Edmund Burke on Paper Fiat Currencies, 1790

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Published : December 02nd, 2019
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Category : Editorials

Today, we have a section by Edmund Burke, from Reflections on the Revolution in France, from 1790. This was, of course, early in the French Revolution, before things became very bloody, and also, before the fiat assignats became worthless. Nevertheless, Burke could see where this was going, including the paper fiat currency. His observations on it pertain to our situation today. We are not today in anything like the debauchery of the assignats as they sank into hyperinflation in 1795. But, while Burke was writing, they hadn’t yet sunk in value very much.

The assignats came about via the confiscation of Church property. At first, they were conceived as a sort of equity shareholding against the properties then owned by the government. Supposedly, the currency could be “redeemed” for property; and. perhaps, property for currency. This did not amount, in the end, to much more than fiction. But, in Burke’s description, there is a connection between the issuance of assignats and the confiscation of Church property.

Another excellent account of the hyperinflation of the assignats is Fiat Money Inflation in France (1896), by Andrew Dickson White.

Here is Burke:

FINDING NO SORT OF PRINCIPLE of coherence with each other in the nature and constitution of the several new republics of France, I considered what cement the legislators had provided for them from any extraneous materials. Their confederations, their spectacles, their civic feasts, and their enthusiasm I take no notice of; they are nothing but mere tricks; but tracing their policy through their actions, I think I can distinguish the arrangements by which they propose to hold these republics together. The first is the confiscation, with the compulsory paper currency annexed to it; the second is the supreme power of the city of Paris; the third is the general army of the state. Of this last I shall reserve what I have to say until I come to consider the army as a head by itself.

As to the operation of the first (the confiscation and paper currency) merely as a cement, I cannot deny that these, the one depending on the other, may for some time compose some sort of cement if their madness and folly in the management, and in the tempering of the parts together, does not produce a repulsion in the very outset. But allowing to the scheme some coherence and some duration, it appears to me that if, after a while, the confiscation should not be found sufficient to support the paper coinage (as I am morally certain it will not), then, instead of cementing, it will add infinitely to the dissociation, distraction, and confusion of these confederate republics, both with relation to each other and to the several parts within themselves. But if the confiscation should so far succeed as to sink the paper currency, the cement is gone with the circulation. In the meantime its binding force will be very uncertain, and it will straiten or relax with every variation in the credit of the paper.

One thing only is certain in this scheme, which is an effect seemingly collateral, but direct, I have no doubt, in the minds of those who conduct this business, that is, its effect in producing an oligarchy in every one of the republics. A paper circulation, not founded on any real money deposited or engaged for, amounting already to forty-four millions of English money, and this currency by force substituted in the place of the coin of the kingdom, becoming thereby the substance of its revenue as well as the medium of all its commercial and civil intercourse, must put the whole of what power, authority, and influence is left, in any form whatsoever it may assume, into the hands of the managers and conductors of this circulation.

In England, we feel the influence of the Bank, though it is only the center of a voluntary dealing. He knows little indeed of the influence of money upon mankind who does not see the force of the management of a monied concern which is so much more extensive and in its nature so much more depending on the managers than any of ours. But this is not merely a money concern. There is another member in the system inseparably connected with this money management. It consists in the means of drawing out at discretion portions of the confiscated lands for sale, and carrying on a process of continual transmutation of paper into land, and land into paper. When we follow this process in its effects, we may conceive something of the intensity of the force with which this system must operate. By this means the spirit of money-jobbing and speculation goes into the mass of land itself and incorporates with it. By this kind of operation that species of property becomes (as it were) volatilized; it assumes an unnatural and monstrous activity, and thereby throws into the hands of the several managers, principal and subordinate, Parisian and provincial, all the representative of money and perhaps a full tenth part of all the land in France, which has now acquired the worst and most pernicious part of the evil of a paper circulation, the greatest possible uncertainty in its value. They have reversed the Latonian kindness to the landed property of Delos. They have sent theirs to be blown about, like the light fragments of a wreck, oras et littora circum.

The new dealers, being all habitually adventurers and without any fixed habits of local predilections, will purchase to job out again, as the market of paper or of money or of land shall present an advantage. For though a holy bishop thinks that agriculture will derive great advantages from the “enlightened” usurers who are to purchase the church confiscations, I, who am not a good but an old farmer, with great humility beg leave to tell his late lordship that usury is not a tutor of agriculture; and if the word “enlightened” be understood according to the new dictionary, as it always is in your new schools, I cannot conceive how a man’s not believing in God can teach him to cultivate the earth with the least of any additional skill or encouragement. “Diis immortalibus sero”, said an old Roman, when he held one handle of the plough, whilst Death held the other. Though you were to join in the commission all the directors of the two academies to the directors of the Caisse d’Escompte, one old, experienced peasant is worth them all. I have got more information upon a curious and interesting branch of husbandry, in one short conversation with an old Carthusian monk, than I have derived from all the Bank directors that I have ever conversed with. However, there is no cause for apprehension from the meddling of money dealers with rural economy. These gentlemen are too wise in their generation. At first, perhaps, their tender and susceptible imaginations may be captivated with the innocent and unprofitable delights of a pastoral life; but in a little time they will find that agriculture is a trade much more laborious, and much less lucrative, than that which they had left. After making its panegyric, they will turn their backs on it like their great precursor and prototype. They may, like him, begin by singing “Beatus ille” but what will be the end?

Haec ubi locutus foenerator Alphius,
Jam jam futurus rusticus
Omnem redegit idibus pecuniam;
Quaerit calendis ponere.

They will cultivate the Caisse d’Eglise, under the sacred auspices of this prelate, with much more profit than its vineyards and its cornfields. They will employ their talents according to their habits and their interests. They will not follow the plough whilst they can direct treasuries and govern provinces.

Your legislators, in everything new, are the very first who have founded a commonwealth upon gaming, and infused this spirit into it as its vital breath. The great object in these politics is to metamorphose France from a great kingdom into one great playtable; to turn its inhabitants into a nation of gamesters; to make speculation as extensive as life; to mix it with all its concerns and to divert the whole of the hopes and fears of the people from their usual channels into the impulses, passions, and superstitions of those who live on chances. They loudly proclaim their opinion that this their present system of a republic cannot possibly exist without this kind of gaming fund, and that the very thread of its life is spun out of the staple of these speculations. The old gaming in funds was mischievous enough, undoubtedly, but it was so only to individuals. Even when it had its greatest extent, in the Mississippi and South Sea, it affected but few, comparatively; where it extends further, as in lotteries, the spirit has but a single object. But where the law, which in most circumstances forbids, and in none countenances, gaming, is itself debauched so as to reverse its nature and policy and expressly to force the subject to this destructive table by bringing the spirit and symbols of gaming into the minutest matters and engaging everybody in it, and in everything, a more dreadful epidemic distemper of that kind is spread than yet has appeared in the world. With you a man can neither earn nor buy his dinner without a speculation. What he receives in the morning will not have the same value at night. What he is compelled to take as pay for an old debt will not be received as the same when he comes to pay a debt contracted by himself, nor will it be the same when by prompt payment he would avoid contracting any debt at all. Industry must wither away. Economy must be driven from your country. Careful provision will have no existence. Who will labor without knowing the amount of his pay? Who will study to increase what none can estimate? Who will accumulate, when he does not know the value of what he saves? If you abstract it from its uses in gaming, to accumulate your paper wealth would be not the providence of a man, but the distempered instinct of a jackdaw.

The truly melancholy part of the policy of systematically making a nation of gamesters is this, that though all are forced to play, few can understand the game; and fewer still are in a condition to avail themselves of the knowledge. The many must be the dupes of the few who conduct the machine of these speculations. What effect it must have on the country people is visible. The townsman can calculate from day to day, not so the inhabitant of the country. When the peasant first brings his corn to market, the magistrate in the towns obliges him to take the assignat at par; when he goes to the shop with his money, he finds it seven per cent the worse for crossing the way. This market he will not readily resort to again. The townspeople will be inflamed; they will force the country people to bring their corn. Resistance will begin, and the murders of Paris and St. Denis may be renewed through all France.

What signifies the empty compliment paid to the country by giving it, perhaps, more than its share in the theory of your representation? Where have you placed the real power over monied and landed circulation? Where have you placed the means of raising and falling the value of every man’s freehold? Those whose operations can take from, or add ten per cent to, the possessions of every man in France must be the masters of every man in France. The whole of the power obtained by this revolution will settle in the towns among the burghers and the monied directors who lead them. The landed gentleman, the yeoman, and the peasant have, none of them, habits or inclinations or experience which can lead them to any share in this the sole source of power and influence now left in France. The very nature of a country life, the very nature of landed property, in all the occupations, and all the pleasures they afford, render combination and arrangement (the sole way of procuring and exerting influence) in a manner impossible amongst country people. Combine them by all the art you can, and all the industry, they are always dissolving into individuality. Anything in the nature of incorporation is almost impracticable amongst them. Hope, fear, alarm, jealousy, the ephemerous tale that does its business and dies in a day — all these things which are the reins and spurs by which leaders check or urge the minds of followers are not easily employed, or hardly at all, amongst scattered people. They assemble, they arm, they act with the utmost difficulty and at the greatest charge. Their efforts, if ever they can be commenced, cannot be sustained. They cannot proceed systematically. If the country gentlemen attempt an influence through the mere income of their property, what is it to that of those who have ten times their income to sell, and who can ruin their property by bringing their plunder to meet it at market? If the landed man wishes to mortgage, he falls the value of his land and raises the value of assignats. He augments the power of his enemy by the very means he must take to contend with him. The country gentleman, therefore, the officer by sea and land, the man of liberal views and habits, attached to no profession, will be as completely excluded from the government of his country as if he were legislatively proscribed. It is obvious that in the towns all things which conspire against the country gentleman combine in favor of the money manager and director. In towns combination is natural. The habits of burghers, their occupations, their diversion, their business, their idleness continually bring them into mutual contact. Their virtues and their vices are sociable; they are always in garrison; and they come embodied and half disciplined into the hands of those who mean to form them for civil or military action.

All these considerations leave no doubt on my mind that, if this monster of a constitution can continue, France will be wholly governed by the agitators in corporations, by societies in the towns formed of directors of assignats, and trustees for the sale of church lands, attorneys, agents, money jobbers, speculators, and adventurers, composing an ignoble oligarchy founded on the destruction of the crown, the church, the nobility, and the people. Here end all the deceitful dreams and visions of the equality and rights of men. In the Serbonian bog of this base oligarchy they are all absorbed, sunk, and lost forever.

Though human eyes cannot trace them, one would be tempted to think some great offenses in France must cry to heaven, which has thought fit to punish it with a subjection to a vile and inglorious domination in which no comfort or compensation is to be found in any, even of those false, splendors which, playing about other tyrannies, prevent mankind from feeling themselves dishonored even whilst they are oppressed. I must confess I am touched with a sorrow, mixed with some indignation, at the conduct of a few men, once of great rank and still of great character, who, deluded with specious names, have engaged in a business too deep for the line of their understanding to fathom; who have lent their fair reputation and the authority of their high-sounding names to the designs of men with whom they could not be acquainted, and have thereby made their very virtues operate to the ruin of their country.

So far as to the first cementing principle.

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Nathan Lewis was formerly the chief international economist of a firm that provided investment research for institutions. He now works for an asset management company based in New York. Lewis has written for the Financial Times, Asian Wall Street Journal, Japan Times, Pravda, and other publications. He has appeared on financial television in the United States, Japan, and the Middle East.
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