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Dangerous Excess - QE Fiscal Easing Past And Present

Interest-Rates / Quantitative Easing Jul 22, 2013 - 03:04 AM GMT

By: Andrew_McKillop


One of our problems is easy to state but very dramatic. There are no real precedents for what is called Quantitative Easing as it is practiced since 2008. Central bankers such as Bernanke, Draghi, Carney and their partners in almost all other countries are engaged in The Great Experiment.

Unfortunately, based on all past history, the chance of it not ending badly or very badly, is minimal.

The French assignat monetary bubble or “fiscal easing” experiment although compressed into only 7 years (1789-96), and operated only in one country, showed many common themes with our global QE Experiment. These start with the unreality of the experiment and its goals, which included printing more money than the national debt to magically generate permanent prosperity, especially for the thrifty middle classes. The delirious increase of the amounts issued was also dangerously similar to the Great Experiment of QE. The economic damage, the political duplicity and me-tooism were also quite similar to QE – all that is missing is the massive and mindless violence of revolutionary France.

Today's QE suffers from unreality. It is not linked or related to the real economy, which is not only slowing down, but what's worse, the trillions of dollars of incremental money created by “fiscal easing” in all countries – there are basically no exceptions – is “mysteriously unable” to make its way into the real economy and the corporate revenue pipeline. For sure and certain, this irritating “reality byte” has no effect on the feel-good hysteria driving world stock markets to unprecedented all-time highs.

A fiat money bubble is always a question of confidence on one hand, and the urge to dream, defraud and manipulate on the other. The political handle is always present. The international fallout is usually large, but not always. Recovery from the bubble explosion can be rapid, but not always. International or civil wars can be intensified, or future wars may be sealed for the near-term. Economic loss is always high or very high. Human suffering is always large, sometimes extreme. This is a  lose-lose strategy, usually on a short timeframe.

The short and tragic period of French history between 1789 and 1796 was primarily driven by the Great Experiment of the time. This is the story of assignats and mandats, both of them fiat money. It ended in mayhem, massive numbers of executions with the recently-invented guillotine for the most-absurd of “economic crimes”, near-civil war, mass spying and denunciation, attempts at launching international wars – which came to “fruition” later on – almost complete economic loss, death by famine, forced emigration, and general misery.

At key phases of this short six-year period, the phases of extreme and insane inflation, we find that the great majority of Frenchmen became desperate optimists, declaring that inflation is prosperity itself. Stock markets literally exploded. There was a form of mass euphoria – the nation was inebriated with paper money, but exactly like a drunk who is fed with all the extra drink he wants, the “declining marginal utility” of extra and new money printing always ensued. The amount of extra euphoria from each new slab of printed money inexorably declined. The day after feeling was always terrible.

Even by midyear 1791, less than two years after The Great Experiment begun, the most brilliant or the most hysterical apologists for French revolutionary “statesmanship” such as Marat, St Just or Talleyrand were forced to say "Commerce has died; betting took its place."  It was becoming very difficult to produce things – but even more difficult to sell them. Refusing payment in worthless assignats, and even more so in the later and initially even more worthless mandats, could carry the death penalty – at minimum a four-year forced-labor prison sentence. Importing anything from abroad was treason. But betting on the stock exchange, in fact the multiple stock markets and exchanges that sprung up, like mildew or flies around carrion, was licit and above all easy. All too easy.

On the 18th of February 1796, at nine o'clock in the morning, in the presence of a great crowd, machinery, plates and paper for printing the earlier but now discredited assignats were brought to the Place Vendome in Paris and there, on the exact spot where the Napoleon Column was later built, these plates and paper were solemnly broken and burned. Shortly after, a report by Camus to the National Assembly said that the total amount of assignat paper money that had been issued, in just-seven-years of madness by the Revolutionary Government of France, was about forty-five thousand million francs equivalent — and that over six thousand million had been annulled and burned or buried, meaning that at the time of the final catastrophe for assignats there were about forty thousand million circulating. The program had started in 1790 with the issue of four hundred million francs-equivalent.

No worries! The mandats were coming. Assignats were “tapered down” but QE carried on and added more, using mandats as a “partly-strengthened” assignat, slightly less divorced from reality..

The mass psychology of fiat money, and its distorting economic powers had become much too powerful to do away with assignats. They were not replaced – but added to – by the supposedly “more credible” or more valuable mandats. Perhaps incredibly for this post-revolutionary France, some higher denomination mandats bore the heads of various past and previous Kings on them – in the case of Louis XVI the same head which was sliced from its shoulders by the guillotine!

Perhaps even more whimsical, the government, pressed as it was by demands of all sorts, continued to issue the old assignats at the same time that a few selected assignat printing plates had been theatrically burned in public. It feebly tried to discredit assignats by issuing the new mandats. In order to make the mandats "as good as gold" it was planned to use a forced loan program, and other more rudimentary means, such as simply burning them, to soak up or reduce or destroy some quantity of the assignats in circulation. In a two-part plan, which was never completed, the value of each assignat would be raised to one-thirtieth of the value of a louis gold coin. At that point, the mandats would be issued, and each mandat would be exchanged against thirty assignats, producing a sort-of return to the gold standard.

This “gold standard” ploy however did not work. The great expectations were cruelly disappointed. Even before the mandats could be issued from the press they fell to about a third of their nominal value. Then they fell to a fifteenth. Then to a twentieth. Finally in August 1796, six months from their first issue, they had suffered a 'ninety-seven percent haircut”. They were worthless. So were the assignats.

It was fully time to put an end to the fiat system, shown by the “gold louis" of twenty-five francs in metal specie which had vastly appreciated, by February 1796, to about 7250 francs, but that only concerned its stock exchange and other gambling usage.  its “street value” was as high as 15000 francs in paper money—that is, one franc in gold was worth 600 nominal or paper francs, whose exchange value in mandats quickly grew, also.

 Such were the results of allowing dreamers, schemers, phrase-mongers, charlatans and criminals to invent, print and distribute “new paper money”, and credits, with zero relationship to the economy.

But the real problem was how to really “taper down and out”. The corrupting and distorting effects of the plethora of paper currency had been evident almost from its beginning. Even by 1791 there was clear evidence of the damage. The most striking was that in the major metropolitan centers grew a luxurious, speculative, stock-gambling frenzy. People rapidly lost all confidence in “the real economy”. It was too difficult to handle, too difficult to operate with all kinds of strange – but worthless – moneys in circulation. And the secret police were watching.

Mingled with the easy-look of instant wealth and quick prosperity – at least for the gamblers, the lucky and those close to power – politicians in their great majority backed the schemes. The National Assembly had voted to confiscate the vast real estate and properties of the French Church - piously accumulated over thirteen hundred years. This “asset grab” was probably equivalent to at least a third of all real estate value existing in France at the time. The “asset backing” for issuing the new fiat money therefore existed – in theory.

Today's Great Experiment of QE as we know, has no asset backing at all.

Unfortunately – and I would personally bet everything I own on this wager – the French deciders of the time were rigorously identical to those of today. They claimed their asset grab fully enabled them to sell, or even give away all assets of State, in the shortest possible time. The State must divest. The State must answer the call of the people. The State must ensure prosperity. The State must liquidate debt – by producing new fiat money which is worthless!

Making the stark then-and-now schizophrenia even more piquant, these revolutionary monsieurs considered they should hand over a large amount of the Church real estate that they stole, to “the thrifty middle classes”. These were exactly the same classes who were to be ruined not once, but several times over in 7 years flat! The political argument was very similar to what we hear today  - that a property-owning middle class would be committed to the Revolution and to the government which gave them title. Ayn Rand if not Engels would approve.

Part of the money printing binge was related to the specific issue of Church property and supposedly handing it over to the middle classes. Concerning purchase and sale of seized property of the Church, special series of notes with high denominations were printed —  notes of 1000 and 500 or 300 livres (another money then circulating, partly gold backed), too large to be used as ordinary currency, but useful when purchasing and selling the Church lands.

In 1790 the memory of the world's very first stock exchange meltdown and linked monetary collapse – the John Law affair culminating in the Paris bourse crash of 1721 – was relatively recent. Thoughtful men in France remembered the dark side of this “vigorous monetary experiment”. They knew too well, from that ruinous experience seventy years before, in John Law's time, what happens when money is literally created from thin air. The original assignat plan – which we can compare to several aspects of the original plan for launching the euro currency in the 1990s – stressed the idea of asset backed currency. The notes were to be secured by a pledge of ex-Church real estate, and pay 3 percent yearly interest to any holder who did not spend, but saved them.

The April 1790 version of the plan – call it QE1 – would see the issuance of four hundred millions of livres-equivalent in new paper money, secured by Church property and paying interest. These assignats were printed notes of the best artwork quality. No fiat currency ever claimed a more scientific and credible-seeming guarantee for its soundness and utility for public finances. The initial amount issued was far below the total value of the seized – that is stolen – Church property. It was a secure money, in theory. In early 1790 what can be called cross-party political support in the Assembly was nearly total.

All politicians in the Assembly rushed to join the fiat money game. Leading orators proudly explained all the advantages (and no disadvantages) of the new currency. The Aseembly said the nation was henceforth "delivered by this grand means from all uncertainty and from all ruinous results of the credit system." It added that issuing the assignats "would bring back into the public treasury, into commerce, and into all branches of industry strength, abundance and prosperity."

The Assembly's rapporteurs worked overtime to give the most lyrical descriptions of what the new money would avoid —"Paper money is without inherent value unless it represents some special property. Without representing some special property it is inadmissible in trade.....paper money which has only the public authority as its basis has always caused ruin where it has been established; that is the reason why the bank notes of 1720, issued by John Law, after having caused terrible evils, have left only frightful memories”.

The theme of “protecting the public from danger” was obsessionally and deceitfully stressed. The Assembly said: “Therefore the National Assembly has not wished to expose you to this danger, but has given this new paper money not only a value derived from the national authority but a real and immutable value, a value which permits it to sustain, with advantage, any comparison with the precious metals themselves."

The orator Mirabeau made one of his most powerful speeches. He claimed that at first he had feared the issue of assignats, but was now convinced it was the only solution. With the comfort of this new paper money, public affairs could be “repaired and freed from the distress” they were subjected to, because credit had been “misallocated”. As with all other major political figures, Mirabeau claimed there was a complete and total difference between the issue of assignat paper money, and the issue or rather deluge of paper money from which the nation had suffered so much, in John Law's time.

Rapidly in fact, the political elite and elite-friendly media of the time bundled together and packaged the reasons why the Great Experiment could only be a success. The media frequently noted that assignats “could easily” be further issued to cover “the entire public debt”. Like today, when we examine some of the press conference material from Bernanke and Company, we find the same strangely euphoric and populist, pseudo socialist strands in their implausible rationales for their own Great QE Experiment.

In early 1790, most French politicians claimed that thanks to assignats handling and covering the debt problem so nicely, all national public lands (including the seized church property) could be almost immediately put up for sale at the very lowest of prices, comforting and helping the middle classes.

All French middle classes could become homeowners or landowners. Peace and prosperity.
Soon, in fact very soon any political opposition to printing more assignats or mandats disappeared and we can ask if today, in our liberal democracies, is it easy to find any mainstream media-compliant politician who opposes more QE?.  In 1790, the “buzz” in Parisian political circles was that assignats and later mandats would be created in amounts sufficient to annihilate and destroy the national debt and create universal prosperity forever. As the crowning glory, all national-owned lands would be handed over at “subprime prices” to the middle classes.

The political decision for the assignat and then mandat program can be traced back to the very beginnings of the revolution – in the revolutionary Summertime of July 1789. At the time, when assignat printing had been mooted, it provoked the angry resignation of Necker, economics minister and  “the guardian of the King's wealth”.  By 1790, twelve months later, any Assembly speaker proposing more assignat printing received near-constant applause.

To cover the national debt, about twenty-four hundred million livres-equivalent of assignats were needed. This was the real goal.

Necker was spurned as a man of the past. He was lucky to be able simply to resign and leave France, crossing the Swiss border at night avoiding the frontier guards, because he had already been accused of economic treason, which carried the death penalty. Paper-money demagogues shouted for joy at his departure. The business media of the time was euphoric that the symbolic logjam of Necker was gone. Especially jubilant but ironically, were the most hysterical revolutionaries such as Marat, Hébert and Desmoulins, who themselves would soon go the guillotine, like Louis XVI.

Arguments used by the demagogues against Necker – that basically he wanted to “underproduce and underprint” the new money – included their claim that assignats were not at par with livres, francs or gold louis coins “because not enough assignats had yet been printed”. The street response of the public to that one was euphoric, like the me-too politicians in the National Assembly.

The John Law affair of 1719-21 was dusted off and used again, but with new spin. The paper money demagogues could claim that the first issues of John Law's paper money, in fact stock market gambling chits exchanged against gold and other specie in a complex operation to dilute the King's debt, had brought a form of 1990s-style neoliberal prosperity. In the 1990s, if you owned a house and played stocks, you could imagine you were wealthy – from literally doing nothing. John Law's stock market bubble was exactly the same, but without the need to own a house.

Ergo the political message became ultra simple. Men of courage should print a lot more paper money, not Taper Down and bow out.

Politicians like Maury admitted that for a short while before 1721 Law had been considered a patriot (although Scottish) and a friend of humanity. But when Maury held up to the Assembly one of Law's bills and asked the lawmakers to recall what happened to France as a result, he was booed. The Law affair was already too far back in time to count, and could be spun several ways. The printing urge took the high ground, and the second issue of assignats, this time eight hundred million, was voted by a comfortable majority of Assembly members in September 1790. A cap of twelve hundred million was set, through a law whereby any assignats paid into the Treasury for land purchases would be burned, creating “healthy contraction” of the new money mass.

Rather similar to today, any evidence of inflation in the real economy was suppressed. Any rise in prices was considered “insignificant”, because rising prices would have enabled opponents to argue the amount needed for circulation had been exceeded. The cry for "more” was permanent and patriotic and became stronger and stronger. As in Law's days when the Parisian populace was many times used to maintain the pressure for printing more easy fiat money, with bizarre marching bands of fake miners “off to Mississippi to produce gold”, street party events in favour of printing more assignats were common. At the same time, the sternest and most revolutionary of intellectuals and philosophers, the Jacobin Club, also clamoured for more assignats.

The process became routine. Discussion and debate on the subject tailed off. Printing assignats and then mandats, like a Bernanke or Draghi QE conference, became utterly humdrum normal. In June 1791, a new issue of six hundred million more was decided with an eery silence and nearly complete lack of debate, or interest in the Assembly.

Fiscal easing of the French Revolutionary type had become so New Normal that opposing it was plain unpatriotic. Currency wars were hinted at, and they were cranked up less and less discreetly against foreigners, to lend credit to the mass credit of fiat money. The Bourbon family was held to be drawing off France's “solid money” to the centers of their intrigue in Germany, an outlyer to the coming Franco-Prussian wars.  Another favored propaganda theme was that British emissaries were amidst the people, instilling the notion that metallic money was superior to paper. This particular witch hunt was highly popular to the French, offering them the crowd-pleasing spectacle of hangings and guillotine killings in public places when the spies and saboteurs were unmasked – that is any unlucky person.

Comic and pathetic evidence of all kinds was invented to show that all forms of commerce and trade were anti-patriotic. With this kind of support, the value of assignats could only be enhanced.

Inventing, then hunting down British royalist wreckers of The Great Experiment was a new sport, like the Tour de France bicycle race invented by French in 1913. Very soon however, less demagogic and supposedly “educated” arguments were heard, that France imported too much and did not export enough. This was in fact the age-old economic and geopolitical theory, called mercantilism.

The new twist was that too much junk money in the form of assignats and mandats led to an outflow of “hard currency” to be remediated by limiting imports and increasing exports. Running alongside and dovetailing with this mercantilist theory, the argument was heard then-as-now that consumers should go out and spend. Domestic demand was insufficient. Not spending was not patriotic. Hoarding money – for example as savings – was wickedness. The revolutionary Marat (before he went to the guillotine himself) opined that death was the fitting and proper penalty for persons who hid their money and did not patriotically spend it all.

Still another difficulty appeared. The fiscal easing fiat money binge had created complete uncertainty as to the future. On a day-to-day basis nobody knew what value any circulating money had. Well before the close of 1791, nobody could say whether a piece of paper money representing a hundred livres would, a month later, have a purchasing power of ninety or eighty or sixty livres. The monthly rate of depreciation was variable. This itself created opportunities for speculating and trading but the economic worth of this frenzied FX trading, then as now, was zero.

The net result was a lock-down of the economy rather easy to compare with the post-2008 experience in the developed economies. Investment of the productive sort received a mortal blow. Demand for labor was further diminished. Unemployment soared. The business of France dwindled into living from hand to mouth.

On December 17, 1791 another new issue was ordered, making in all twenty-one hundred millions authorized. Coupled with this was another “ceiling lift' raising the ceiling to a target total monetary circulation not exceeding sixteen hundred millions. One month previously, the Assembly had solemnly limited the maximum circulation to fourteen hundred millions.
Rather similar to Istanbul, Rio or Cairo today, street protest at constantly rising prices and no “trickle down” from fiscal easing led on 28 February 1793 to Parisian mobs of men and women, wearing theatrical disguise and previously paid to demonstrate for more assignats, plundering luxury stores and shops in central Paris. At first they demanded only bread; but soon they insisted on coffee and rice and sugar. Later they moved up to seizing everything on which they could lay their hands—clothes, textiles, groceries and every kind of luxury trinket. The plunder went on through the night and order was restored only by a grant of seven million francs to buy off the mob. A new political economy was beginning to bear its fruits in a typically degenerate manner.

Seeing the power “of the street'”, French politicians soon adapted their rhetoric to suit the mob. In the short term, the government bought time by throwing cash at the mob, then used mob-logic to come back with a series of far-fetched “reforms”. All of them dovetailed with the Great Experiment.

As we know, since the “Cyprus affair” of 2013, the so-called Troika of faceless unelected “experts” from the European Central Bank, the IMF and European Commission can seize the savings of individuals or the cashflow of enterprises in “bailed-in” banks they supposedly save from ruin. There is no recourse. This is what fiat money does to institutions.

More than 200 years before, the French Revolutionaries were much further ahead with their own special measures “to save the economy”. Three of them gained an evil center-stage eminence in French history, and are well known to this day in France. The first of the three was the Forced Loan, but its meaning cannot be divorced from the other two shock measures.

The forced loan was reinforced by the second measure -- selective demonetization. Danton, then at the height of his hysterical power, before going to the guillotine himself, declared that only aristocrats could favor notes or bills bearing royal portraits. He famously declared: "Imitate Nature, which watches over the preservation of the race but has no regard for individuals". He preferred low value notes and bills with natural green things printed on them. The others – as it happened big denomination – could be scrapped.  The decree was passed on 31July 1793. Its futility was apparent in less than two months, when the ruling revolutionary council or Convention decreed that two thousand millions of francs of new assignats must be issued, in small-denomination bills between ten sous and four hundred francs each, to cover the “lost money”. By December, another five hundred million were added.

To be sure, knowing a large or even only a considerable part of all your savings are going to be demonetized will make you “sympathetic” to making forced loans to the state. But the third measure was surely the most cunningly demagogic. The third spinoff from the vast issue of fiat money was the Maximum. As far back as November, 1792, the Terrorist associate of Robespierre, St. Just, taking time off from hanging and guillotining enemies of the State in public, to rapturous applause from the football-type crowd, said a scheme was needed to ensure prices were fixed at the right levels.

The steady rise in prices of the necessities of life had created a political need for setting their prices by law, at a rate proportionate to the wages of the working classes. This plan culminated on September 29, 1793, as the Law of the Maximum.

In fact St Just meant a new spy system to detect goods concealed by farmers and shopkeepers. The system was established with a reward to each informer of one-third of the value of the goods that were seized. To spread terror, the Criminal Tribunal at Strasbourg was ordered to destroy the dwellings of any person found guilty of selling goods above the Maximum price set by law. Whenever a farmer found that he could not raise his produce at anything like the price required by the new law, and tried to hold back his crops or cattle or sheep, they would be seized by force. He would be lucky to get paid anything in depreciating fiat money, and farmers were often hanged “as an example”.

Reaching a climax of ferocity, the Convention decreed in May 1794 that the death penalty would be inflicted on any person convicted of "having asked what money would be used for payment before making a transaction." Refusing assignats as payment led to the death penalty on many occasions. Nor was this all. The revolutionary finance minister Cambon soon declared the worst enemy of the State is gold and silver money. A witch hunt was ordered against dealers involved in gold and silver, with the law of 13 November 1793 setting the death penalty for commerce in the precious metals and harsh custodial sentences for possessing them.

The same finance minister, we can note, also suppressed the Maximum a little later on but in his fevered logic and imagination this action was perfectly justified because of the “solidity” of assignats, now freed from the disloyal competition of gold and silver. In numerous Assembly speeches in 1793 and 1794, Cambon said that the ever-increasing rate of issuing the fiat money provided “perfect security” for the assignats. Showing the delirious side of this reasoning, Cambon also included the security provided by future war reparations that would be paid to France following wars that had not yet started and were not even in prospect. For Cambon, this was pure patriotism!

The French revolutionary council or National Convention, which had effectively suppressed the parliamentary system while maintaining the Assembly as a “squawk box”, was by 1795 fighting well armed and organized forces on its home soil. Its overseas attempts at fomenting war were mostly unsuccessful, but Napoleon would soon change that.

Its struggle to circumvent the weakness of the national moneys, with an “s”, was another battle that ended badly. The existing gold standard Louis d'or coin had not been demonetized, while the assignats and mandats demonetized themselves. The paper francs, used as a kind of “strong assignat” and exchanged for assignats, wilted due to the onslaught and contamination of assignats. In Summer 1795 a Louis d'or fetched about 900 francs in Paris. In February 1796 it fetched about 7200 francs.

The problem was that gold and silver were acting like what they are – commodities. They were appreciating in price, rapidly, in the same way as wheat, wax, cotton, leather, wood, meat and candles. Soap, flour and sugar became hard to find – and expensive in paper money. In fact everything got much more expensive – except wages – which plummetted. This reflected what was really happening in and to the economy. It was deflating and contracting, output was falling through monetary inflation.

Making sure the process would continue to the bitter end, casino-type stock exchange and market speculation still paid huge returns to lucky gamblers. Anyone who was a net debtor was of course jubilant. Anybody who in 1790 had borrowed 10 000 francs could pay down their debt in 1796 for about 35 francs. Savers, of course including the “thrifty middle classes” were completely ruined.

To be sure, the revolutionaries rushed to cobble up brokenback remedies, such as Official depreciation tables for the calculation of “real debts”, but this playacting was of course futile. In particular types of transactions, for example concerning wills and inheritances, the revolutionaries ensured that notaries and officials administering the estates of deceased persons used only assignats to pay heirs, often reducing the real net value of inheritances 300-fold, forcing the inheritors to spend all the “chaff money' they had received in lieu of a valuable estate and property. 

In the space of no more than 7 years a vast transfer of wealth had occurred, far exceeding the hopes of the revolutionaries – but not at all in the direction of transfer they had hoped. The chaff money was in the hands of the working classes, lower-paid employees, the old and the young. All those who had been unable to speculate on the stock market and convert their chaff money to high value property, objects of high value, and of course gold and silver. The economy had literally dislocated, with a general fall in output.  Savings no longer existed. Roads and bridges were neglected. Farms and fields went out of production. Factories were under-equipped and under-maintained, lacked raw materials, and were under-staffed. Nothing but very short-term investment could be contemplated.

As the English neoliberal politician Mrs Thatcher cackled at the serried ranks of Losers when she destroyed the industrial base of the UK and cranked up the casino-type paper economy to reward the greedy and the lucky in the early 1980s “You have No Future”.

In the 1790s French version of the “spiv” economy, called revolutionary, this gigantic failure was used to intensify the show trials and the killings – to amuse and terrify the crowd. The Revolutionaries, having sent to the guillotine first the Royalists and then the leading Republicans they could entrap, launched an ideological witch hunt amongst their own fraternity. The followers of Hebert, Danton and then Robespierre soon trooped to the guillotine. Yet another revolutionary council, the Directory, was thrown together from the survivors in Octber 1795.

By late 1796 the game was up for French fiscal easing of the 18th century type. It was no longer physically possible to print enough chaff money – shown by bills circulating that were still wet from the press. Using the Revolutionary calendar, the coup of 18/19 Brumaire in the Year VIII of the calendar (November 9, 1799) is generally taken as the end of the French Revolution and the beginning of Napoleon Bonaparte's dictatorship. The Corsican general had returned from Egypt on October 9th. His success in evading the British confirmed the growing belief that Napoleon's 'star' was rising.

His wife Josephine, the live-in ladyfriend of the last chief of the revolutionary Directory, Barras while the general was away, returned to comfort Napoleon. Barras – exceptionally for a revolutionary – was not executed but allowed to die from the multiple diseases he had contracted on the run, after losing power. French bankers who had literally refused to lend “one more sou” to the Directory quickly rallied to The General, who by decree on 18 January 1800 established the Bank of France – with a remit to purchase or acquire gold to  back the money. Launching a long series of military and imperial adventures, that ended in disaster for him and for France, Napoleon however never fell into the trap of unlimited fiscal easing.

References: The French revolution's great monetary experiment and disaster is heavily documented  but one excellent source is: 'Fiat Money Inflation in France'  by Andrew Dickson White, Ph.D.

By Andrew McKillop


Former chief policy analyst, Division A Policy, DG XVII Energy, European Commission. Andrew McKillop Biographic Highlights

Co-author 'The Doomsday Machine', Palgrave Macmillan USA, 2012

Andrew McKillop has more than 30 years experience in the energy, economic and finance domains. Trained at London UK’s University College, he has had specially long experience of energy policy, project administration and the development and financing of alternate energy. This included his role of in-house Expert on Policy and Programming at the DG XVII-Energy of the European Commission, Director of Information of the OAPEC technology transfer subsidiary, AREC and researcher for UN agencies including the ILO.

© 2013 Copyright Andrew McKillop - All Rights Reserved Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisor.

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