[8]
To crown its work the National Assembly, to explain the advantages of
this new currency, issued an address to the French people. In this
address it spoke of the nation as "delivered by this grand means from
all uncertainty and from all ruinous results of the credit system." It
foretold that this issue "would bring back into the public treasury, into
commerce and into all branches of industry strength, abundance and
prosperity."[9]
Some of the arguments in this address are worth recalling, and, among
them, the following:--"Paper money is without inherent value unless it
represents some special property. Without representing some special
property it is inadmissible in trade to compete with a metallic currency,
which has a value real and independent of the public action; therefore it
is that the paper money which has only the public authority as its basis
has always caused ruin where it has been established; that is the reason
why the bank notes of 1720, issued by John Law, after having caused
terrible evils, have left only frightful memories. Therefore it is that the
National Assembly has not wished to expose you to this danger, but has
given this new paper money not only a value derived from the national
authority but a value real and immutable, a value which permits it to
sustain advantageously a competition with the precious metals
themselves."[10]
But the final declaration was, perhaps, the most interesting. It was as
follows:--
"These _assignats_, bearing interest as they do, will soon be considered
better than the coin now hoarded, and will bring it out again into
circulation." The king was also induced to issue a proclamation
recommending that his people receive this new money without
objection.
All this caused great joy. Among the various utterances of this feeling
was the letter of M. Sarot, directed to the editor of the Journal of the

National Assembly, and scattered through France. M. Sarot is hardly
able to contain himself as he anticipates the prosperity and glory that
this issue of paper is to bring to his country. One thing only vexes him,
and that is the pamphlet of M. Bergasse against the _assignats_;
therefore it is after a long series of arguments and protestations, in
order to give a final proof of his confidence in the paper money and his
entire skepticism as to the evils predicted by Bergasse and others, M.
Sarot solemnly lays his house, garden and furniture upon the altar of
his country and offers to sell them for paper money alone.
There were, indeed, some gainsayers. These especially appeared among
the clergy, who, naturally, abhorred the confiscation of Church
property. Various ecclesiastics made speeches, some of them full of
pithy and weighty arguments, against the proposed issue of paper, and
there is preserved a sermon from one priest threatening all persons
handling the new money with eternal damnation. But the great majority
of the French people, who had suffered ecclesiastical oppression so
long, regarded these utterances as the wriggling of a fish on the hook,
and enjoyed the sport all the better.[11]
The first result of this issue was apparently all that the most sanguine
could desire: the treasury was at once greatly relieved; a portion of the
public debt was paid; creditors were encouraged; credit revived;
ordinary expenses were met, and, a considerable part of this paper
money having thus been passed from the government into the hands of
the people, trade increased and all difficulties seemed to vanish. The
anxieties of Necker, the prophecies of Maury and Cazalès seemed
proven utterly futile. And, indeed, it is quite possible that, if the
national authorities had stopped with this issue, few of the financial
evils which afterwards arose would have been severely felt; the four
hundred millions of paper money then issued would have simply
discharged the function of a similar amount of specie. But soon there
came another result: times grew less easy; by the end of September,
within