The issue of French assignats began in 1789 because the assembly would not vote adequate taxation, and Necker, the minister of finance, was unable to borrow enough to cover the deficit. In the two years from 1789 to 1791, the public revenue was 470 millions, and the public expenditures, 1719 millions, of livres. The deficit was covered by assignats, or paper livres, bearing interest, in denominations varying from 1000 to 5 livres. Thus the assignats may be regarded as a floating debt currency. In November, 1791, the assignats were worth 52 per cent of their face value. In June, 1792, after the declaration of war on Austria, they rose to 57. After the victory of Valmy, in September, they rose to 72 and remained there till December. In January, 1793, the king was guillotined, and war was declared on England. By August, after violent fluctuations, the assignat had fallen to 15 per cent of its face value. Thereafter the laws enforcing the acceptance of assignats were strengthened.
It became an offence to sell coin, or to differentiate between coin and assignats in any transaction, or to refuse payment in assignats, or to negotiate assignats at a discount. By a decree of the 5th of September the death penalty itself was imposed. Here was a forced currency indeed.[9 ]
For a few months an artificial improvement was effected in the value of the assignat by these ferocious measures; but in 1795, after the Terror, the system and the paper money collapsed. The gold and silver money, which had been hoarded, returned to circulation. In June, 1795, the quotation of the assignat oscillated violently. On one day a louis of 24 livres would buy 450 paper livres, on another, 1000.[10 ] Paper notes which fluctuated so violently were useless as money. They could not serve either as a medium of exchange or as a measure of value. Country people expressed their contempt for the assignats by calling them l'argent de Paris.
A new currency of mandats was tried, into which assignats were made convertible. It was a complete failure. The assignats were wound up in 1796, and in February, 1797, there was "a general demonetisation of paper money."[11 ] The holders got practically nothing. France returned to hard cash, as Mexico has done recently. In 1918, when Mr. Hawtrey wrote, he was able to describe the decline and full of the assignats as an 'almost unique' instance of "the currency of a great nation fading away into nothing." The Russian paper rouble has performed the same feat since 1918. So has the Polish mark. And now (December, 1921) the German paper mark is also fading into nothingness.[12 ] In Austria and in most of the new states of Europe, the inconvertible paper legal tender currency has lost almost the whole of its value, in comparison with the pre-war coin which it pretends to represent.
The real difference between the present monetary conditions and the American continentals, or the French assignats, is a difference not of kind, but of degree and extent. The causes and the consequences, the motives of those who work the mint, the ruin and demoralization of the victims, the effects upon public and private debts and credit are the same. But a whole continent populated by four hundred millions of people is concerned. The commercial and moral fabric of European civilization is tottering. Three years have passed since the war ended; but the currencies and exchanges of Europe are in a much worse condition than when peace was being negotiated.
At the end of June, 1921, I walked from my office in the Strand down to Messrs. Hands & Co., who deal in foreign money at Charing Cross. On the way I passed the shop of a tailor, who had placarded on his shop window the announcement that he would give a hundred thousand roubles to every customer who bought a suit of clothes from him. He added that at the pre-war rate of exchange the one hundred thousand roubles would be worth ten thousand pounds. He did not add that they were at that time worth only two shillings.[13 ] On arriving at my destination, I asked to see specimens of the most debased currencies and eventually laid out ten shillings,[14 ] or, to be exact, 9s/10d. Here is the bill:
| Ten German marks | cost me one shilling |
| A hundred Austrian crowns | cost me one and sixpence |
| A hundred Polish marks | cost me sixpence |
| Twenty-five Russian (Czar)[15 ] roubles (1909) | cost me sixpence |
| Two Italian lire | cost me eightpence |
| Two Greek drachmas | cost me eightpence |
| Two Roumanian lei | cost me sixpence |
| Five Yugoslav dinars[16] | cost me one shilling |
| Ten Czechoslovakian crowns | cost me one shilling |
| Five Bulgarian levas | cost me sixpence |
| Five Finnish marks | cost me one shilling |
| Five Esthonian marks | cost me one shilling |
| Five Latvian roubles | cost me sixpence |
To show that my friend, the exchange dealer, made a decent profit out of this retail transaction, I quote some of his selling rates for the day on which he based his charges:
| Rates of Exchange | June 29, 1921 | |
| Austrian paper crowns | 2400-2600 | for £1 |
| Finnish marks | 220-240 | for £1 |
| German marks | 265-275 | for £1 |
| Polish marks | 6000 (selling rate) | for £1 |
| Greek drachmas | 62-65 | for £1 |
| Italian lire | 76-77 | for £1 |
| Roumanian lei | 230-250 | for £1 |
The last I heard from Vienna was that they had been varying from ten thousand to fifteen thousand to the paper pound!