“If you want to know what God thinks of money, just look at the people he gave it to.”― Dorothy Parker
In his classic but still riveting book “Fiat Money Inflation in France”, 19th century American educator, diplomat and historian Andrew Dickson White recounts how France’s prescription of fiat money as the cure for its fiscal ills initiated a ten year slide [1789-1799] into economic collapse, internal class revolution, ruinous foreign wars and imperial dictatorship. Americans living in 2018 might want to take notes.
Facing “heavy debt and a serious deficit”, the French people began a “general search for some short road to prosperity”. In spite of stern warnings from those who had lived through France’s devastating experience with fiat money 60 years before, the people were seduced by the promise that fiat money was a way of “securing resources without paying interest.” Reluctantly at first and over the uncompromising protests of “thoughtful men who saw that here was the turning point between good and evil”, the French turned to “eloquent theorists [who] arose to glorify paper [money]” and “issued a proclamation recommending that [the] people receive this new paper money without objection”.
But only five months after an initial burst of economic activity and proud promises of even more prosperity ahead, “times grew less easy” until the country “was again in distress … [and] the old remedy immediately and naturally recurred to the minds of men.” And so ... “in final rejection of a large minority [that] stood firm to their earlier principles [opposing fiat money]” ... and in fatal submission to demagogues crying “we must save the country … we must accomplish that which we have begun” ... France “fully committed to a policy of inflation … showing the exceeding difficulty of stopping a nation once in the full tide of a depreciating currency”.
“The great majority of Frenchmen now became desperate optimists, declaring that inflation is prosperity. … The nation was becoming inebriated with paper money … but as the draughts of paper money came faster the successive periods of good feeling grew shorter. Various bad signs began to appear … [but were quickly explained away by] giving any explanation for the new difficulties rather than the right one … [until the non-elite French were] living from hand to mouth.”
The “plethora of paper currency” spawned a host of complications including “the cancerous disease of [financial] speculation” which “grew [into] a dislike of steady labor and a contempt for moderate gains and simple living”. Ignorant politicians proposed treating these symptoms with new regulations “thinking that this would prove a sufficient remedy for an evil which had its roots far down in the whole system of irredeemable currency. As well might a physician prescribe a pimple wash for a diseased liver.”
“As these knots of plotting [financial] schemers at the city centers were becoming bloated with sudden wealth, the producing classes of the country, though having in their possession more and more currency, grew lean … which crippled a large class in the country. … [And although] the artful plundering of the people at large was bad enough, worse still was [a] growing corruption in official and legislative circles.” The result was “the breaking down of the morals of the country at large … [and] the decay of a true sense of national good faith.”
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Well … I don’t want to give away the ending … read it yourself … it is short but powerful … and will sound quite familiar.
In 2018, America may find itself once again struggling to diagnose another breakdown of its social structures, economic systems and national good faith. And if/when we do … and our politicians tell us how they are going to “save the country” ... it might be good to remember White’s advice about diagnosing and treating the deeply rooted symptoms of a nation that has embraced fiat money and credit … applying pimple wash to cure liver disease caused by alcohol addition is simply not helpful. We must sooner or later confront our addiction to monetary [aka fiscal] stimulus … and radically excise the entrenched and growing central banking cancer that is eating away at the republic … or suffer the fatal but predictable sociological consequences of our shameful choices … without hope or excuse.
