"Hyperinflation, famine and bloodshed" â Twisting History to Preserve the Status Quo

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On Monday 22 October 2012, we alerted our readers to a very interesting article which was published that day in the Daily Telegraph.
Written by Ambrose Evans-Pritchard, the newspaperâs International Business Editor, it highlighted the recent IMF paper by Jaromir Benes and Michael Kumhof, entitled, âThe Chicago Plan Revisitedâ which strongly supported the proposals of Irving Fisher for full reserve banking. Fisherâs ideas are one of the inspirations behind Positive Moneyâs proposals.
An epic comment thread ensued on the internet version of the article (dated 21 Oct). There were over 1,100 comments, with around 50% in favour, and a vociferous 50% against (who were the same names posting again and again).
There was one particular character who was regularly posting almost every hour or so, with the same point â the erroneous claim that this âhad been done beforeâ â immediately after the French Revolution apparently â and the result was âhyperinflation, famine and bloodshed.â
âHyperinflation, famine and bloodshedâ, indeed!
Talk about trying to scare people away from the perfectly reasonable proposals suggested by Positive Money. Talk about âprotesting too muchâ.
So what was this person referring to?
He was linking regularly in his posts to a PDF version of a book called âFiat Money Inflation in Franceâ by an Andrew Dickson White.
We asked one of the worldâs foremost monetary historians, Stephen Zarlenga, of the American Monetary Institute for his opinion on the matter and he directed us, helpfully, to pages 446-450 of his magnum opus, âThe Lost Science of Moneyâ (Valatie, NY: American Monetary Institute, 2002).
Referring to the American âGreenbacksâ, Zarlenga writes:
âPerhaps the most clever attack of all on the Greenbacks was Andrew Dickson Whiteâs âFiat Money Inflation in Franceâ, written in 1876. White (1832-1918), whose inherited fortune arose from banking, eloquently used several rhetorical methods to undermine the Greenbacks. But Hazlittâs introduction [to Whiteâs book] presents Whiteâs essay as objective history, rather than with a political motive. Not mentioned is that Whiteâs purpose was to attack the Greenbacks, which at that time a majority of voters wanted to make a permanent feature of our money system.â
âSince a direct examination of the Greenbacks and their results would defeat his purpose, instead White argued from analogy, asserting that what was true for France must also be true for the United States: the failure of paper money, under the chaotic conditions of the French Revolution, automatically condemns government paper money everywhere. The argument does begin to look weak, even silly, when stated in that way.â (pp. 447-448)
Zarlenga points out that a repudiation to Whiteâs essay was published, within a year, by Stephen D. Dillaye.  [Stephen D. Dillaye, âAssignats and Mandats, A True History, Including an Examination of Dr. Andrew Dickson Whiteâs âPaper Money in France'â, (Philadelphia: Henry Carey Baird & Co, 1877)].
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Massive Counterfeiting of âAssignatsâ
Dillaye pointed out that one of the reasons for the failure was massive counterfeiting of the paper currency, âthe Assignatsâ â largely through London â where, according to Dillaye: âSeventeen manufacturing establishments were in full operation in London, with a force of four hundred men devoted to the production of false and forged Assignats.â
Dillaye cites legal proceedings in England where court disputes between those involved in these activities brought the matter into public record.
It was found at one stage that there was 12-15 billion francs of forged Assignats in circulation in comparison to the 7.86 billion issued by the Revolutionary government. Dillaye says that Whiteâs figure of 45 billion francs of Revolutionary money is wrong.
It appears that Andrew Dickson White was politically motivated against the Greenbacks to, as Dillaye said, âoverthrow our paper currency; to destroy confidence in our stability as a government; to question our honor as a nation, and our honesty as a people, by producing the history of French paper money, and showing by its failure and worthlessness, an example and illustration to convince us that because the French revolutionists failed in establishing a paper currency worthy of confidence, we must fail; that as they repudiated the obligations they created, the Government of the United States must repudiate the obligations it has created or may hereafter create. Mr Whiteâs argument amounts to this or it amounts to nothing.â
Weâre pleased to see people finally debating the issues around the creation of money, but making inaccurate (and irrelevant) comparisons to historical events is hardly helpful. Time moves on, and a largely âpaper currencyâ would be unworkable â and unnecessary â today.
However, the arguments for a publicly-created money supply remain sound.
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Reference:
Stephen Zarlenga, âThe Lost Science of Moneyâ (Valatie, NY: American Monetary Institute, 2002), pp.446-450. The book is available via Amazon, or via American Monetary InstituteÂ
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