them, they were made transferable without indorsement, and constituted legal tender; that is, they were converted into paper money, and as the issue of them increased, they displaced the sounder portions of the currency, and became the universal medium of exchange.

As the expenditures of the state were heavy, through the war in which it was involved, and as it was an easy process to stamp and issue assignats in satisfaction of all demands, the issue of this paper money soon became excessive, and the inevitable consequence followed, its rapid and great depreciation. This fall in value could not be checked by the sale of the confiscated estates, for, as the currency depreciated, the prices of the national domains, as well as of all other property, rose in the same proportion. The issue began in 1790; and as early as 1793 one franc in silver had come to be worth six francs in assignats. The arbitrary government of the Jacobins, who were then in power, having put in forced circulation the anticipated proceeds of the property, now undertook to sustain the value of its currency by penal enactments. They might as well have enacted laws to prevent the sun from setting at the close of the day. Six years' imprisonment was denounced against any one who should exchange any amount of silver or gold for a greater nominal value of assignats; and a maximum of price was established for bread and the other necessaries of life. The only consequence was, that the owners of grain and other commodities refused to bring them to market at all, and thus what was a scarcity became a famine. The starving people then became furious; the severities formerly exercised only against the nobles, the clergy, and the royalists were now turned against the rich, the farmers of the public revenue, the traders who were accused of monopolizing food and holding it. back from sale, &c., and these were sent in crowds to the guillotine. But all the terrors of that period which was emphatically called "the Reign of Terror" were not enough to arrest the depreciation. Bread rose to 22 francs (nominally over $4) a pound, and the prices of other commodities were in proportion. The issue of assignats amounted, in 1796, to the enormous sum of 45,000,000,000 of francs. But the state receipts from taxes, loans, the sale of the national domains, and other causes, had reduced the amount actually in circulation to about

24,000,000,000. These were exchanged, at the rate of thirty for one, for mandats, another species of paper money, the holder of which was entitled to take any portion of the confiscated estates not yet sold, by paying in this new currency 22 times the rent which the property brought in 1790. The mandats were also receivable in payment of government taxes and loans. In this way, the stock of paper money in circulation was greatly diminished; but the issue of mandats still being excessive, they finally became as much depreciated as the assignats had been before them, and by a spasmodic effort, both the government and the people reverted to a specie currency. The final result of the experiment in France, as in America, was, that through the depreciation of the currency, the people paid a very heavy tax for the success of the Revolution, a tax somewhat irregularly and unequally imposed, but yet approaching as near to equity as could be expected from any public measure which had its birth in the exigencies and turmoil of a great civil war.

Paper money was also issued by the revolutionary authorities of Hungary and Rome in 1849; but the speedy restoration of the former government in both cases prevented the experiment from being worked out to an end. In fact, experience has proved, what might have been demonstrated from the theory of the subject, that this kind of money is a proper revolutionary currency. It is usually first issued amid the commercial disasters, and the destruction of public and private credit, which are among the first consequences of the overthrow of an old government, and the outbreak of a civil war. The way is prepared for the introduction of it by a violent contraction of the old currency, consequent on the general disappearance of the gold and silver coins, which everybody at such a crisis is disposed to collect and hoard, or to send out of the country. This gap or vacuum in the circulation manifests itself by the extraordinary low prices of all commodities, the difficulty of effecting sales of any kind of property, the consequent impossibility of meeting commercial engagements, and general bankruptcy. Some kind of money—it hardly matters what is needed to fill up this gap; and it turns out, by a happy coincidence, that the issue of some sort of conventional currency is the only financial resource of the revolutionary

government. At the trivial expense of stamping bits of paper with a vague "promise to pay" at some future date, the insurgent authorities, otherwise penniless, find their exchequer as well supplied for a time, as if, to adopt Mr. Ricardo's illustration, a gold mine had been suddenly discovered within the precincts of the public treasury. In such cases, it is thought to be the enthusiastic patriotism of the people which, for a while, sustains the credit of the new currency, and preserves it from any material depreciation, till a very considerable amount has been issued. But the truth is, that the gap produced in the circulation, by the causes already explained, creates a pressing want of something to fill it up, and restore prices to their former level. Any kind of money, though the feelings of the people were against rather than in favor of the issuers of it, would have this effect, provided only that it be made legal tender, or an instrument for discharging debts. So long as the new currency is not more than sufficient to fill up the vacant space in the old one, its value will remain nearly at par; nearly, I say, because gold and silver coin, being capable of exportation, which paper money is not, will always command a slight premium. And the difference indicated by this premium will act still further in favor of the new currency; because, for reasons already explained, the depreciated or overvalued money will drive out even what remained of the perfect and sound currency, and take the whole circulation to itself.

Suppose, for instance, that the currency of the country in its normal condition is equal to 200 millions. If, then, in the panic created by a revolution, 80 millions should be hoarded or sent abroad, the insurgent government will be able to issue 80 millions in paper at once, which will circulate at a discount of not more than 2 or 3 per cent. As every person will then prefer to pay his debts and make purchases with paper rather than coin, inasmuch as he will thereby save 2 or 3 per cent, the remaining portion of the sound currency will be gradually collected and sent abroad, and the new government will be enabled to issue 120 millions more in specie, without doing any other injury than raising the prices of commodities 2 or 3 per cent, a difference too slight to be noticed.

Any revolutionary government, therefore, though it should inherit, as is most probable, only an empty treasury, may at

once obtain funds equal in amount to the whole circulation of the country, by merely issuing paper money to this extent. Still further: this issue, coming immediately after a period of violent contraction of the currency, and of consequent low prices, inability to realize property or collect debts, general want of credit, and widely spread bankruptcy, will have the effect to raise prices again, to restore credit, to animate commerce anew, and to diffuse through the whole country the glow of returning prosperity. All this will operate to the advantage of the new government, and the revolutionary fever of the people will rise higher than ever. Yet again: as this paper money, now in universal use, depends solely upon the faith of the revolutionary government, whose engagements, it is feared, would not be respected by the former authorities, should they be restored to power, every person in the country has an interest in resisting such a restoration, and supporting the cause of the insurgents. It is thus that a heavy national debt and a large depreciated paper currency, such as exist in Austria at the present day, though to a superficial glance they may appear as sources of weakness in the government, are in truth the pillars of its strength. Every capitalist, every person who has any property to lose, under such circumstances, will resist a revolution to the death, fearing that the successful insurgents would wipe out the debt with a sponge, and obtain room for a new batch of paper money by repudiating the former issue. Without its enormous national debt, it may be doubted whether even the government of Great Britain would have resisted as successfully as it did the political convulsions of the memorable year 1848. As it was, every stockholder and every shopkeeper in London armed himself as a special constable, to resist the ragged army of proletaries who assembled on Kennington Common in April of that year.

Could the revolutionists stop here, then, in their issue of paper money, all would be well. Unfortunately they cannot stop. There is a necessity of lavish expenditure in a revolution, especially if the exigencies of a civil or foreign war are added to the other demands on the treasury. Having put forth paper money enough to fill up the whole circulation of the country, and being intoxicated with the brilliant success of this measure, the needy government finds itself compelled, not

unwillingly, to issue more; and then, inevitably, marked depreciation ensues. John Adams stated the theory of this subject with perfect correctness seventy-five years ago, when his own country was affording a striking illustration of the truth of his doctrine. "The amount of ordinary commerce, external and internal, of a country," he says, "may be computed at a fixed sum. A certain sum of money is necessary to circulate among the society in order to carry on their business. This precise sum is discoverable by calculation, and reducible to certainty. You may emit paper or any other currency for this purpose, until you reach this rule, and it will not depreciate. After you exceed this rule, it will depreciate; and no power or act of legislation hitherto invented can prevent it. In the case of paper, if you go on emitting for ever, the whole mass will be worth no more than that was which was emitted within the rule."

In the case already supposed, of the ordinary currency amounting to 200 millions, should paper money be issued to the extent of 400 millions, the certain result will be a depreciation of fifty per cent; that is, no greater value will remain in the hands of the community than 200 millions, though the government has nominally paid off twice as much. Here, then, taxation begins; by issuing 400 millions when only half as much was needed, the government has really taxed the community to the extent of 200 millions, less the depreciation to which each portion of this sum was subject at the date of its emission. If, for instance, 40 millions of this sum were issued before the depreciation began, a second 40 millions when the depreciation was at 12 per cent, a third 40 millions when it was at 25, a fourth at 37, and a fifth at 50 per cent, the tax really levied upon the people amounted to 150 millions. As the depreciation goes on, moreover, the necessity of issuing more paper rapidly increases; and hence it is, that, when the fall in value has once begun, it seems to continue and enlarge with frightful rapidity. When the depreciation, for instance, is at 50 per cent, the prices of all commodities are doubled; government must pay twice as much in wages and salaries, and for provisions and munitions of war, and must therefore

* John Adams's Works, Vol. VII. p. 195.