Deflation Made Simple II

The Story of Real Money (Entry 184)

Of particular interest in regard to the revaluation of the louis and écu in late 17th century France is an article about English monetary reform that appeared in a French publication in Amsterdam:

“C’est une chose glorieuse pour le Parlement anglais, qu’il ait entrepris de soutenir d’une main le fardeau de la guerre, et de l’autre le redressement des monnaies. On a réformé les monnaies en France, afin de les donner au public à un plus haut prix qu’elles ne valaient et d’y trouver une partie des dépenses de la guerre. Mais, en Angleterre, loin d’altérer l’ancien ordre, on entreprend de le rétablir, de remédier aux abus, d’en supporter la perte et de fournir, en outre, aux frais immenses de la guerre. C’est l’oeuvre de la nation elle-même, qui sent ses forces et ses moyens, au lieu que, en France, l’autorité qui impose les taxes, n’ayant point de part au fardeau, le rejette sur qui bon lui semble.” La Gazette d’Amsterdam, 27 février 1696

In translation from French into English,

“It was a glorious feat that the British Parliament undertook to carry the weight of war with the one hand while restoring its monetary order with the other. In France the monarchy restored the integrity of its money only to sell it back at a price much higher than what it was truly worth. In so doing, it reduced the cost of the war to itself. In England, rather than seeking to modify the old monetary order, the English sought to restore it by eliminating its abuses, suffering the corresponding losses, and in so doing covering the enormous cost of war. In England it was the enterprise of an entire nation that balanced its means with its conduct. In France it was the monarchy imposing the entire weight of war on its own people with higher taxes.”

This citation, by the way, was made in 1885 -- a brief decade and a half after the fall of Napoléon III and the restoration of the German Reich (the 2nd) in 1870. It was about half-way between Great Britain’s two Boer Wars (1880-1881) and (1899-1902) in South Africa and a decade before the likes of Cecil Rhodes, Alfred Milner, and Edward VI began their plans to draw Germany into war with the British Empire some three decades later. Indeed, nearly two centuries had past since the founding of the BOE, and still there were many in the rest of Europe who had not yet realized the financial deceit upon which the bank was founded (Entries 144-151).

Maybe we should not be too harsh on the self-critical commentary of a 17th century French-speaking journalist in Amsterdam and a 19th century French historian (Entry 181) in Paris. After all, Ludwig von Mises had not yet published his 20th-century work entitled Theorie des Geldes and der Umlaufsmittel (Entries 147 and 151). No, this would not occur until several years of hyperinflation in post-war Germany had finally peaked, the German Mark lost all value in trade, and the German Reichsmark was introduced in 1924.

Indeed, we have only to look at the US dollar touted by our own government as the greatest currency that the world has ever known and understand what fools we in the West have been for the past three and a quarter centuries! Fortunately, our founding fathers were much wiser than we, modern progressive Americans, have become. What is more, they left us with a constitutional legacy upon which we can still lawfully dismantle our phony money supply and rebuild.

Let us, however, not advance too quickly in our study of real money, for what are several centuries of recent folly in light of a medium of exchange that has already survived several millennia? Then too, what might still another monetary crisis bring, if not more of the same, until we finally wake up to the grand theft and deception that is currently under way and how to avoid it in the future?

Alas, just as Charles V had once melted down and reformed the artwork of the Aztecs and Incas in Central and South America in an effort to increase his purchasing power at the expense of others, so too did De Pontchartrain melt down French pottery, furniture, and decorative art to increase the purchasing power of King Louis XIV. Just as presumptuous, late 17th French artisans were forbidden to work with either gold or silver in the production of their many crafts, and the melting of specie — no matter that it was rightfully obtained — was severely punished. The money-changers were forced to go underground. Alas, Governor Inslee of the State of Washington was not the first autocrat in the history of the Western World to declare the livelihood of the little guy unessential.

From the French (17th century) and Spanish (16th century) monetary episodes we can clearly see that Franklin Delano Roosevelt, 32nd President of the United States, was also not the first head-of-state to confiscate a nation’s gold supply (May 1, 1933) in an effort to impose his will on an unsuspecting general public!

At minimum, Louis XIV could, however, justify the behavior of his monarchy by the fact that his nation was at war. In contrast, neither was FDR a hereditary monarch, nor was America at war. Alas, the outcome was the same in both cases; the hard-working, ever-trading, gold-bearing many were made to pay for the poor conduct of the corroborating, rapacious few. We will return to the case of FDR further ahead.

Unfortunately, holding the market place in contempt while ripping it off is a character-trait of most states. That those of the caliber of Jean-Baptiste Colbert, and his Dutch counterpart, Johan de Witt (Images 97 and 100-103), who once understood the need for the state to balance “its means with its conduct” be more frequent and have the courage to enforce such balance!

Indeed, with the exception of Colbert, Les contrôleurs générales des finances of Louis XIV were by no means exceptional. Then too, to their credit, or perhaps ignorance, Les contrôleurs générales of late 17th century France did not create a central bank to escape their budgetary folly. These “financial experts” followed a different strategy. Rather than having private sector individuals lend money-ex-nihilo into existence and collect real-interest on the issue of counterfeit currency, they simply spent money-ex-nihilo directly into existence and made it redeemable in specie after a given period of time.

Obviously, perhaps, such government notes were inflationary, for they were backed only by what the monarchy could collect in real taxes, and the monarchy was already suffering from an average, per annum, short-fall of 16.4 million livres in real-wealth. Fortunately, at least, no one in the private sector was getting rich at the expense of others by their issue (Images 100-102 and Entries 114, 170, and 181). No, it was strictly a matter of the monarchy (state) vs the people (citizenry). So, how did this confrontation play out?

When the French monarchy appeared at your shop and demanded that you accept its paper in exchange for your wares, it is likely that you did not resist. After all, it had the authority, as well as the ability, to take what you had, whether you took what it offered in exchange, or not. It was a different story, however, when a fellow Parisian appeared and tried to the same. Indeed, you were under no obligation to accept his paper offering. There was not yet a law that forced you to accept a currency that you did not want! In other words, once the monarchy had obtained what it wanted, you were free to go about your business as usual.

In liberty, or not at all,
Roddy A. Stegemann, First Hill, Seattle 98104