The weekly democratic statesman. [volume] (Austin, Tex.) 1871-1883, 1878-10-31
Fiat IIOney-in n Horn.
AUSTIN. October oS. 1875

Editors Democratic Statesman:
The Teeas Capital publishes an ar
ticle under the heading. France and
Absolute Paper Money" sosfull of er-
rors that l desire to state some facts,
showing the ignorance of some writer's
whenever they desire to enlighten the
public on finances. Germany, having
vanquished France in 1871, imposed
upon her a ransom of five mIlliards of
francs, or one thousand millions OF
gold dollars. France did pay this
enormous amount sooner than the con-
queror had imposed, and the question
at issue is how did France pay this2-
not by issuing fat money, as stated,
nor was it pad in the money of the
world.
The writer Of this al ticle is certainly
not familiar with the monetary condi-
ton of France. The power TO issue
notes is monopoly, enjoyed by the
Bank of France alone. No limit is put
on the paper issues of the bank, except
that the bank must redeem its notes
on demand in gold and silver. Is this
fiat money? During the Francc-Prus-
sian war, when the demands upon the
bank became so enormous, the Bank
Of France suspended specie payment,
but the very first thing the French leg
islature did after the war was to set
time by which the Bank of France was
obliged to resume specie payment, that
Is redeem her notes for gold and silver.
This latter event took place on Janu-
airy 1, 1878, but long before that date
the bank was in condition to re-
sumo. 1t was this preparation of the
bank which stopped, even during
the darkest hour of that remarkable
war, the depreciation of French notes
to more than 2 1-2 per cent. as against
gold. The managers of that grand ir-
stituticn knew full we'll that the m Oney
of the world alone could keep the pa
per money .hey issued from becoming
worthless, and they stroye with all
their power to acquire gold and silver,
in order to be able to give it to every
conner who should desire to make the
exchange for the notes of the bank.
The public debt of France is composed
of
1. The consolidated debt, or rentes
Tin French "rente" constitutes per-
petuity)
2. The floating debt.
3. The pension debt.
/ have to deal with the first kind of
debt because it has become part and
parcel of the French people; the rentes
of France are bond, the interest OF
which is paid TO the owner every six
months, but the principal only when
ever a conversion of interest takes
place. 1t was by making loans that
the French government obtained
the means TO pay, in money of the
world, that is, in gold and silver, and
not in fat money. which the astute
German. chancellor. Bismarck, would
certainly never have accepted. France
had to pay to Germany 800, 900, 900
gold, thirty days after the preliminaries
of peace had been signed $500, 900, 900
gold, during 1871; 800, 900, 900 gold,
on May 1. 1872; 5000, 900, 900 gold,
May /, 1874. Total, $1,000. 900, 900.
the last 5000, 600, 900 bore interest at
the rate of five per cent. from the day
of the ratification of peace, and the
terms of payment were especially stip-
ulated to be exclusively gold and sill
yer, either coined or in bars, notes of
the Banks of Prussia, England and
Holland and drafts on first class houses;
but as favor to France and by a sep
arate convention dated May 81, 1877,
Germany accepted $25. 1000, 900 in the
notes of the Bank of France, which
were paid at Metz, Strassbourg and
Mulhouse, and how little fiat there was
in all this proves that the drafts on
first class houses could only be paid
on Hamburg, Frankfort and Berlin.
The government promptly paid the
first installment out of money on hand
and then opened a subscription to a
five per cent. loan for $500, 600. 900;
the price at which the loan was offered
was so 1-2, netting the government,
after deducting expenses and dis
counts, 1926. Those who remember
this financial operation will know that
the whole amount was signed in day.
A year after that the government
opened another subscription for $780,
coo, 600 five per cent. loan at the fixed
price of 81 1-2, and its results aston
ished the world, because $500. 900, 600
were signed, when but 800, 0O0, 900
were required. The French govern
ment new had the money to pay Ger
many, as follows: