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and on the great rivers. For private exchanges, however, such drawbacks were neutralized by reimbursing the creditor from tobacco levied by the county courts for that purpose. In case of destruction of the warehouses by fire or food, the Assembly held itself liable for the loss incurred.

A substantial addition to this system was made in 1734, when a second variety of circulating notes was authorized. This was to provide for the case of the " private crops of gentlemen,” which gave so much offense in the first law. This law applied to all tobacco which was merely stored awaiting export, and not intended for the payment of public dues. For such tobacco, socalled “crop notes were issued against specified hogsheads, which were distinctly branded and specially reserved until the notes representing them should be presented. The inspection for this tobacco was less rigorous, and the fees were only about one half as great as those allowed for the inspection of transfer tobacco. Provision was made for an exchange of crop for transfer notes by the payment of an additional fee.

This system underwent but few modifications in the colonial period, except so far as changes in administration were made necessary by the increase of population and the determined attempts to evade the law. The transfer tobacco which was received in the payment of public debts was sold annually, and the proceeds were devoted to the proper uses. They were not to pass current after that year, but others were substituted for them. Gradually the crop notes seem to have become used for the payment of debts, which apparently was not the original intention of the legislators. This led to considerable frauds, and in 1748 a more stringent law was enacted, strictly and effectively limiting the legal tender quality to the transfer and crop notes. The system was suspended for a time during the war of 1755, but in 1761 was revived in the old form. The only change previous to the Revolution was a reduction of the time of deposit for crop tobacco notes from eighteen to twelve months. This was found necessary to prevent the great waste from shrinkage.

CHAPTER XV

PAPER MONEY IN FRANCE 1

Near the end of the year 1789 the French nation found itself in deep financial embarrassment: there was a heavy debt and a serious deficit.

The vast reforms of that year, though a lasting blessing politically, were a temporary evil financially. There was a general want of confidence in business circles; capital had shown its proverbial timidity by retiring out of sight as far as possible; but little money was in circulation ; throughout the land was temporary stagnation.

Statesmanlike measures, careful watching, and wise management, would doubtless have led, ere long, to a return of confidence, a reappearance of money, and resumption of business ; but this involved waiting, self-denial, and self-sacrifice; and thus far in human history those are the rarest products of an improved political condition. Few nations, up to this time, have been able to exercise these virtues ; and France was not then one of those few.

There was a general looking about for some short road to prosperity ; ere long, the idea was set afloat that the great want of the country was more of the circulating medium; and this was speedily followed by calls for an issue of paper money. The Minister of Finance at this period was Necker. In financial ability he was acknowledged among the great bankers of Europe ; but he had something more than financial ability: he had a deep feeling of patriotism and a high sense of personal honor. The difficulties in his way were great, but he steadily endeavored to keep France faithful to those financial principles which the

1 By Honorable Andrew D. White. Reprinted, by consent of the author and publisher, from Fiat Money Inflation in France. Copyright, 1877, by D. Appleton & Company, New York.

general experience of modern times had established as the only path to national safety. As difficulties arose, the National Assembly drew away from him, and soon came among the members muttered praises of paper money ; members like Allarde and Gouy held it up as a panacea,

as a way of “ sec g resources without paying interest." This was echoed outside; the journalist Loustalot caught it up and proclaimed its beauties ; Marat, in his newspaper, also joined the cries against Necker, picturing him a man who gave up health and fortune for the sake of France as a wretch seeking only to enrich himself from the public purse.

Against the tendency to the issue of irredeemable paper Necker contended as best he might. . . . But the current was too strong; on the 19th of April, 1790, the Finance Committee of the Assembly reported that “ the people demand a new circulating medium”; that “ the circulation of paper money is the best of operations”; that “it is the most free because it reposes upon the will of the people"; that it will bind the interests of the citizens to the public good."

The report appealed to the patriotism of the French people with the following exhortation : " Let us show to Europe that we understand our own resources ; let us immediately take the broad road to our liberation, instead of dragging ourselves along the tortuous and obscure paths of fragmentary loans ” ; it concluded by recommending an issue of paper money, carefully guarded, to the amount of four hundred million francs.

But mingled with the financial argument was a very strong political argument. The nation had just taken as its own the vast real property of the French Church, the pious accumulations of thirteen hundred years. There were princely estates in the country, sumptuous palaces and conventual buildings in the towns ; these formed about one third of the entire real property of France, and amounted in value to about four thousand million francs, yielding a yearly income of about two hundred millions. By one sweeping stroke all this had become the property of the nation ; never, apparently, did a nation secure a more solid basis for a great financial future.

There were two great reasons why French statesmen desired speedily to sell these lands. First, a financial reason, — to obtain money to relieve the government. Secondly, a political reason, - to get this land distributed among the thrifty middle classes, and so to commit them to the Revolution and to the government which gave their title.

It was urged, then, that the issue of four hundred millions of paper would give the treasury something to pay out immediately, and relieve the national necessities; that, having been put into circulation, this paper money would stimulate business; that it would give to all capitalists, large or small, the means for buying of the nation the ecclesiastical real estate, and that from the proceeds of this real estate the nation would again obtain new funds for new necessities: never was theory more seductive both to financiers and statesmen.

But it would be a great mistake to suppose that the statesmen of France, or the French people, were ignorant of the dangers of issuing irredeemable paper money. No matter how skillfully the bright side of such a currency was exhibited, all thoughtful men in France knew something of its dark side. They knew too well, from that fearful experience in John Law's time, the difficulties and dangers of a currency not based upon specie. They had then learned how easy it is to issue it; how difficult it is to check an overissue ; how seductively it leads to the absorption of the means of the workingmen and men of small fortunes ; how surely it impoverishes all men living on fixed incomes, salaries, or wages ; how it creates on the ruins of the prosperity of all workingmen a small class of debauched speculators, the most injurious class that a nation can harbor, more injurious, indeed, than professional criminals whom the law recognizes and can throttle; how it stimulates overproduction at first, and leaves every industry flaccid afterward; how it breaks down thrift, and develops political and social immorality. All this France had been thoroughly taught by experience.

Oratory prevailed over science and experience. In December, 1789, came the first decree. After much discussion it was

decided to issue four hundred million francs in paper money, based upon the landed property of the nation as its security. The deliberations on this first decree, and on the bill carrying it into effect, were most interesting ; prominent in the debate were Necker, Dupont, Maury, Cazalès, Bailly, and many others hardly inferior. ...

At last, in April, 1790, the four hundred million francs were issued in assignats — paper money secured by a pledge of productive real estate, and bearing interest to the holder at three per cent. No irredeemable currency has ever claimed a more scientific and practical guarantee for its goodness and for its proper action on public finances. On one side it had what the world universally recognized as the most practical security, — a mortgage on productive real estate of vastly greater value than the issue. On the other hand, as the notes bore interest, there was every reason for their being withdrawn from circulation whenever they became redundant.

As speedily as possible the notes were put into circulation. Unlike those issued in John Law's time, they were engraved in the best style of the art. To stimulate loyalty, the portrait of the king was placed in the center; to stimulate patriotism, patriotic legends and emblems surrounded him; to stimulate public cupidity, the amount of interest which the note would yield each day to its holder was printed on the margin ; and the whole was duly garnished with stamps and signatures, showing that it was under careful registration and control.

*

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 the paper money having thus been passed from the government into the midst of the people, trade was revived, and all difficulties seemed past. The anxieties of Necker, the prophecies of Bergasse, 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 evils which afterward arose would

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