Evening star., 1933-10-04
Copyright. 1888 by North American News
paper Alliance. Inc.J
Article No. 10.
LIMITATION IN HISTORY"

"INFLATION IN HISTORY"
It was no mere chance that when the
rift developed among the delegates to
the World Economic Conference in
! London over currency matters France
should have emerged as the standard
bearer of the anti-inflationist group;
nor was it chance that Germany, her
traditional political enemy, should have
been found staunchly supporting the
French monetary position.
France and Germany know what in
! f1ation is rom the bitter experience Of
| their own histories. The French have
| tried the experiment twice on catas-
trophic scale. and once. more recently,
they were all but carried down by it..
The Germans have had only one ex-
perience with imitation in the grand
manner, but that experience is still a
nightmare to those who went through
it. Any German will tell you today
that as between the World War and
imitation, he would prefer to relive the
horrors of the war.
In this and the succeeding article
we shall survey some of the manifesto
tlonS and consequences of initiation at
three periods and in three settings
through the assignats, in 1790-1796 the
German postwar imitation and Amer
ica's comparatively minor excursion
into the issuance of paper money in the
1860s.
Parallel Is Striking,
The first, though more remote in time
| than the others, will be considered at
somewhat greater length. for two rea-
sons. One is that the literature on it
is the most complete and scholarly to
he fO1ln6 the cl1hinct nf inf
The other reason is because the parallel
between the situation which gave rise
to the emission of the aSsignatS and
that prevailing in the United States to-
day is peculiarly striking.
In contrast with Germany's imitation
OF the mark and the American green
back experiment, the French imitation
OF 1890 was entered upon not as an
exlgency Of war but as deliberate, cal
culated attempt to revive a country
financially exhausted by wars and taxes.
Louis XIV had said, Live at peace with
| your neighbors,' but since his death in
Ills four wars had been waged. cul-
minating in the disastrous Seven Years
War by which French commerce had
been destroyed and the French colonies
lost Debts were multiplied and taxes
increased. With war and extravaganza,
Louis XIV had left France a bankrupt
state.
This imitation was not the work of
irresponsible, ignorant revolutionists.
The French National Assembly at the
American historian of the period, points
out. included such figures as Sieyes.
Bailly, Mirabeau, Talleyrand and Du
Pont, and was, on the whole, lone of
the most patriotic and keen-sighted
legislative bodies" in the nations his
tory The French finance minister was
that successful banker and brilliant
financial statesman, Necker.
Dangers Were Perceived.
In addition, French statesmen were
keenly alert to the dangers of paper
money imitation. Their country two
generations earlier had been reduced to
financial shambles by the paper
money experiments OF John Law. But.
as Francis Gribble observed in discuss
ing this curious example of national OBJ
tuseness. politicians have short mem
ories. and drowning financiers clutch
! frantically at StraWS.'
The truth is that French leaders Of
| the period labored under delusion
which seems common to all episodes OF
the sort. Like all supporters Of ire
deemable paper, before or since," wrote
White, "they thought that circum-
stances were not the same at the time
and place of the issue proposed as with
previous disastrous issues Thus we
| find Martineau, one of the leaders in
the inflationist cause, saying:
Paper money under despotism is
dangerous. 1t favors corruption. But
in a nation constitutionally governed.
which itself takes care of the emission
of its notes, and which determines their
use. that danger no longer exists
| The assignats it was proposed to
| issue we're to be secured by recently
! seized church lands, whose value was
estimated at some three billion francs.
In this circumstance many thoughtful
persons saw sharp contrast with the
paper money of John Law, which was
without inherent value" THE earth. "
said one defender of the issue, "is the
source of value. 1t Is obvious
that creditors will not be injured by
taking this money"
Necker Favored Limits.
Necker, in the language of today, was
a limited" or controlled" inflationist.
He hoped that by staying in Office he
could exercise restraining influence
on the extreme inflationists. But his
hope the issue could be confined to
400 100000 francs. the maximum
originally contemplated, was early dis
appointed. In giving the experiment
his grudging benediction he found he
had taken a step down a slippery slope.
The first 400 100000 assignats were
brought out in April, 1890, and seemed
to have a mildly stimulating effect on
trade. But when this issue had been
used up and business showed signs Of
sagging, the question rose. what should
be done next. What more natural than
that the old remedy should suggest
itself?
Necker realized now he had made a
mistake. But the demand for infla-
ton was stronger than he. The trou-
BILE, Necker's associates said, was that
he had not inflated enough. They
urged that the authorized issue be
raised to two billions. Necker went
down in the fight and retired to spend
the remainder of his days in Switzer-
land; Mirabeau, an enthusiastic infla-
zionist, came to the top. Experience
bowed to oratory.
A compromise was reached at 1,200.-
600 francs, but not for long. In
June 1871, Mirabeau announced that
currency WAS running low and the au-