Monday, 3 December 2007

Paper Money History: The 18th Century and The French Livres

The History of the French Livres

The 18th Century saw more states and nations experimenting with the issuing of paper money as a means of monetary exchange. The noticeable fact during this era is that a lot of the issuing bodies were not banks but big companies or states.

It was during this Era that the first French paper money was issued. This happened in 1701, bang at the beginning of the Century. What I find interesting about the French Livre is that it did alright to start with, but then it took off and did very well for a while, helping to bring a time of great boom to the economy of France via the economic leadership of John Law before it went burst in 1720.

John Law

John Law (1671-1729)
He was born in Edinburgh, the son of a successful banker and goldsmith. He led a very colorful life which spanned from his native Scotland to London in England, then France and Belgium to name a few. He started working with his father at the age of 14, he must have learnt something because he is quite an important fellow in the area of economics. He is considered one of the forefathers of economics. His flowery life though seemed to have taken precedence most of the time, he was a gambler, womanizer, which incidentally led to the murder of one of his rivals over a certain lady. He was tried and convicted, he escaped before his appeal and ended up in France were he landed the top job at the Royal Bank of France.

In 1716 he started a bank and systematically created a reality of boom in Paris, the state previously was wallowing in debt and Law created an economic boom via his issue of paper money which he built to a point where it was more valuable than the coinage in use. He then extended his reach to the trade between France and its colonies in the New World.

John Law's Paper Money (issued 1718)

When his boss the Regent Duc decided to go over his head and print more paper money, thinking that this would double the wealth of the state, he and everyone else got a rude shock as for the first time the value of the French livre took a dive down and never recovered. It went burst in 1720 and became worthless paper.

John Law subsequently lost his job and he fled France, he turned to gambling but never made it big again, he died in 1729 a poor man. So the economy of boom and burst was born, no wonder the housing and credit market in England has for years been predicted to certainly be heading for a burst, US' management of its finances has definitely recorded this trend in the last couple of months. When will we start taking a leaf from history, learn the lessons and stop being so greedy?

The End of the 18th Century and French Paper Money

In the interim, a system was put in place to stabilize the monetary system using coinage, it was not until 1776 that paper money was reintroduced and was issued alongside the assignats from 1789 until 1793. Assignats were legal tender certificates issued during the revolution, these were like bonds in relation to landed property especially the church, which were government held lands. Their value soon diminished, and so the last of the livre coins and paper money were issued in 1794, the franc was introduced a while later.

An Assignat Note

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