Fiat Money Inflation in France: How it Came, What it Brought, and How it Ended

by Andrew Dickson White

This was hailed by many as a measure in the interests of the poorer classes 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 passed 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 classes 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 Assembly 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 Assemblies; 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 Assembly, clubs, local meetings and elsewhere now endeavored to enlighten people by assigning 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 nobles, 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 assignats 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.