Category: Book Quotes of the Day

Cambon, especially, ranked then and ranks now as among the most expert in any period. The disastrous results of all his courage and ability in the attempt to stand against the deluge of paper money show how powerless are the most skillful masters of finance to stem the tide of fiat money calamity when once it is fairly under headway; and how useless are all enactments which they can devise against the underlying laws of nature.

Whenever any nation intrusts to its legislators the issue of a currency not based on the idea of redemption in standard coin recognized in the commerce of civilized nations, it intrusts to them the power to raise or depress the value of every article in the possession of every citizen.

The result was that very many went out of business and the remainder forced buyers to pay enormous charges under the very natural excuse that the seller risked his life in trading at all. That this excuse was valid is easily seen by the daily lists of those condemned to the guillotine, in which not infrequently figure the names of men charged with violating the Maximum laws.

The first result of the Maximum was that every means was taken to evade the fixed price imposed, and the farmers brought in as little produce as they possibly could. This increased the scarcity, and the people of the large cities were put on allowance.

The result outside the Convention was increased activity of the guillotine; the results inside were new measures against all who had money, and on June 22, 1793, the Convention determined that there should be a Forced Loan, secured on the confiscated lands of the emigrants and levied upon all married men with incomes of ten thousand francs and upon unmarried men with incomes of six thousand francs. But a difficulty was found. So many of the rich had lied or had concealed their wealth that only a fifth of the sum required could be raised, and therefore a law was soon passed which levied forced loans upon incomes as low as one thousand, francs,–or, say two hundred dollars of American money.

A decree was now passed issuing three hundred millions more. By this the prices of everything were again enhanced save one thing, and that one thing was labor. Strange as it may at first appear, while the depreciation of the currency had raised all products enormously in price, the stoppage of so many manufactories and the withdrawal of capital caused wages in the summer of 1792, after all the inflation, to be small as they had been four year before–vix., 15 sous per day

The nation was becoming inebriated with paper money. The good feeling was that of a drunkard just after his draught; and it is to be noted as a simple historical fact, corresponding to a psychological fact, that, as draughts of paper money came faster the successive periods of good feeling grew shorter.

Speeches like this gave courage to a new swarm of theorists,–it began to be especially noted that men who had never shown any ability to make or increase fortunes for themselves abounded in brilliant plans for creating and increasing wealth for the country at large.

No matter how skillfully the bright side of such a currency was exhibited, all thoughtful men in France remembered the dark side. They knew too well, from that ruinous experience, seventy years before, in John Law’s time, the difficulties and dangers of a currency not well based and controlled. They had then learned how easy it is to issue it; how difficult it is to check its overissue; how seductively it leads to the absorption of the means of the workingmen and men of small fortunes; how heavily it falls on all those living on fixed incomes, salaries or wages; how securely it creates on the ruins of the prosperity of all men of meagre means a class of debauched speculators, the most injurious class that a nation can harbor,–more injurious, indeed, than professional criminals whom the law recognizes and can throttle; how it stimulates overproduction at first and leaves every industry flaccid afterward; how it breaks down thrift and develops political and social immorality.

Claude Debussy said, “Music is the space between the notes.” Analogously, the space between investments–the times one is out of the market–can be critical to successful investing.