Part 5

It has been argued that the _assignats_ 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 _assignats_ on government real estate failed because of the general want of confidence in the title 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 _assignats_ 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 _assignats_ 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 _assignat_ printing press was the one resource left to the government, and the increase in the volume of paper money became every day more appalling.

It will doubtless surprise many to learn that, in spite of these evident results of too much currency, the old cry of a "scarcity of circulating medium" was not stilled; it appeared not long after each issue, no matter how large.

But every thoughtful student of financial history knows that this cry always comes after such issues--nay, that it _must_ come,--because in obedience to a natural law, the former scarcity, or rather _insufficiency_ of currency recurs just as soon as prices become adjusted to the new volume, and there comes some little revival of business with the usual increase of credit. [56]

In August, 1793, appeared a new report by Cambon. No one can read it without being struck by its mingled ability and folly. His final plan of dealing with the public debt has outlasted all revolutions since, but his disposition of the inflated currency came to a wretched failure. Against Du Pont, who showed conclusively that the wild increase of paper money was leading straight to, ruin, Cambon carried the majority in the great assemblies and clubs by sheer audacity--the audacity of desperation. Zeal in supporting the _assignats_ became his religion. The National Convention which succeeded the Legislative Assembly, issued in 1793 over three thousand millions of _assignats_, and, of these, over twelve hundred millions were poured into the circulation. And yet Cambon steadily insisted that the security for the _assignat_ currency was perfect. The climax of his zeal was reached when he counted as assets in the national treasury the indemnities which, he declared, France was sure to receive after future victories over the allied nations with which she was then waging a desperate war. As patriotism, it was sublime; as finance it was deadly. [57]

Everything was tried. Very elaborately he devised a funding scheme which, taken in connection with his system of issues, was in effect what in these days would be called an "_interconvertibility scheme_" By various degrees of persuasion or force,--the guillotine looming up in the background,--holders of _assignats_ were urged to convert them into evidence of national debt, bearing interest at five per cent, with the understanding that if more paper were afterward needed more would be issued. All in vain. The official tables of depreciation show that the _assignats_ continued to fall. A forced loan, calling in a billion of these, checked this fall, but only for a moment. The "_interconvertibility scheme_" between currency and bonds failed as dismally as the "_interconvertibility scheme_" between currency and land had failed. [58]

A more effective expedient was a law confiscating the property of all Frenchmen who left France after July 14, 1789, and who had not returned. This gave new land to be mortgaged for the security of paper money.

All this vast chapter in financial folly is sometimes referred to as if it resulted from the direct action of men utterly unskilled in finance. This is a grave error. That wild schemers and dreamers took a leading part in setting the fiat money system going is true; that speculation and interested financiers made it worse is also true: but the men who had charge of French finance during the Reign of Terror and who made these experiments, which seem to us so monstrous, in order to rescue themselves and their country from the flood which was sweeping everything to financial ruin were universally recognized as among the most skillful and honest financiers in Europe. Cambon, especially, ranked then and ranks now as among the most expert in any period. The disastrous results of all his courage and ability in the attempt to stand against the deluge of paper money show how powerless are the most skillful masters of finance to stem the tide of fiat money calamity when once it is fairly under headway; and how useless are all enactments which they can devise against the underlying laws of nature.

Month after month, year after year new issues went on. Meanwhile everything possible was done to keep up the value of paper. The city authorities of Metz took a solemn oath that the _assignats_ should bear the same price whether in paper or specie,--and whether in buying or selling, and various other official bodies throughout the nation followed this example. In obedience to those who believed with the market women of Paris, as stated in their famous petition, that "laws should be passed making paper money as good as gold," Couthon, in August, 1793, had proposed and carried a law punishing any person who should sell _assignats_ at less than their nominal value with imprisonment for twenty years in chains, and later carried a law making investments in foreign countries by Frenchmen punishable with death. [59]

But to the surprise of the great majority of the French people, the value of the _assignats_ was found, after the momentary spasm of fear had passed, not to have been permanently increased by these measures: on the contrary, this "fiat" paper persisted in obeying the natural laws of finance and, as new issues increased, their value decreased. Nor did the most lavish aid of nature avail. The paper money of the nation seemed to possess a magic power to transmute prosperity into adversity and plenty into famine. The year 1794 was exceptionally fruitful: and yet with the autumn came scarcity of provisions and with the winter came distress. The reason is perfectly simple. The sequences in that whole history are absolutely logical. First, the Assembly had inflated the currency and raised prices enormously. Next, it had been forced to establish an arbitrary maximum price for produce. But this price, large as it seemed, soon fell below the real value of produce; many of the farmers, therefore, raised less produce or refrained from bringing what they had to market. [60] But, as is usual in such cases, the trouble was ascribed to everything rather than the real cause, and the most severe measures were established in all parts of the country to force farmers to bring produce to market, millers to grind and shopkeepers to sell it. [61] The issues of paper money continued. Toward the end of 1794 seven thousand millions in _assignats_ were in circulation. [62] By the end of May, 1795, the circulation was increased to ten thousand millions, at the end of July, to fourteen thousand millions; and the value of one hundred _francs_ in paper fell steadily, first to four _francs_ in gold, then to three, then to two and one-half. [63] But, curiously enough, while this depreciation was rapidly going on, as at various other periods when depreciation was rapid, there came an apparent revival of business. The hopes of many were revived by the fact that in spite of the decline of paper there was an exceedingly brisk trade in all kinds of permanent property. Whatever articles of permanent value certain needy people were willing to sell certain cunning people were willing to buy and to pay good prices for in _assignats_. At this, hope revived for a time in certain quarters. But ere long it was discovered that this was one of the most distressing results of a natural law which is sure to come into play under such circumstances. It was simply a feverish activity caused by the intense desire of a large number of the shrewder class to convert their paper money into anything and everything which they could hold and hoard until the collapse which they foresaw should take place. This very activity in business simply indicated the disease. It was simply legal robbery of the more enthusiastic and trusting by the more cold-hearted and keen. It was, the "unloading" of the _assignats_ upon the mass of the people. [64]

Interesting is it to note in the midst of all this the steady action of another simple law in finance. Prisons, guillotines, enactments inflicting twenty years' imprisonment in chains upon persons twice convicted of buying or selling paper money at less than its nominal value, and death upon investors in foreign securities, were powerless. The National Convention, fighting a world in arms and with an armed revolt on its own soil, showed titanic power, but in its struggle to circumvent one simple law of nature its weakness was pitiable. The _louis d'or_ stood in the market as a monitor, noting each day, with unerring fidelity, the decline in value of the _assignat_; a monitor not to be bribed, not to be scared. As well might the National Convention try to bribe or scare away the polarity of the mariner's compass. On August 1, 1795, this gold _louis_ of 25 _francs_ was worth in paper, 920 _francs_; on September 1st, 1,200 _francs_; on November 1st, 2,600 _francs_; on December 1st, 3,050 _francs_. In February, 1796, it was worth 7,200 _francs_ or one franc in gold was worth 288 _francs_ in paper. Prices of all commodities went up nearly in proportion. [65] The writings of this period give curious details. Thibaudeau, in his Memoirs, speaks of sugar as 500 _francs_ a pound, soap, 230 _francs_, candles, 140 _francs_. Mercier, in his lifelike pictures of the French metropolis at that period, mentions 600 _francs_ as carriage hire for a single drive, and 6,000 for an entire day. Examples from other sources are such as the following:--a measure of flour advanced from two _francs_ in 1790, to 225 _francs_ in 1795; a pair of shoes, from five _francs_ to 200; a hat, from 14 _francs_ to 500; butter, to, 560 _francs_ a pound; a turkey, to 900 _francs_. [66] Everything was enormously inflated in price _except the wages of labor_. As manufacturers had closed, wages had fallen, until all that kept them up seemed to be the fact that so many laborers were drafted off into the army. From this state of things came grievous wrong and gross fraud. Men who had foreseen these results and had gone into debt were of course jubilant. He who in 1790 had borrowed 10,000 _francs_ could pay his debts in 1796 for about 35 _francs_. Laws were made to meet these abuses. As far back as 1794 a plan was devised for publishing official "tables of depreciation" to be used in making equitable settlements of debts, but all such machinery proved futile. On the 18th of May, 1796, a young man complained to the National Convention that his elder brother, who had been acting as administrator of his deceased father's estate, had paid the heirs in _assignats_, and that he had received scarcely one three-hundredth part of the real value of his share. [67] To meet cases like this, a law was passed establishing a "scale of proportion." Taking as a standard the value of the _assignat_ when there were two billions in circulation, this law declared that, in payment of debts, one-quarter should be added to the amount originally borrowed for every five hundred millions added to the circulation. In obedience to this law a man who borrowed two thousand _francs_ when there were two billions in circulation would have to pay his creditors twenty-five hundred _francs_ when half a billion more were added to the currency, and over thirty-five thousand _francs_ before the emissions of paper reached their final amount. This brought new evils, worse, if possible, than the old. [68]

The question will naturally be asked, _On whom did this vast depreciation mainly fall at last_? When this currency had sunk to about one three-hundredth part of its nominal value and, after that, to nothing, in whose hands was the bulk of it? The answer is simple. I shall give it in the exact words of that thoughtful historian from whom I have already quoted: "Before the end of the year 1795 the paper money was almost exclusively in the hands of the working classes, employees and men of small means, whose property was not large enough to invest in stores of goods or national lands. [69] Financiers and men of large means were shrewd enough to put as much of their property as possible into objects of permanent value. The working classes had no such foresight or skill or means. On them finally came the great crushing weight of the loss. After the first collapse came up the cries of the starving. Roads and bridges were neglected; many manufactures were given up in utter helplessness." To continue, in the words of the historian already cited: "None felt any confidence in the future in any respect; few dared to make a business investment for any length of time and it was accounted a folly to curtail the pleasures of the moment, to accumulate or save for so uncertain a future." [70]

This system in finance was accompanied by a system in politics no less startling, and each system tended to aggravate the other. The wild radicals, having sent to the guillotine first all the Royalists and next all the leading Republicans they could entrap, the various factions began sending each other to the same destination:--Hébertists, Dantonists, with various other factions and groups, and, finally, the Robespierrists, followed each other in rapid succession. After these declaimers and phrase-mongers had thus disappeared there came to power, in October, 1795, a new government,--mainly a survival of the more scoundrelly,--the Directory. It found the country utterly impoverished and its only resource at first was to print more paper and to issue even while wet from the press. These new issues were made at last by the two great committees, with or without warrant of law, and in greater sums than ever. Complaints were made that the array of engravers and printers at the mint could not meet the demand for _assignats_--that they could produce only from sixty to seventy millions per day and that the government was spending daily from eighty to ninety millions. Four thousand millions of _francs_ were issued during one month, a little later three thousand millions, a little later four thousand millions, until there had been put forth over thirty-five thousand millions. The purchasing power of this paper having now become almost nothing, it was decreed, on the 22nd of December, 1795, that the whole amount issued should be limited to forty thousand millions, including all that had previously been put forth and that when this had been done the copper plates should be broken. Even in spite of this, additional issues were made amounting to about ten thousand millions. But on the 18th of February, 1796, at nine o'clock in the morning, in the presence of a great crowd, the machinery, plates and paper for printing _assignats_ were brought to the Place Vendome and there, on the spot where the Napoleon Column now stands, these were solemnly broken and burned.

Shortly afterward a report by Camus was made to the Assembly that the entire amount of paper money issued in less than six years by the Revolutionary Government of France had been over forty-five thousand millions of _francs_--that over six thousand millions had been annulled and burned and that at the final catastrophe there were in circulation close upon forty thousand millions. It will be readily seen that it was fully time to put an end to the system, for the gold "_louis_" of twenty-five _francs_ in specie had, in February, 1796, as we have seen, become worth 7,200 _francs_, and, at the latest quotation of all, no less than 15,000 _francs_ in paper money--that is, one franc in gold was nominally worth 600 _francs_ in paper.

Such were the results of allowing dreamers, schemers, phrase-mongers, declaimers and strong men subservient to these to control a government. [71]

III.

The first new expedient of the Directory was to secure a forced loan of six hundred million _francs_ from the wealthier classes; but this was found fruitless. Ominous it was when persons compelled to take this loan found for an _assignat_ of one hundred _francs_ only one franc was allowed. Next a National Bank was proposed; but capitalists were loath to embark in banking while the howls of the mob against all who had anything especially to do with money resounded in every city. At last the Directory bethought themselves of another expedient. This was by no means new. It had been fully tried on our continent twice before that time: and once, since--first, in our colonial period; next, during our Confederation; lastly, by the "Southern Confederacy" and here, as elsewhere, always in vain. But experience yielded to theory--plain business sense to financial metaphysics. It was determined to issue a new paper which should be "fully secured" and "as good as gold."

Pursuant to this decision it was decreed that a new paper money "fully secured and as good as gold" be issued under the name of "_mandats_." In order that these new notes should be "fully secured," choice public real estate was set apart to an amount fully equal to the nominal value of the issue, and any one offering any amount of the _mandats_ could at once take possession of government lands; the price of the lands to be determined by two experts, one named by the government and one by the buyer, and without the formalities and delays previously established in regard to the purchase of lands with _assignats_.

Perhaps the most whimsical thing in the whole situation was the fact that the government, pressed as it was by demands of all sorts, continued to issue the old _assignats_ at the same time that it was discrediting them by issuing the new _mandats_. And yet in order to make the _mandats_ "as good as gold" it was planned by forced loans and other means to reduce the quantity of _assignats_ in circulation, so that the value of each _assignat_ should be raised to one-thirtieth of the value of gold, then to make _mandats_ legal tender and to substitute them for _assignats_ at the rate of one for thirty. Never were great expectations more cruelly disappointed. Even before the _mandats_ could be issued from the press they fell to thirty-five per cent of their nominal value; from this they speedily fell to fifteen, and soon after to five per cent, and finally, in August, 1796, six months from their first issue, to three per cent. This plan failed--just as it failed in New England in 1737; just as it failed under our own Confederation in 1781; just as it failed under the Southern Confederacy during our Civil War. [72]

To sustain this new currency the government resorted to every method that ingenuity could devise. Pamphlets suited to people of every capacity were published explaining its advantages. Never was there more skillful puffing. A pamphlet signed "Marchant" and dedicated to "People of Good Faith" was widely circulated, in which Marchant took pains to show the great advantage of the _mandats_ as compared with _assignats_,--how land could be more easily acquired with them; how their security was better than with _assignats_; how they could not, by any possibility, sink in values as the _assignats_ had done. But even before the pamphlet was dry from the press the depreciation of the _mandats_ had refuted his entire argument. [73]

The old plan of penal measures was again pressed. Monot led off by proposing penalties against those who shall speak publicly against the _mandats_; Talot thought the penalties ought to be made especially severe; and finally it was enacted that any persons "who by their discourse or writing shall decry the _mandats_ shall be condemned to a fine of not less than one thousand _francs_ or more than ten thousand; and in case of a repetition of the offence, to four years in irons." It was also decreed that those who refused to receive the _mandats_ should be fined,--the first time, the exact sum which they refuse; the second time, ten times as much; and the third time, punished with two years in prison. But here, too, came in the action of those natural laws which are alike inexorable in all countries. This attempt proved futile in France just as it had proved futile less than twenty years before in America. No enactments could stop the downward tendency of this new paper "fully secured," "as good as gold"; the laws that finally govern finance are not made in conventions or congresses. [74]