Part 3

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 five months after the issue of the four hundred millions in assignats, the government had spent them and was again in distress.

The old remedy immediately and naturally recurred to the minds of men. Throughout the country began a cry for another issue of paper; thoughtful men then began to recall what their fathers had told them about the seductive path of paper-money issues in John Law's time, and to remember the prophecies that they themselves had heard in the debate on the first issue of assignats less than six months before.

At that time the opponents of paper had prophesied that, once on the downward path of inflation, the nation could not be restrained and that more issues would follow. The supporters of the first issue had asserted that this was a calumny; that the people were now in control and that they could and would check these issues whenever they desired.

The condition of opinion in the Assembly was, therefore, chaotic: a few schemers and dreamers were loud and outspoken for paper money; many of the more shallow and easy-going were inclined to yield; the more thoughtful endeavored to breast the current.

One man there was who could have withstood the pressure: Mirabeau. He was the popular idol,--the great orator of the Assembly and much more than a great orator,--he had carried the nation through some of its worst dangers by a boldness almost godlike; in the various conflicts he had shown not only oratorical boldness, but amazing foresight. As to his real opinion on an irredeemable currency there can be no doubt. It was the opinion which all true statesmen have held, before his time and since,--in his own country, in England, in America, in every modern civilized nation. In his letter to Cerutti, written in January, 1789, hardly six months before, he had spoken of paper money as "A nursery of tyranny, corruption and delusion; a veritable debauch of authority in delirium." In one of his early speeches in the National Assembly he had called such money, when Anson covertly suggested its issue, "a loan to an armed robber," and said of it: "that infamous word, paper money, ought to be banished from our language." In his private letters written at this very time, which were revealed at a later period, he showed that he was fully aware of the dangers of inflation. But he yielded to the pressure: partly because he thought it important to sell the government lands rapidly to the people, and so develop speedily a large class of small landholders pledged to stand by the government which gave them their titles; partly, doubtless, from a love of immediate rather than of remote applause; and, generally, in a vague hope that the severe, inexorable laws of finance which had brought heavy punishments upon governments emitting an irredeemable currency in other lands, at other times, might in some way at this time, be warded off from France.

The question was brought up by Montesquieu's report on the 27th of August, 1790. This report favored, with evident reluctance, an additional issue of paper. It went on to declare that the original issue of four hundred millions, though opposed at the beginning, had proved successful; that assignats were economical, though they had dangers; and, as a climax, came the declaration: "We must save the country."

Upon this report Mirabeau then made one of his most powerful speeches. He confessed that he had at first feared the issue of assignats, but that he now dared urge it; that experience had shown the issue of paper money most serviceable; that the report proved the first issue of assignats a success; that public affairs had come out of distress; that ruin had been averted and credit established. He then argued that there was a difference between paper money of the recent issue and that from which the nation had suffered so much in John Law's time; he declared that the French nation had now become enlightened and he added, "Deceptive subtleties can no longer mislead patriots and men of sense in this matter." He then went on to say: "We must accomplish that which we have begun," and declared that there must be one more large issue of paper, guaranteed by the national lands and by the good faith of the French nation. To show how practical the system was he insisted that just as soon as paper money should become too abundant it would be absorbed in rapid purchases of national lands; and he made a very striking comparison between this self-adjusting, self-converting system and the rains descending in showers upon the earth, then in swelling rivers discharged into the sea, then drawn up in vapor and finally scattered over the earth again in rapidly fertilizing showers. He predicted that the members would be surprised at the astonishing success of this paper money and that there would be none too much of it.

His theory grew by what it fed upon,--as the paper-money theory has generally done. Toward the close, in a burst of eloquence, he suggested that assignats be created to an amount sufficient to cover the national debt, and that all the national lands be exposed for sale immediately, predicting that thus prosperity would return to the nation and that an classes would find this additional issue of paper money a blessing.

This speech was frequently interrupted by applause; a unanimous vote ordered it printed, and copies were spread throughout France. The impulse given by it permeated all subsequent discussion; Gouy arose and proposed to liquidate the national debt of twenty-four hundred millions,--to use his own words--"by one single operation, grand, simple, magnificent." This "operation" was to be the emission of twenty-four hundred millions in legal tender notes, and a law that specie should not be accepted in purchasing national lands. His demagogy bloomed forth magnificently. He advocated an appeal to the people, who, to use his flattering expression, "ought alone to give the law in a matter so interesting." The newspapers of the period, in reporting his speech, noted it with the very significant remark, "This discourse was loudly applauded."

To him replied Brillat-Savarin. He called attention to the depreciation of assignats already felt. He tried to make the Assembly see that natural laws work as inexorably in France as elsewhere; he predicted that if this new issue were made there would come a depreciation of thirty per cent. Singular, that the man who so fearlessly stood against this tide of unreason has left to the world simply a reputation as the most brilliant cook that ever existed! He was followed by the Abbe Goutes, who declared,--what seems grotesque to those who have read the history of an irredeemable paper currency in any country--that new issues of paper money "will supply a circulating medium which will protect public morals from corruption."

Into this debate was brought a report by Necker. He was not, indeed, the great statesman whom France especially needed at this time, of all times. He did not recognize the fact that the nation was entering a great revolution, but he could and did see that, come what might, there were simple principles of finance which must be adhered to. Most earnestly, therefore, he endeavored to dissuade the Assembly from the proposed issue; suggesting that other means could be found for accomplishing the result, and he predicted terrible evils. But the current was running too fast. The only result was that Necker was spurned as a man of the past; he sent in his resignation and left France forever. The paper-money demagogues shouted for joy at his departure; their chorus rang through the journalism of the time. No words could express their contempt for a man who was unable to see the advantages of filling the treasury with the issues of a printing press. Marat, Hébert, Camille Desmoulins and the whole mass of demagogues so soon to follow them to the guillotine were especially jubilant.

Continuing the debate, Rewbell attacked Necker, saying that the assignats were not at par because there were not yet enough of them; he insisted that payments for public lands be received in assignats alone; and suggested that the church bells of the kingdom be melted down into small money. Le Brun attacked the whole scheme in the Assembly, as he had done in the Committee, declaring that the proposal, instead of relieving the nation, would wreck it. The papers of the time very significantly say that at this there arose many murmurs. Chabroud came to the rescue. He said that the issue of assignats would relieve the distress of the people and he presented very neatly the new theory of paper money and its basis in the following words: "The earth is the source of value; you cannot distribute the earth in a circulating value, but this paper becomes representative of that value and it is evident that the creditors of the nation will not be injured by taking it." On the other hand, appeared in the leading paper, the "Moniteur," a very thoughtful article against paper money, which sums up all by saying, "It is, then, evident that all paper which cannot, at the will of the bearer, be converted into specie cannot discharge the functions of money." This article goes on to cite Mirabeau's former opinion in his letter to Cerutti, published in 1789,--the famous opinion of paper money as "a nursery of tyranny, corruption and delusion; a veritable debauch of authority in delirium." Lablache, in the Assembly, quoted a saying that "paper money is the emetic of great states."

Boutidoux, resorting to phrasemaking, called the assignats "un papier terre," or "land converted into paper." Boislandry answered vigorously and foretold evil results. Pamphlets continued to be issued,--among them, one so pungent that it was brought into the Assembly and read there,--the truth which it presented with great clearness being simply that doubling the quantity of money or substitutes for money in a nation simply increases prices, disturbs values, alarms capital, diminishes legitimate enterprise, and so decreases the demand both for products and for labor; that the only persons to be helped by it are the rich who have large debts to pay. This pamphlet was signed "A Friend of the People," and was received with great applause by the thoughtful minority in the Assembly. Du Pont de Nemours, who had stood by Necker in the debate on the first issue of assignats, arose, avowed the pamphlet to be his, and said sturdily that he had always voted against the emission of irredeemable paper and always would.

Far more important than any other argument against inflation was the speech of Talleyrand. He had been among the boldest and most radical French statesmen. He it was,--a former bishop,--who, more than any other, had carried the extreme measure of taking into the possession of the nation the great landed estates of the Church, and he had supported the first issue of four hundred millions. But he now adopted a judicial tone--attempted to show to the Assembly the very simple truth that the effect of a second issue of assignats may be different from that of the first; that the first was evidently needed; that the second may be as injurious as the first was useful. He exhibited various weak points in the inflation fallacies and presented forcibly the trite truth that no laws and no decrees can keep large issues of irredeemable paper at par with specie.

In his speech occur these words: "You can, indeed, arrange it so that the people shall be forced to take a thousand livres in paper for a thousand livres in specie; but you can never arrange it so that a man shall be obliged to give a thousand livres in specie for a thousand livres in paper,--in that fact is embedded the entire question; and on account of that fact the whole system fails."

The nation at large now began to take part in the debate; thoughtful men saw that here was the turning Point between good and evil, that the nation stood at the parting of the ways. Most of the great commercial cities bestirred themselves and sent up remonstrances against the new emission,--twenty-five being opposed and seven in favor of it.

But eloquent theorists arose to glorify paper and among these, Royer, who on September 14, 1790, put forth a pamphlet entitled "Reflections of a patriotic Citizen on the issue of Assignats," in which he gave many specious reasons of the why the assignats could not be depressed, and spoke of the argument against them as "vile clamors of people bribed to affect public opinion." He said to the National Assembly, "If it is necessary to create five thousand millions, and more, of the paper, decree such a creation gladly." He, too, predicted, as many others had done, a time when gold was to lose all its value, since all exchanges would be made with this admirable, guaranteed paper, and therefore that coin would come out from the places where it was hoarded. He foretold prosperous times to France in case these great issues of paper were continued and declared these "the only means to insure happiness, glory and liberty to the French nation." Speeches like this gave courage to a new swarm of theorists,--it began to be especially noted that men who had never shown any ability to make or increase fortunes for themselves abounded in brilliant plans for creating and increasing wealth for the country at large.

Greatest force of all, on September 27, 1790, came Mirabeau's final speech. The most sober and conservative of his modern opponents speaks of its eloquence as "prodigious." In this the great orator dwelt first on the political necessity involved, declaring that the most pressing need was to get the government lands into the hands of the people, and so to commit to the nation and against the old privileged classes the class of landholders thus created.

Through the whole course of his arguments there is one leading point enforced with all his eloquence and ingenuity--the excellence of the proposed currency, its stability and its security. He declares that, being based on the pledge of public lands and convertible into them, the notes are better secured than if redeemable in specie; that the precious metals are only employed in the secondary arts, while the French paper money represents the first and most real of all property, the source of all production, the land; that while other nations have been obliged to emit paper money, none have ever been so fortunate as the French nation, for the reason that none had ever before been able to give this landed security; that whoever takes French paper money has practically a mortgage to secure it,--and on landed property which can easily be sold to satisfy his claims, while other nations have been able only to give a vague claim on the entire nation. "And," he ones, "I would rather have a mortgage on a garden than on a kingdom!"

Other arguments of his are more demagogical. He declares that the only interests affected will be those of bankers and capitalists, but that manufacturers will see prosperity restored to them. Some of his arguments seem almost puerile, as when he says, "If gold has been hoarded through timidity or malignity, the issue of paper will show that gold is not necessary, and it will then come forth." But, as a whole, the speech was brilliant; it was often interrupted by applause; it settled the question. People did not stop to consider that it was the dashing speech of an orator and not the matured judgment of a financial expert; they did not see that calling Mirabeau or Talleyrand to advise upon a monetary policy, because they had shown boldness in danger and strength in conflict, was like summoning a prize-fighter to mend a watch.

In vain did Maury show that, while the first issues of John Law's paper had brought prosperity, those that followed brought misery; in vain did he quote from a book published in John Law's time, showing that Law was at first considered a patriot and friend of humanity; in vain did he hold up to the Assembly one of Law's bills and appeal to their memories of the wretchedness brought upon France by them; in vain did Du Pont present a simple and really wise plan of substituting notes in the payment of the floating debt which should not form a part of the ordinary circulating medium; nothing could resist the eloquence of Mirabeau. Barnave, following, insisted that "Law's paper was based upon the phantoms of the Mississippi; ours, upon the solid basis of ecclesiastical lands," and he proved that the assignats could not depreciate further. Prudhomme's newspaper poured contempt over gold as security for the currency, extolled real estate as the only true basis and was fervent in praise of the convertibility and self-adjusting features of the proposed scheme. In spite of all this plausibility and eloquence, a large minority stood firm to their earlier principles; but on the 29th of September, 1790, by a vote of 508 to 423, the deed was done; a bill was passed authorizing the issue of eight hundred millions of new assignats, but solemnly declaring that in no case should the entire amount put in circulation exceed twelve hundred millions. To make assurance doubly sure, it also provided that as fast as the assignats were paid into the treasury for land they should be burned, and thus a healthful contraction be constantly maintained. Unlike the first issue, these new notes were to bear no interest.

Great were the plaudits of the nation at this relief. Among the multitudes of pamphlets expressing this joy which have come down to us the "Friend of the Revolution" is the most interesting. It begins as follows: "Citizens, the deed is done. The assignats are the keystone of the arch. It has just been happily put in position. Now I can announce to you that the Revolution is finished and there only remain one or two important questions. All the rest is but a matter of detail which cannot deprive us any longer of the pleasure of admiring this important work in its entirety. The provinces and the commercial cities which were at first alarmed at the proposal to issue so much paper money now send expressions of their thanks; specie is coming out to be joined with paper money. Foreigners come to us from all parts of Europe to seek their happiness under laws which they admire; and soon France, enriched by her new property and by the national industry which is preparing for fruitfulness, will demand still another creation of paper money."

France was now fully committed to a policy of inflation; and, if there had been any question of this before, all doubts were removed now by various acts very significant as showing the exceeding difficulty of stopping a nation once in the full tide of a depreciating currency. The National Assembly had from the first shown an amazing liberality to all sorts of enterprises, wise or foolish, which were urged "for the good of the people." As a result of these and other largesses the old cry of the "lack of a circulating medium" broke forth again; and especially loud were the clamors for more small bills. The cheaper currency had largely driven out the dearer; paper had caused small silver and copper money mainly to disappear; all sorts of notes of hand, circulating under the name of "confidence bills," flooded France--sixty-three kinds in Paris alone. This unguaranteed currency caused endless confusion and fraud. Different districts of France began to issue their own assignats in small denominations, and this action stirred the National Assembly to evade the solemn pledge that the circulation should not go above twelve hundred millions and that all assignats returned to the treasury for lands should immediately be burned. Within a short time there had been received into the treasury for lands one hundred and sixty million livres in paper. By the terms of the previous acts this amount of paper ought to have been retired. Instead of this, under the plea of necessity, the greater part of it was reissued in the form of small notes.

There was, indeed, much excuse for new issues of small notes, for, under the theory that an issue of smaller notes would drive silver out of circulation, the smallest authorized assignat was for fifty livres. To supply silver and copper and hold it in circulation everything was tried. Citizens had been spurred on by law to send their silverware and jewels to the mint. Even the king sent his silver and gold plate, and the churches and convents were required by law to send to the government melting pot all silver and gold vessels not absolutely necessary for public worship. For copper money the church bells were melted down. But silver and even copper continued to become more and more scarce. In the midst of all this, various juggleries were tried, and in November, 1790, the Assembly decreed a single standard of coinage, the chosen metal being silver, and the ratio between the two precious metals was changed from 15 1/2 to 1, to 14 1/2 to 1--but all in vain. It was found necessary to issue the dreaded small paper, and a beginning was made by issuing one hundred millions in notes of five francs, and, ere long, obedient to the universal clamor, there were issued parchment notes for various small amounts down to a single sou.

Yet each of these issues, great or small, was but as a drop of cold water to a parched throat. Although there was already a rise in prices which showed that the amount needed for circulation had been exceeded, the cry for "more circulating medium" was continued. The pressure for new issues became stronger and stronger. The Parisian populace and the Jacobin Club were especially loud in their demands for them; and, a few months later, on June 19, 1791, with few speeches, in a silence very ominous, a new issue was made of six hundred millions more;--less than nine months after the former great issue, with its solemn pledges to keep down the amount in circulation. With the exception of a few thoughtful men, the whole nation again sang paeans.

In this comparative ease of new issues is seen the action of a law in finance as certain as the working of a similar law in natural philosophy. If a material body fall from a height its velocity is accelerated, by a well-known law, in a constantly increasing ratio: so in issues of irredeemable currency, in obedience to the theories of a legislative body or of the people at large, there is a natural law of rapidly increasing emission and depreciation. The first inflation bills were passed with great difficulty, after very sturdy resistance and by a majority of a few score out of nearly a thousand votes; but we observe now that new inflation measures were passed more and more easily and we shall have occasion to see the working of this same law in a more striking degree as this history develops itself.

During the various stages of this debate there cropped up a doctrine old and ominous. It was the same which appeared toward the end of the nineteenth century in the United States during what became known as the "greenback craze" and the free "silver craze." In France it had been refuted, a generation before the Revolution, by Turgot, just as brilliantly as it was met a hundred years later in the United States by James A. Garfield and his compeers. This was the doctrine that all currency, whether gold, paper, leather or any other material, derives its efficiency from the official stamp it bears, and that, this being the case, a government may relieve itself of its debts and make itself rich and prosperous simply by means of a printing press:--fundamentally the theory which underlay the later American doctrine of "fiat money."

There came mutterings and finally speeches in the Jacobin Club, in the Assembly and in newspaper articles and pamphlets throughout the country, taking this doctrine for granted. These could hardly affect thinking men who bore in mind the calamities brought upon the whole people, and especially upon the poorer classes, by this same theory as put in practice by John Law, or as refuted by Turgot, but it served to swell the popular chorus in favor of the issue of more assignats and plenty of them.