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22/March/2016

It's 1790 All Over Again

Hugo Salinas Price

It was 1790 and the revolutionary National Assembly in Paris was worried.

Complaints were reaching the Assembly from all over France, that business was stagnant, sales were down, people were without work, and there was a great scarcity of money.

This was quite natural, because all business slows down when the prevailing source of Authority is under question. The Bastille prison had been taken the prior year by a revolutionary crowd and all sorts of ugly things were being said about King Louis XVI and his pretty young Queen, Marie Antoinette.

But this was the "Age of Reason" and the most educated, intelligent and reasonable people in France were members of the revolutionary National Assembly, which gathered daily in Paris.

The Assembly put their highly educated heads together and came to the conclusion that a scarcity of money was quite intolerable and that the Assembly must really do something about it.

"What do we have highly educated brains for, if we can't solve the problem of a scarcity of money? Without a doubt, Reason can overcome this problem."

So the members of the National Assembly thought about the problem of the scarcity of money, and came up with a splendid idea: "Let us create the necessary money, and things will go swimmingly."

Thus was born the "Assignat". Out of the collective wisdom of the Assembly, the Assignat was born as a claim upon the vast extension of lands recently taken by the State of France, from the Catholic Church. What could be more solid than a claim upon the lovely lands of dear France?

The Assignats were soon printed up, with various denominations of monetary value in gold Francs.

At first, the Assignats circulated alongside gold coin at par value. But soon enough, the exchange value of the Assignats against gold began to fall.

Thus began a nightmare episode that lasted seven years.

The first issue of Assignats did not relieve the problem of business being in a funk. So a second issue followed the first; and then another, and then more, and thick and fast they came at last, and more and more and more, falling, falling, always falling in value against gold.

The highly intelligent gentlemen of the Assembly decided that this fall in value of their Assignat must be the work of wicked, unpatriotic people who should be severely punished.

The Assembly decreed that a merchant should be punished by being sent to the galleys or to the guillotine, if he should venture to ask a customer who wanted to know the price of bread, with what money he planned to pay for the bread - whether it was with gold coin or with Assignats?

The Assembly created a national net of spies to hunt down the wicked hoarders of gold, confiscate their gold and have them part with their heads with a short, sharp shock on a big, black block.

In the meantime, the more intelligent of the citizenry took out enormous debts in Assignats, with the certainty that their value would soon plummet; with borrowed Assignats they purchased all sorts of things of lasting value, such as real estate, art and jewelry. In due course, the value of the Assignat fell to next to nothing and the debts were wiped out. Enormous wealth was transferred from the mass of the ignorant to the few who were able to see what was going on.

Eventually, the common people of Paris found that bread was hard to come by. Starvation set in, and the Parisian government had to provide rations of bread for the multitude - rotting, wormy bread.

In 1797 Napoleon came to power in France. He put a stop to the very reasonable plans of the highly educated men of the National Assembly, and declared that henceforth, only gold would be money.

In the center of the Place Vendome, where today there stands a great column surmounted by a statue of Napoleon, a huge bonfire consumed piles of freshly printed Assignats and the wooden printing machinery which fabricated them.

The highly educated and eminently reasonable men of the National Assembly had succeeded - in the mighty work of bringing France to its knees. But not one of those men, responsible for the colossal disaster, was ever known to have said about it: "We were mistaken".

2016: Why is it 1790 all over again? Because just as in France in 1790, today we have a set of conceited men running the world's economic policy on the basis of a flawed intellectual construct. In 1790, the flawed construct was the Assignat. Today, the flawed intellectual construct is the irredeemable dollar and its derivative currencies.

In 1790, gold was the enemy of those conceited men, because the depreciation of the Assignat against gold revealed the falsity of the Assignat; so the National Assembly did their best to suppress the use of gold by violence against its owners. Today, gold is once again the enemy of our conceited masters: gold, whose value threatens to expose the falsity of the irredeemable dollar.

In 1933, the value of the dollar in gold was 1 1/2 grams. Today, the value of the dollar is only about 2 1/2 hundredths of a gram of gold. Our conceited masters are struggling to keep their intellectual construct, the irredeemable currency which is the dollar, from plunging in value to thousandths and ten-thousandths of a gram.

Like the Assignat, which in 1797 fell to a value of zero grams of gold, the dollar faces the same inevitable fate. And since the rest-of-the-world's currencies are derivatives of the dollar, they too will become worthless.

The fundamental flaw in the thinking of the conceited members of the National Assembly of France in 1790 was their mistaken idea that they could invent a money more suitable than gold to achieve the prosperity of France.

Today, the fundamental flaw in the thinking of our conceited Masters of the Universe is the same as that which blinded the members of the National Assembly in France, in 1790: they are convinced that their intellectual construct, the irredeemable dollar, is far more suitable than gold for use as money.

The conceit of the majority of the members of the National Assembly in France in 1790 led to the total prostration of the economy of France in the course of seven years. The conceited Central Bankers of today will without a doubt achieve a world sunk in economic prostration. But don't expect any one of them to ever say "We were mistaken".

So that's why It's 1790 All Over Again.

* * * 

Conceit: over-high opinion of, too much pride in, oneself or one's powers, abilities, etc. (OED)

Reference: Andrew Dickson White "Fiat Money Inflation in France".

 

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Hugo Salinas Price, World Riba Conference, Kuala Lumpur, Malaysia, Nov. 26, 2012.
Hugo Salinas Price, World Riba Conference, Kuala Lumpur, Malaysia, Nov. 26, 2012.
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