Fiat Money Inflation in France Part 2

Thus came a collapse in manufacturing and commerce, just as it had come previously in France: just as it came at various periods in Austria, Russia, America, and in all countries where men have tried to build up prosperity on irredeemable paper. [32]

All this breaking down of the manufactures and commerce of the nation made fearful inroads on the greater fortunes; but upon the lesser, and upon the little properties of the ma.s.ses of the nation who relied upon their labor, it pressed with intense severity. The capitalist could put his surplus paper money into the government lands and await results; but the men who needed their money from day to day suffered the worst of the misery. Still another difficulty appeared. There had come a complete uncertainty as to the future. Long before the close of 1791 no one knew whether a piece of paper money representing a hundred _livres_ would, a month later, have a purchasing power of ninety or eighty or sixty _livres_. The result was that capitalists feared to embark their means in business. Enterprise received a mortal blow. Demand for labor was still further diminished; and here came a new cause of calamity: for this uncertainty withered all far-reaching undertakings. The business of France dwindled into a mere living from hand to mouth. This state of things, too, while it bore heavily upon the moneyed cla.s.ses, was still more ruinous to those in moderate and, most of all, to those in straitened circ.u.mstances. With the ma.s.ses of the people, the purchase of every article of supply became a speculation--a speculation in which the professional speculator had an immense advantage over the ordinary buyer. Says the most brilliant of apologists for French revolutionary statesmanship, "Commerce was dead; betting took its place." [33]

Nor was there any compensating advantage to the mercantile cla.s.ses. The merchant was forced to add to his ordinary profit a sum sufficient to cover probable or possible fluctuations in value, and while prices of products thus went higher, the wages of labor, owing to the number of workmen who were thrown out of employment, went lower.

But these evils, though great, were small compared to those far more deep-seated signs of disease which now showed themselves throughout the country. One of these was the _obliteration of thrift_ from the minds of the French people. The French are naturally thrifty; but, with such ma.s.ses of money and with such uncertainty as to its future value, the ordinary motives for saving and care diminished, And a loose luxury spread throughout the country. A still worse outgrowth was the increase of speculation and gambling. With the plethora of paper currency in 1791 appeared the first evidences of that cancerous disease which always follows large issues of irredeemable currency,--a disease more permanently injurious to a nation than war, pestilence or famine. For at the great metropolitan centers grew a luxurious, speculative, stock-gambling body, which, like a malignant tumor, absorbed into itself the strength of the nation and sent out its cancerous fibres to the remotest hamlets. At these city centers abundant wealth seemed to be piled up: in the country at, large there grew a dislike of steady labor and a contempt for moderate gains and simple living. In a pamphlet published in May, 1791, we see how, in regard to this also, public opinion was blinded. The author calls attention to the increase of gambling in values of all sorts in these words: "What shall I say of the stock-jobbing, as frightful as it is scandalous, which goes on in Paris under the very eyes of our legislators,--a most terrible evil, yet, under the present circ.u.mstances,--necessary?" The author also speaks of these stock-gamblers as using the most insidious means to influence public opinion in favor of their measures; and then proposes, seriously, a change in various matters of detail, thinking that this would prove a sufficient remedy for an evil which had its roots far down in the whole system of irredeemable currency. As well might a physician prescribe a pimple wash for a diseased liver. [34]

Now began to be seen more plainly some of the many ways in which an inflation policy robs the working cla.s.s. As these knots of plotting schemers at the city centers were becoming bloated with sudden wealth, the producing cla.s.ses of the country, though having in their possession more and more currency, grew lean. In the schemes and speculations put forth by stock-jobbers and stimulated by the printing of more currency, mult.i.tudes of small fortunes were absorbed and lost while a few swollen fortunes were rapidly aggregated in the larger cities. This crippled a large cla.s.s in the country districts, which had employed a great number of workmen.

In the leading French cities now arose a luxury and license which was a greater evil even than the plundering which ministered to it. In the country the gambling spirit spread more and more. Says the same thoughtful historian whom I have already quoted: "What a prospect for a country when its rural population was changed into a great band of gamblers!" [35]

Nor was this reckless and corrupt spirit confined to business men; it began to break out in official circles, and public men who, a few years before, had been thought above all possibility of taint, became luxurious, reckless, cynical and finally corrupt. Mirabeau, himself, who, not many months previous, had risked imprisonment and even death to establish const.i.tutional government, was now--at this very time--secretly receiving heavy bribes. When, at the downfall of the monarchy a few years later, the famous iron chest of the Tuileries was opened, there were found evidences that, in this carnival of inflation and corruption, he had been a regularly paid servant of the Royal court. [36] The artful plundering of the people at large was bad enough, but worse still was this growing corruption in official and legislative circles. Out of the speculating and gambling of the inflation period grew luxury, and, out of this, corruption. It grew as naturally as a fungus on a muck heap. It was first felt in business operations, but soon began to be seen in the legislative body and in journalism.

Mirabeau was, by no means, the only example. Such members of the legislative body as Jullien of Toulouse, Delaunay of Angers, Fabre d'Eglantine and their disciples, were among the most noxious of those conspiring by legislative action to raise and depress securities for stock-jobbing purposes. Bribery of legislators followed as a matter of course, Delaunay, Jullien and Chabot accepted a bribe of five hundred thousand _livres_ for aiding legislation calculated to promote the purposes of certain stock-jobbers. It is some comfort to know that nearly all concerned were guillotined for it. [37]

It is true that the number of these corrupt legislators was small, far less than alarmists led the nation to suppose, but there were enough to cause wide-spread distrust, cynicism and want of faith in any patriotism or any virtue.

II.

Even worse than this was the breaking down of the morals of the country at large, resulting from the sudden building up of ostentatious wealth in a few large cities, and from the gambling, speculative spirit spreading from these to the small towns and rural districts. From this was developed an even more disgraceful result,--the decay of a true sense of national good faith. The patriotism which the fear of the absolute monarchy, the machinations of the court party, the menaces of the army and the threats of all monarchical Europe had been unable to shake was gradually disintegrated by this same speculative, stock-jobbing habit fostered by the superabundant currency. At the outset, in the discussions preliminary to the first issue of paper money, Mirabeau and others who had favored it had insisted that patriotism as well as an enlightened self-interest, would lead the people to keep up the value of paper money. The very opposite of this was now revealed, for there appeared, as another outgrowth of this disease, what has always been seen under similar circ.u.mstances. It is a result of previous, and a cause of future evils. This outgrowth was a vast debtor cla.s.s in the nation, directly interested in the depreciation of the currency in which they were to pay their debts. The nucleus of this cla.s.s was formed by those who had purchased the church lands from the government. Only small payments down had been required and the remainder was to be paid in deferred installments: an indebtedness of a mult.i.tude of people had thus been created to the amount of hundreds of millions. This body of debtors soon saw, of course, that their interest was to depreciate the currency in which their debts were to be paid; and these were speedily joined by a far more influential cla.s.s;--by that cla.s.s whose speculative tendencies had been stimulated by the abundance of paper money, and who had gone largely into debt, looking for a rise in nominal values. Soon demagogues of the viler sort in the political clubs began to pander to it; a little later important persons in this debtor cla.s.s were to be found intriguing in the a.s.sembly--first in its seats and later in more conspicuous places of public trust. Before long, the debtor cla.s.s became a powerful body extending through all ranks of society. From the stock-gambler who sat in the a.s.sembly to the small land speculator in the rural districts; from the sleek inventor of _canards_ on the Paris Exchange to the lying stock-jobber in the market town, all pressed vigorously for new issues of paper; all were apparently able to demonstrate to the people that in new issues of paper lay the only chance for national prosperity.

This great debtor cla.s.s, relying on the mult.i.tude who could be approached by superficial arguments, soon gained control. Strange as it might seem to those who have not watched the same causes at work at a previous period in France and at various times in other countries, while every issue of paper money really made matters worse, a superst.i.tion gained ground among the people at large that, if only _enough_ paper money were issued and were more cunningly handled the poor would be made rich. Henceforth, all opposition was futile. In December, 1791, a report was made in the Legislative a.s.sembly in favor of yet another great issue of three hundred millions more of paper money. In regard to this report Cambon said that more money was needed but asked, "Will you, in a moment when stock-jobbing is carried on with such fury, give it new power by adding so much more to the circulation?" But such high considerations were now little regarded. Dorisy declared, "There is not enough money yet in circulation; if there were more the sales of national lands would be more rapid." And the official report of his speech states that these words were applauded.

Dorisy then went on to insist that the government lands were worth at least thirty-five hundred million _livres_ and said: "Why should members ascend the tribunal and disquiet France? Fear nothing; your currency reposes upon a sound mortgage." Then followed a glorification of the patriotism of the French people, which, he a.s.serted, would carry the nation through all its difficulties.

Becquet, speaking next, declared that "The circulation is becoming more rare every day."

On December 17, 1791, a new issue was ordered, making in all twenty-one hundred millions authorized. Coupled with this was the declaration that the total amount in actual circulation should never reach more than sixteen hundred millions. Before this issue the value of the 100 _livres_ note had fallen at Paris to about 80 _livres_; [38] immediately afterward it fell to about 68 _livres_. What limitations of the currency were worth may be judged from the fact that not only had the declaration made hardly a year before, limiting the amount in circulation to twelve hundred millions, been violated, but the declaration, made hardly a month previous, in which the a.s.sembly had as solemnly limited the amount of circulation to fourteen hundred millions, had also been repudiated.

The evils which we have already seen arising from the earlier issues were now aggravated; but the most curious thing evolved out of all this chaos was a _new system of political economy_. In speeches, newspapers and pamphlets about this time, we begin to find it declared that, after all, a depreciated currency is a blessing; that gold and silver form an unsatisfactory standard for measuring values: that it is a good thing to have a currency that will not go out of the kingdom and which separates France from other nations: that thus shall manufacturers be encouraged; that commerce with other nations may be a curse, and hindrance thereto may be a blessing; that the laws of political economy however applicable in other times, are not applicable to this particular period, and, however operative in other nations, are not now so in France; that the ordinary rules of political economy are perhaps suited to the minions of despotism but not to the free and enlightened inhabitants of France at the close of the eighteenth century; that the whole state of present things, so far from being an evil is a blessing. All these ideas, and others quite as striking, were brought to the surface in the debates on the various new issues. [39]

Within four months came another report to the a.s.sembly as ingenious as those preceding. It declared: "Your committee are thoroughly persuaded that the amount of the circulating medium before the Revolution was greater than that of the _a.s.signats_ today: but at that time the money circulated slowly and now it pa.s.ses rapidly so that one thousand million _a.s.signats_ do the work of two thousand millions of specie." The report foretells further increase in prices, but by some curious jugglery reaches a conclusion favorable to further inflation. Despite these encouragements the _a.s.signats_ nominally worth 100 _livres_ had fallen, at the beginning of February, 1792, to about 60 _livres_, and during that month fell to 53 _livres_. [40]

In March, Claviere became minister of finance. He was especially proud of his share in the invention and advocacy of the _a.s.signats_, and now pressed their creation more vigorously than ever, and on April 30th, of the same year, came the fifth great issue of paper money, amounting to three hundred millions: at about the same time Cambon sneered ominously at public creditors as "rich people, old financiers and bankers."

Soon payment was suspended on dues to public creditors for all amounts exceeding ten thousand _francs_.

This was hailed by many as a measure in the interests of the poorer cla.s.ses of people, but the result was that it injured them most of all.

Henceforward, until the end of this history, capital was quietly taken from labor and locked up in all the ways that financial ingenuity could devise. All that saved thousands of laborers in France from starvation was that they were drafted off into the army and sent to be killed on foreign battlefields.

On the last day of July, 1792, came another brilliant report from Fouquet, showing that the total amount of currency already issued was about twenty-four hundred millions, but claiming that the national lands were worth a little more than this sum. A decree was now pa.s.sed issuing three hundred millions more. By this the prices of everything were again enhanced save one thing, and that one thing was labor. Strange as it may at first appear, while the depreciation of the currency had raised all products enormously in price, the stoppage of so many manufactories and the withdrawal of capital caused wages in the summer of 1792, after all the inflation, to be as small as they had been four years before--viz., fifteen _sous_ per day. No more striking example can be seen of the truth uttered by Daniel Webster, that "of all the contrivances for cheating the laboring cla.s.ses of mankind, none has been more effective than that which deludes them with paper-money." [41]

Issue after issue followed at intervals of a few months, until, on December 14, 1792, we have an official statement to the effect that thirty-five hundred millions had been put forth, of which six hundred millions had been burned, leaving in circulation twenty-eight hundred millions.

When it is remembered that there was little business to do and that the purchasing power of the _livre_ or franc, when judged by the staple products of the country, was equal to about half the present purchasing power of our own dollar, it will be seen into what evils France had drifted. As the mania for paper money ran its course, even the _sous_, obtained by melting down the church bells, were more and more driven out of circulation and more and more parchment notes from twenty _four_ to five were issued, and at last pieces of one _sou_, of half a _sou_ and even of one-quarter of a _sou_ were put in circulation. [42]

But now another source of wealth was opened to the nation. There came a confiscation of the large estates of landed proprietors who had fled the country. An estimate in 1793 made the value of these estates three billions of _francs_. As a consequence, the issues of paper money were continued in increased amounts, on the old theory that they were guaranteed by the solemn pledge of these lands belonging to the state.

Under the Legislative a.s.sembly through the year 1792 new issues were made virtually every month, so that at the end of January, 1793, it was more and more realized that the paper money actually in circulation amounted close upon three thousand millions of _francs_. All this had been issued publicly, in open sessions of the National and Legislative a.s.semblies; but now under the National Convention, the two Committees of Public Safety and of Finance began to decree new issues privately, in secret session.

As a result, the issues became larger still, and four hundred workmen were added to those previously engaged in furnishing this paper money, and these were so pressed with work from six o'clock in the morning until eight in the evening that they struck for higher wages and were successful. [43]

The consequences of these overissues now began to be more painfully evident to the people at large. Articles of common consumption became enormously dear and prices were constantly rising. Orators in the Legislative a.s.sembly, clubs, local meetings and elsewhere now endeavored to enlighten people by a.s.signing every reason for this depreciation save the true one. They declaimed against the corruption of the ministry, the want of patriotism among the Moderates, the intrigues of the emigrant n.o.bles, the hard-heartedness of the rich, the monopolizing spirit of the merchants, the perversity of the shopkeepers,---each and all of these as causes of the difficulty. [44]

This decline in the government paper was at first somewhat masked by fluctuations. For at various times the value of the currency _rose_. The victory of Jemappes and the general success of the French army against the invaders, with the additional security offered by new confiscations of land, caused, in November, 1792, an appreciation in the value of the currency; the franc had stood at 57 and it rose to about 69; but the downward tendency was soon resumed and in September, 1793, the _a.s.signats_ had sunk below 30. Then sundry new victories and coruscations of oratory gave momentary confidence so that in December, 1793, they rose above 50. But despite these fluctuations the downward tendency soon became more rapid than ever. [45]

The washerwomen of Paris, finding soap so dear that they could hardly purchase it, insisted that all the merchants who were endeavoring to save something of their little property by refusing to sell their goods for the wretched currency with which France was flooded, should be punished with death; the women of the markets and the hangers-on of the Jacobin Club called loudly for a law "to equalize the value of paper money and silver coin." It was also demanded that a tax be laid especially on the rich, to the amount of four hundred million _francs_, to buy bread. Marat declared loudly that the people, by hanging shopkeepers and plundering stores, could easily remove the trouble. The result was that on the 28th of February, 1793, at eight o'clock in the evening, a mob of men and women in disguise began plundering the stores and shops of Paris. At first they demanded only bread; soon they insisted on coffee and rice and sugar; at last they seized everything on which they could lay their hands--cloth, clothing, groceries and luxuries of every kind. Two hundred such places were plundered. This was endured for six hours and finally order was restored only by a grant of seven million _francs_ to buy off the mob. The new political economy was beginning to bear, its fruits luxuriantly. A gaudy growth of it appeared at the City Hall of Paris when, in response to the complaints of the plundered merchants, Roux declared, in the midst of great applause, that "shopkeepers were only giving back to the people what they had hitherto robbed them of."

The mob having thus been bought off by concessions and appeased by oratory, the government gained time to think, and now came a series of amazing expedients,--and yet all perfectly logical.

Three of these have gained in French history an evil pre-eminence, and first of the three was the Forced Loan.

In view of the fact that the well-to-do citizens were thought to be lukewarm in their support of the politicians controlling the country, various demagogues in the National Convention, which had now succeeded the National, Const.i.tuent and Legislative a.s.semblies, found ample matter for denunciations long and loud. The result outside the Convention was increased activity of the guillotine; the results inside were new measures against all who had money, and on June 22, 1793, the Convention determined that there should be a Forced Loan, secured on the confiscated lands of the emigrants and levied upon all married men with incomes of ten thousand _francs_, and upon all unmarried men with incomes of six thousand _francs_. It was calculated that these would bring into the treasury a thousand millions of _francs_. But a difficulty was found. So many of the rich had lied or had concealed their wealth that only a fifth of the sum required could be raised, and therefore a law was soon pa.s.sed which levied forced loans upon incomes as low as one thousand, _francs_,--or, say, two hundred dollars of American money. This tax was made progressive. On the smaller proprietors it was fixed at one-tenth and on the larger, that is, on all incomes above nine thousand _francs_, it was made one-half of the entire income. Little if any provision was made for the repayment of this loan but the certificates might be used for purchasing the confiscated real estate of the church and of the n.o.bility. [46]

But if this first expedient shows how naturally a "fiat" money system runs into despotism, the next is no less instructive in showing how easily it becomes repudiation and dishonor.

As we have seen, the first issue of the _a.s.signats_,--made by the National a.s.sembly, bore a portrait of the king; but on the various issues after the establishment of a republic this emblem had been discarded. This change led to a difference in value between the earlier and the later paper money. The wild follies of fanatics and demagogues had led to an increasing belief that the existing state of things could not last; that the Bourbons must ere long return; that in such case, while a new monarch would repudiate all the vast ma.s.s of the later paper issued by the Republic, he would recognize that first issue bearing the face and therefore the guarantee of the king. So it was that this first issue came to bear a higher value than those of later date. To meet this condition of things it was now proposed to repudiate an that earlier issue. In vain did sundry more thoughtful members of the Convention plead that this paper money, amounting to five hundred and fifty-eight millions of _francs_, bore the solemn guarantee of the nation, as well as of the king; the current was irresistible. All that Cambon, the great leader of finance at that time, could secure was a clause claiming to protect the poor, to the effect that this demonetization should not extend to notes below a hundred _francs_ in value; and it was also agreed that any of the notes, large or small, might be received in payment of taxes and for the confiscated property of the clergy and n.o.bility. To all the arguments advanced against this breach of the national faith Danton, then at the height of his power, simply declared that only aristocrats could favor notes bearing the royal portrait, and gave forth his famous utterance: "Imitate Nature, which watches over the preservation of the race but has no regard for individuals." The decree was pa.s.sed on the 31st of July, 1793, yet its futility was apparent in less than two months, when the Convention decreed that there should be issued two thousand millions of _francs_ more in _a.s.signats_ between the values of ten _sous_ and four hundred _francs_, and when, before the end of the year, five hundred millions more were authorized. [47]

The third outgrowth of the vast issue of fiat money was the _Maximum_.

As far back as November, 1792, the Terrorist a.s.sociate of Robespierre, St. Just, in view of the steady rise in prices of the necessaries of life, had proposed a scheme by which these prices should be established by law, at a rate proportionate to the wages of the working cla.s.ses.

This plan lingered in men's minds, taking shape in various resolutions and decrees until the whole culminated on September 29, 1793, in the Law of the _Maximum_.

While all this legislation was high-handed, it was not careless. Even statesmen of the greatest strength, having once been drawn into this flood, were borne on into excesses which, a little earlier, would have appalled them. Committees of experts were appointed to study the whole subject of prices, and at last there were adopted the great "four rules"

which seemed to statesmen of that time a masterly solution of the whole difficulty. [48]

_First_, the price of each article of necessity was to be fixed at one and one-third its price in 1790. _Secondly_, all transportation was to be added at a fixed rate per league. _Thirdly_, five per cent was to be added for the profit of the wholesaler. _Fourthly_, ten per cent was to be added for the profit of the retailer. Nothing could look more reasonable. Great was the jubilation. The report was presented and supported by Barrere,--"the tiger monkey,"--then in all the glory of his great orations: now best known from his portrait by Macaulay.

Nothing could withstand Barrere's eloquence. He insisted that France had been suffering from a "_Monarchical_ commerce which only sought wealth," while what she needed and what she was now to receive was a "_Republican_ commerce--a commerce of moderate profits and virtuous." He exulted in the fact that "France alone enjoys such a commerce,--that it exists in no other nation." He poured contempt over political economy as "that science which quacks have corrupted, which pedants have obscured and which academicians have depreciated." France, he said, has something better, and he declared in conclusion, "The needs of the people will no longer be spied upon in order that the commercial cla.s.ses may arbitrarily take advantage." [49]

The first result of the _Maximum_ was that every means was taken to evade the fixed price imposed, and the farmers brought in as little produce as they possibly could. This increased the scarcity, and the people of the large cities were put on an allowance. Tickets were issued authorizing the bearer to obtain at the official prices a certain amount of bread or sugar or soap or wood or coal to cover immediate necessities. [50]

But it was found that the _Maximum_, with its divinely revealed four rules, could not be made to work well--even by the shrewdest devices. In the greater part of France it could not be enforced. As to merchandise of foreign origin or merchandise into which any foreign product entered, the war had raised it far above the price allowed under the first rule, namely, the price of 1790, with an addition of one-third. Shopkeepers therefore could not sell such goods without ruin. The result was that very many went out of business and the remainder forced buyers to pay enormous charges under the very natural excuse that the seller risked his life in trading at all. That this excuse was valid is easily seen by the daily lists of those condemned to the guillotine, in which not infrequently figure the names of men charged with violating the _Maximum_ laws. Manufactures were very generally crippled and frequently destroyed, and agriculture was fearfully depressed. To detect goods concealed by farmers and shopkeepers, a spy system was established with a reward to the informer of one-third of the value of the goods discovered. To spread terror, the Criminal Tribunal at Stra.s.sburg was ordered to destroy the dwelling of any one found guilty of selling goods above the price set by law. The farmer often found that he could not raise his products at anything like the price required by the new law, and when he tried to hold back his crops or cattle, alleging that he could not afford to sell them at the prices fixed by law, they were frequently taken from him by force and he was fortunate if paid even in the depreciated fiat money--fortunate, indeed, if he finally escaped with his life. [51]

Involved in all these perplexities, the Convention tried to cut the Gordian knot. It decreed that any person selling gold or silver coin, or making any difference in any transaction between paper and specie, should be imprisoned in irons for six years:--that any one who refused to accept a payment in _a.s.signats_, or accepted _a.s.signats_ at a discount, should pay a fine of three thousand _francs_; and that any one committing this crime a second time should pay a fine of six thousand _francs_ and suffer imprisonment twenty years in irons. Later, on the 8th of September, 1793, the penalty for such offences was made death, with confiscation of the criminal's property, and so reward was offered to any person informing the authorities regarding any such criminal transaction. To reach the climax of ferocity, the Convention decreed, in May, 1794, that the death penalty should be inflicted on any person convicted of "having asked, before a bargain was concluded, in what money payment was to be made." Nor was this all. The great finance minister, Cambon, soon saw that the worst enemies of his policy were gold and silver. Therefore it was that, under his lead, the Convention closed the Exchange and finally, on November 13, 1793, under terrifying penalties, suppressed all commerce in the precious metals. About a year later came the abolition of the Maximum itself. [52]

It is easily seen that these _Maximum_ laws were perfectly logical.

Whenever any nation intrusts to its legislators the issue of a currency not based on the idea of redemption in standard coin recognized in the commerce of civilized nations, it intrusts to them the power to raise or depress the value of every article in the possession of every citizen.

Louis XIV had claimed that all property in Prance was his own, and that what private persons held was as much his as if it were in his coffers.

But even this a.s.sumption is exceeded by the confiscating power exercised in a country, where, instead of leaving values to be measured by a standard common to the whole world, they are left to be depressed or raised at the whim, caprice or interest of a body of legislators. When this power is given, the power of prices is inevitably included in it. [53]

It may be said that these measures were made necessary by the war then going on. Nothing could be more baseless than such an objection. In this war the French soon became generally successful. It was quickly pushed mainly upon foreign soil. Numerous contributions were levied upon the subjugated countries to support the French armies. The war was one of those in which the loss, falling apparently on future generations, first stimulates, in a sad way, trade and production. The main cause of these evils was tampering with the circulating medium of an entire nation; keeping all values in fluctuation; discouraging enterprise; paralyzing energy; undermining sobriety; obliterating thrift; promoting extravagance and exciting riot by the issue of an irredeemable currency.

The true business way of meeting the enormous demands on France during the first years of the Revolution had been stated by a true statesman and sound financier, Du Pont de Nemours, at the very beginning. He had shown that using the same paper as a circulating medium and as a means for selling the national real estate was like using the same implement for an oyster knife and a razor. [54]

It has been argued that the _a.s.signats_ sank in value because they were not well secured,--that securing them on government real estate was as futile as if the United States had, in the financial troubles of its early days, secured notes on its real estate. This objection is utterly fallacious. The government lands of our country were remote from the centers of capital and difficult to examine; the French national real estate was near these centers--even _in_ them--and easy to examine.

Our national real estate was unimproved and unproductive; theirs was improved and productive--its average productiveness in market in ordinary times being from four to five per cent. [55]

It has also been objected that the attempt to secure the _a.s.signats_ on government real estate failed because of the general want of confidence in the t.i.tle derived by the purchasers from the new government. Every thorough student of that period must know that this is a misleading statement. Everything shows that the vast majority of the French people had a fanatical confidence in the stability of the new government during the greater part of the Revolution. There were disbelievers in the security of the _a.s.signats_ just as there were disbelievers in the paper money of the United States throughout our Civil War; but they were usually a small minority. Even granting that there was a doubt as to investment in French lands, the French people certainly had as much confidence in the secure possession of government lands as any people can ever have in large issues of government bonds: indeed, it is certain that they had far more confidence in their lands as a security than modern nations can usually have in large issues of bonds obtained by payments of irredeemable paper. One simple fact, as stated by John Stuart Mill, which made _a.s.signats_ difficult to convert into real estate was that the vast majority of people could not afford to make investments outside their business; and this fact is no less fatal to any attempt to contract large issues of irredeemable paper--save, perhaps, a bold, statesmanlike attempt, which seizes the best time and presses every advantage, eschewing all juggling devices and sacrificing everything to maintain a sound currency based on standards common to the entire financial world.

And now was seen, taking possession of the nation, that idea which developed so easily out of the fiat money system;--the idea that the ordinary needs of government may be legitimately met wholly by the means of paper currency;--that taxes may be dispensed with. As a result, it was found that the _a.s.signat_ printing press was the one resource left to the government, and the increase in the volume of paper money became every day more appalling.