Kevin (The Politically Incorrect Guide to Socialism) Williamson looks at financial folly in 1790s France and sees uncomfortable similarities with us.

He refers to this book "Fiat Money Inflation in France: How It Came, What It Brought, and How It Ended" which is availiable in a free kindle edition at Amazon. BTW, even if you don't have a kindle, Amazon has a free kindle program that works on your PC.

Here's some choice quotes from Kevin's article.

(What follows is heavily chopped up. Read The Whole Thing)

It was a new dawn, a day of hope and change, the ancien régime and the theocrats and the plutocracy having been supplanted by fresh new faces dedicated to Reason and promising to fundamentally change France. ...

A source of particular annoyance to the Jacobins and the rest of the Left was the fact that businesses and investors were sitting on a great deal of cash but refusing to spend or to invest, and many were sheltering their capital abroad.

The government decided upon a stimulus package - to flood the economy with fresh money in order to encourage new business through the magic of l’effet multiplicateur. ...

So confident were the French authorities in the effects of this stimulatory pump-priming that M. de la Rochefoucauld predicted all of that gold sitting in businesses’ coffers and offshore enterprises would soon come online and start making business happen. The revolution was shovel-ready. ...

Commodities prices started to rise as investors, suspicious of the weak currency and high levels of government debt, put their money into assets with tangible value. (Did gold prices hit record highs? You bet they did, soon enough.) When it came to non-core inflation - all that food and fuel that economists are committed to ignoring - rising prices were a worrisome development indeed to the revolutionary government; when bread prices rose, they started hearing the words "Let them eat cake" in their sleep. ...

Boom turned to bust, business stagnated, wages dropped - but prices continued to rise.

So the government embarked on QE2: another dose of paper money injected into the economy. This was especially attractive to the French government in 1790, inasmuch as it had already spent all of the money it had raised from QE1, and it wanted to raise more without paying market rates to lenders. (Did I mention this would sound familiar?) ...

In the newspapers, ... the Paul Krugmans complained that the first round of stimulus hadn’t been big enough. ...

(four stimuli later) ...the government promising each time that one more round of stimulus would do the trick. When prices shot up, the government started whispering darkly about gougers and profiteers. When food subsequently disappeared from the marketplace, the army was dispatched to the farms and fields to bring produce to market. That worked - for one harvest. The next year’s harvest was too small even to feed Paris, much less all of France: Gaul went Galt. ...

The government pumped up its balance sheet by including enormous tribute payments that France believed it would receive after defeating all its international rivals in future wars - they actually put "Win the Future" on the ledger as if it were an asset. ...

The only new jobs were the 400 positions added at the presses where the money was printed. Being French, those workers staged a strike in 1793, demanding higher pay and benefits. (They won.) ...

A bag of flour went from two francs to 225 francs. The original 400 million (livres) in quantitative easing became 45 billion over the course of six years.

According to Cambridge Modern History: French Revolution, the compte rendu of 1788, the final budget presented to Louis XVI - the one that sparked the crisis that ultimately unleashed the revolution and all that came after - featured a deficit of about 30 percent of government spending. Barack Obama’s last one was 46 percent. In May, Paul Krugman began calling for QE3 - "both larger and broader-based than QE2." Napoleon put France back on gold and vowed that he’d die before he saw paper money being issued again, but he also wore funny hats and wasn’t nearly as enlightened as us.

I'm confident we won't precisely repeat the French experience. This is America!. We'll find a uniquely American way to ruin ourselves.

Posted by: Open Blogger at 05:38 PM | Comments (27)
Post contains 733 words, total size 5 kb.

Hide Comments | Add Comment | Refresh | Top