203 



Paper Currency. 



This province was far enough away and so little was known of it, 

 that it was decided to declare that there were there extensive gold and 

 diamond mines, all of which were pledged as security for the paper 

 currency. This currency lifted the country out of its lamentable con- 

 dition, the wildest kind of speculation prevailed, but at last the bub- 

 ble burst and thousands were financially ruined. 



Serious as this lesson was, its effects were eventually forgotten. In 

 1774, France was greatly agitated over the proposition to respond to 

 the appeal for assistance, which was made by the North American 

 colonies in their war with Great Britain. Some of the leading men 

 in France thought it a good time to punish England and recover the 

 territory and military prestige which had been lost in the last war. 



The King, Louis XVI, who had succeeded his grandfather at the 

 age of twenty years, was young and timid. And, although he was 

 anxious to do what was best for the country, on account of embarass- 

 ments inherited from previous rulers and the low condition of the 

 public treasury, he hesitated and finally declined to assist the colonies. 

 This caused much dissatisfaction and resulted in the imprisonment 

 of such leading spirits as the young Marquis de La Fayette, who be- 

 longed to one of the most ancient and eminent families in the king- 

 dom. He finally escaped into Spain, from thence to this country, 

 and, although not quite twenty years of age, was, on July 31, 1777, 

 commissioned as a major-general, without pay, in our army under 

 Washington. 



This little bit of history is thrown in, partly to show the origin and 

 seriousness of the financial embarrassment of France in 1789, and 

 partly as a reminder that we are considering a period contemporaneous 



France was called upon to provide for her expenses, which were far 

 in excess of the usual revenues. In the Assembly, the finance com- 

 mittee recommended that the confiscated estates of the church and 

 wealthy people who had left the country, be pledged as security for 

 paper issues called assignats. During the discussion of the measure, 

 attention was called to the country's experience with the paper cur- 

 rency issued seventy years before. But it was argued that circum- 

 stances had changed, and that with such men as Bailly, Necker and 

 Mirabeau as leaders, no trouble could possibly arise from the issue 

 of paper currency. The measure was hotly contested, but its friends 

 were in the majority, and it was carried. The paper was issued, bear- 

 ing interest, was payable on demand, and four hundred million francs 

 were put in circulation. Business revived, prices advanced, the opP°- 



