It’s written in the history book: printing more money has never solved an economic crisis. The assignats that were in circulation in France and the territories occupied by the French Revolutionaries between 1789 and 1796 are a golden example. Several exhibits of assignats can be found in Room 4 of the Museum, including a 10 000-franc assignat dating back to 1795. This paper money that was initially intended to be used to buy church property given over to the nation had been diverted from its original objective and turned into an unlimited currency, issued without control, which led to a major inflation crisis.
At the end of the Ancien Régime, France was in the grips of a major financial crisis. The people were starving, the public deficit was enormous and the kingdom was virtually bankrupt. The Revolution did not help. It was in this dire economic context that the assignat was created. In 1789, the French King Louis XVI convened the Estates-General with a view to finding a way out of the crisis. This meeting of the French estates of the realm produced a National Constituent Assembly, a body tasked with finding a way to relieve the public debt burden. This Assembly decided to abolish the Ancien Régime’s tax system, regarded as the people’s oppressor. At the time, there were many different taxes levied very unequally, leading to general unrest and eventually revolt.
Charles Maurice de Talleyrand, then the Bishop of Autun and later diplomat and politician, put forward a suggestion: why not nationalise church property? This extensive stock of real estate mainly consisted of buildings and farm properties with a total value estimated at 2 or 3 billion livres. So, the National Assembly decided to auction off the property seized from the church. The idea was quite simple: people wanting to buy this property now deemed to belong to the nation could only do so in exchange for assignats that they had to acquire beforehand. The assignats were similar to bonds issued by the Treasury. The value of this paper currency is mortgaged on or “assignée” (ascribed) to these national domains. This arrangement enabled money to come straight into the State’s coffers thanks to loans from private individuals particuliers earning interest at 5% and without having to wait for the actual sale of the property.
Production of assignats started in December 1789. An Extraordinary Chest (Caisse de l’extraordinaire) was established and given the responsibility of issuing this paper money and collecting the proceeds from selling property confiscated from the church. An initial print run of assignats was worth 400 million livres. The first assignats were in livres and in large denominations too (200, 300 and 1000 livres), which made them difficult to use for other transactions. Once the assignats came back into the hands of the State, it was imperative for them to be destroyed. From their inception, this bank notes were the subject of much debate in the National Assembly. Some deputies were worried that too many assignats were being put into circulation in relation to the value of the national property. This anxiety was heightened following the bankruptcy of Law…
On 17 April 1790, the government, which was still short of cash, declared an emergency exchange rate for the assignat, and the interest was cut from 5% to 3% before being scrapped altogether. This is how it became genuine paper money. On top of that, the State was no longer destroying the assignats that it was getting back. Jacques Necker, Minister of Finance and fervent opponent of the paper money, disapproved of these decisions and handed in his resignation in September. But the Assembly and the government were not giving up and started printing even more assignats. In a bid to shore up the assignat, the government took action such as obliging merchants to accept this paper currency and prohibiting any conversion of the assignat into precious metal. Another problem with this paper money is that it is easy to forge. England, one of France’s main enemies at the time, would forge counterfeit notes with a view to confusing the French, who were soon confronted with false assignats coming in left, right and centre. The whole system quickly started spiralling out of control and the French State had to issue even more notes to make up for the heavy costs of the war that began in 1792 against Austria. This war marked the beginning of a long series of international crises between revolutionary France and the rest of Europe.
With such an abundance of assignats, France was faced with a hyperinflation crisis. Between 1790 and 1793 alone, the assignat lost 60% of its value. In the space of seven years, the Revolution multiplied the country’s money supply by twenty. Faced with this proliferation of assignats, the church property put at the nation’s disposal could no longer guarantee their value and this led to further depreciation of these banknotes. In 1796, the total amount of assignats had reached 45 billion livres, while the estimated worth of the clergy property was only 2 to 3 billion. These banknotes had become worthless in a inflationary context. In February 1796, having lost all their value, the assignats along with their banknote plates were burned symbolically in the Place Vendôme by the Directoire which replaced them with a new note called the mandat territorial. This suffered the same fate as the assignats but its depreciation was much faster. One year later, it disappeared too and the coin of the realm made its comeback.
The assignat was supposed to wipe out the public debt, but on the contrary, it only made the financial crisis worse. The paper currency was not a flop for everyone, though. It not only enabled France to finance the 1792 war effort, but it also offered French peasants a chance to acquire farmland that they would never have been able to obtain otherwise, thanks to the depreciating paper money and the possibility to spread out payment over time.
Laurie De Maré
- Florin AFTALION, L’économie de la Révolution française, Quadrige/Presses Universitaires de France, 1996.
- Jean LAFAURIE, Les assignats et les papiers-monnaies émis par l’Etat au XVIIIe siècle, Le Léopard d’Or, Paris, 1981.
- Jean MORINI-COMBY, Les assignats: révolution et inflation, Paris: Nouvelle librairie nationale, 1925.
- Revue “NUMISMATIQUE & change”: Le billet: une collection passionnante à la portée de tous, Seiten 37 bis 43.