Copyright 2013 by John T. Reed

A reader suggested I read the book Fiat Money Inflation in France by Andrew Dickson White.

“Is that about the assignats and death penalties and all that?”


“I already read about it and covered it at some length in my hyperinflation book.”

He recommended I read it anyway and gave me a copy. Apparently it is available for free on the Internet.

I recommend you read it.

I thought the French Revolution was a Thalidomide-deformed attempt by French people with shoe-size IQs like “Madame DeFarge” to imitate the American Revolution of 1776-1789. Only they beheaded people left and right for no good reason.

I was mistaken. DeFarge, of course, is a fictional character, although apparently a relatively representative composite of many real French revolutionaries. With that image in mind, I did not see the French hyperinflation as worth much study. I was mistaken. I wrote a brief item about the book on line and another reader made the same mistake I did. Too long ago. Too unrepresentative of anything that would happen today.

I was mistaken.

The reason to read this book is to be shocked by how similar the politicians and elected officials of the French Revolution government sound like Obama and Shumer and Reid and Paul Krugman and all that crowd.

The book was written in 1896. It has an introduction written by its author in 1912. He was the first president of Cornell University. It was copyrighted in 1896 then again in 1923 and 1933. It covers generally the period of the French Revolution, about 1786 until 1796. Napoleon Bonaparte, who took over after that, refused to restart the hyperinflation by saying simply,

I will pay cash [gold or sliver coins] or I will pay nothing.

Poof went a decade of horrific conditions caused by hyperinflation.

You can read what I already wrote about the French hyperinflation on page 106 of my book How to Protect Your Life Savings from Hyperinflation & Depression, 2nd edition in the pertinent history time line. John Law (see below) is written about on the prior page.

France was a great nation in the 1700s. True, they had a monarchy, but so did all the other great nations then. And it was not one king and a zillion peasants. They had a very modern society with banks and universities and bureaucrats and all that.

And the Revolution created a government bearing some resemblance to ours, not just street mobs. In other words, they had elections, elected federal legislators, newspapers, speeches, etc. And their speeches and various new laws passed creating and worsening the hyperinflation all sound very much like today’s fiscal cliff, debt-ceiling-increase debates, quantitative easing and all that. It is quite depressing, albeit enlightening, to read so much similarity between a bunch of French nut cakes guillotining merchants for exceeding price controls—in accordance with their federal laws of the time, and our current federal government politicians refusal to cut spending and increasingly draconian regulation of business.

Same political BS. Same problem of spending too much. Same notion of “printing” money as a way to create prosperity for all. Same responses to the market’s rejection of the excessively printed money.

Good antidote for those of you inclined to have thoughts like

Hyperinflation can’t happen here. We are too civilized and intelligent.

The people in the French federal government including the leading citizens of what, as I said, was an extremely sophisticated society with many educated, esteemed economists and other financial leaders weighing in on France’s excessive printing of paper money during that period.

Furthermore, France knew better. They had previously made the same mistake under the monarchy when a Scottish economist name John Law—apparently the Paul Krugman of the 1720s—believed there was no risk to printing too much paper fiat (nothing backing it) money. Wikipedia says of Law:

Law’s views held that money creation will stimulate the economy, that paper money is preferable to metallic money which should be banned, and that shares [stock in corporations] are a superior form of money since they pay dividends. He was responsible for the Mississippi Bubble and a chaotic economic collapse in France.

One of the surprising things you find in almost all book about depression or hyperinflation are comments like this from the Forward of Fiat Money

Every fetter that could hinder the will or thwart the wisdom of democracy had been shattered, and in consequence every device and expedient of untrammeled power and unrepressed optimism could conceive were brought to bear. But the attempts failed. They left behind a legacy of moral and material desolation and woe, from which one of the most intellectual and spirited races of Europe has suffered for a century and a quarter, and will continue to suffer until the end of time.

Legislatures are as powerless to abrogate moral and economic laws as they are to abrogate physical laws. They cannot convert wrong into right nor divorce effect from cause, either by parliamentary majorities, or by unity of supporting public opinion. The penalties for such legislative folly will always be exacted by inexorable time.

A wholesale demoralization of society took place under which thrift, integrity, humanity, and every principle of morality were thrown into the welter of seething chaos and cruelty.

That was written in 1914. Let me make sure you understand it. By passing insane laws—namely those that require you to pretend that worthless money is absolutely worth the same as it was before—you turn the people of the nation into cynics and outlaws with no respect for morality, ethics, or their fellow man. All good flows from favors from the government and all who try to make their lives better based on merit are doomed chumps. We can feel this happening to us in America now as more and more stay on unemployment rather than look for work, apply for fraudulent disabilities, demand no cuts in Social Security and Medicare that pay out three times what the beneficiaries paid in, and so on.

The excess money that is currently being “printed” will eventually be thrown on the trash heap of history by the market, and entitlements will be drastically cut back and people forced back into self-reliance, but the loss of morality in our society will probably be a permanent scourge that will hurt us forever.

Here is the last paragraph of the 1914 forward of the book. Remember, this is a man talking to his fellow North Americans in 1914 about what the people of 1914 North America should remember from the events of the last decade of the 1700s in France. My comments are in [red].

Public opinion in our own country is so far sound on the question of currency, [he means the public was still opposed to “printing” too much of it] but signs are not lacking in some lay quarters of an inclination to sanction dangerous experiments. [“Quantitative Easing”] The doctrine of governmental regulation of prices, has, however made its appearance in embryo. [He means wage and price controls which are almost always enacted when voters become unhappy with inflation levels.] Class dissatisfaction is also on the increase. ["The rich are not paying their fair share in any nation that is facing the kind of employment issues [America currently does] — whether it's individual, corporate or whatever [form of] taxation forms," Hillary Clinton told an audience at the Brookings Institute,…] The confiscation of property rights under legal forms and processes [e.g., progressive income tax, placing union members over secured Chrysler bond owners] is apt to be condoned when directed against unpopular interests [the 1%, “Wall Street,” banks, “millionaires and billionaires”] and when limited to amounts [boiling frog syndrome and salami slice method and “We must ask for the wealthy to pay a little bit more” (part of Obama’s “You didn’t build that” speech)] that do not revolt the conscience. The wild and terrible expression given to these insidious principles in the havoc of the [French] Revolution should be remembered by all. Nor should the fact be overlooked that, as Mr. White points out on page 6, the National Assembly [Congress equivalent] of France which originated and supported these measures contained in its membership the ablest Frenchmen of the day.

It should be noted that U.S. inflation rates rose to double digits in the U.S. in the years 1917 through 1920. The U.S. was in World War I and had price controls during the war. Hyperinflation in Austria, Germany, Hungary began after the war ended in 1919 and continued through 1924. World War I and inflation or hyperinflation in the U.S. and Europe occurred three or more years after the paragraph I just quoted from Fiat Money…

One of the goofy “this time is different” theories of the French regarding printing too much money as that was only a danger when a king did it. When the people in a democracy wanted it, it was okay.

Then there’s this from page 7:

Oratory prevailed over science and experience.

Tell me about it. Are you sure you wrote this in 1896 and not 2012?

And here’s a paragraph that could have been written about Obama and Romney in 2012.

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.

This author says as did those talking about later inflations that everyone—politician and public—insisted on claiming a zillion reasons other than printing too much money as the cause of the hyperinflation.

Inflation is always and everywhere a monetary phenomenon.
—Milton Friedman, 1963

In other words, inflation is caused solely by the law of supply and demand. When the supply of money to do transactions exceeds the demand, that is, the number and amount of transactions, the purchasing power of the money falls. The money supply should grow at the same rate as the economy. When it grows faster, inflation is the result. Blaming it on anything and everything else is the typical behavior of an addict or alcoholic rationalizing his ever increasing quantities of consumption of that which is killing him.

When price controls failed to end the inflation, they concluded it was because the penalty was too lenient. Eventually, they imposed the death penalty. Many were executed—really—but the price controls were still ignored.

Here’s another observation I have seen in histories of the Great Depression and of other hyperinflations:

Commerce was dead; betting took its place.

And here is another that is typical of inflation/deflation crises:

…in the country at large there grew a dislike of steady labor and a contempt for moderate gains and simple living.

I have said that when the conditions reach a certain point, you must leave the country.

Apparently, plenty of French did that and they got this on page 36:

There came a confiscation of the large estates of landed proprietors who had fled the country.

On February 28, 1793, a Paris mob wearing masks first looted bread, then they simply stole everything, progressing from the somewhat sympathetic bread only to take it all, all in the same night.

On June 22, 1793, the French federal government employed financial repression, forcing all married men who made more than 10,000 francs and all single men who made more than 6,000 francs to lend money to the government—essentially like forcing them to buy government bonds, which is the way they do this in the U.S. in post-World War II America. France later lowered the loan threshold to those who made one thousand francs because so many of the rich fled the country taking their wealth with them.

Does any of this sound familiar? Remember, this was done in the 1790s. Same crap as today. Same reasons cited by the politicians. Same trying to sneak it in on everyone using the salami-slice, a-little-at-a-time method.

Importers in France were initially in good shape because import prices cannot be controlled. But the government tried to create price controls on imports in effect by raising tariffs higher and higher. That forced importers out of business.

As even more paper money continued to be printed, laws were passed levying heavy fines and prison sentences on anyone who dared even criticize the currency.

On July 16, 1796, the French government did what all hyperinflating governments must eventually do: repeal their legal tender law. That means they let the residents of the country use whatever money they want and reject whatever money they want. When they do that, hyperinflation goes away overnight. Zimbabwe did it in 2005. The U.S. will do it after we get into hyperinflation.

Page 62 of the book says the 10 years of French hyperinflation took 40 years to overcome, that is, to get all the economic metrics back to where they were on the last day of the hated, evil monarchy. That is where we are headed. So take a good look at today in America. It may be another 45 years before we get back to it.

This book often sounds like a doctor talking about drug addiction, a rare psychosis back in the early 1900s. Here is a famous phrase used with regard to rent control which is hyperinflation’s first cousin.

When it comes to hyperinflation, starting is euphoric; quitting is impossible; and continuing is disaster.

Here is an email from a reader:

Hi John--

Just as a little P.S. to your excellent article on this subject: it probably hasn't escaped your notice that the film Les Miserables is getting a lot of press at the moment, what with it starring Hugh Jackman, Russell Crowe, and Anne Hathaway and being a filmed version of the acclaimed stage musical. The musical itself is a stage version of Victor Hugo's novel of the same name.

Les Miserables, with its cast of downtrodden, emaciated characters struggling to survive and be moral in horrifying conditions, is set in France of 1815 - 19 years after the French Revolution ended. The cast of tragic characters in Les Miserables are living in the economic ruins the Revolution left behind. They are living through the 40 years of recovery it took to get France back to its economic state before the revolution. Indeed the sheer misery of their existence, and the conditions they live in, gave the book its name: Les Miserables -- the phrase translates in French depending on context as The Miserable, The Wretched, The Miserable Ones, The Poor Ones, The Wretched Poor, or The Victims. The story opens as the main character, Jean Valjean, is released from prison after 19 years: 5 for stealing bread to feed his family, 14 for escape attempts. Valjean's original crime therefore was committed in 1796: that is, at the end of the French Revolution as White describes in his book.

Victor Hugo's Preface to Les Miserables was as follows:

"So long as there shall exist, by reason of law and custom, a social condemnation, which, in the face of civilization, artificially creates hells on earth, and complicates a destiny that is divine, with human fatality; so long as the three problems of the age—the degradation of man by poverty, the ruin of women by starvation, and the dwarfing of childhood by physical and spiritual night—are not solved; so long as, in certain regions, social asphyxia shall be possible; in other words, and from a yet more extended point of view, so long as ignorance and misery remain on earth, books like this cannot be useless."

It struck me that the section you've quoted from White's Forward about the degradation of morals resulting from the hyperinflation dovetails very nicely with Hugo's own preface. Hugo seems to be saying that as long as idiots make insane laws interfering with freedoms God-given to man, as long as poverty exists, as long as class warfare and [economic] ignorance exists, horrors like that in Les Miserables will keep happening, again and again.

And if America's economic path follows the one White describes as imposed on France, which it seems to be, then the flocks of moviegoers currently watching Hugh Jackman sing ever-so-tragically about his lot in life may well be watching a preview of their, or their children's, futures. The irony is palpable.

Great article otherwise.

Kind regards,

Michael Aulfrey


There is a beautifully produced video on YouTube covering the Fiat Money Inflation in France that explains the history of it an a clear and concise manner. It is one of a series of two videos, the first covering John Law and the Mississippi Bubble.

It comes off as an absolutely text book example of what you have been saying for the few years with the capital controls and the politicians pointing their fingers at everyone else.

Here they are:

John Law:

Fiat Money Inflation In France:

Randy Skillin

I appreciate informed, well-thought-out constructive criticism and suggestions.

John T. Reed