Assignat

Origins

France's royal finances were in severe crisis in the 1780s. The debt was estimated at 4 to 5 billion livres, and about half the royal budget went to servicing it. The sources disagree on who proposed the confiscation: the French account says Talleyrand proposed confiscating Church property without compensation, while the English account attributes the confiscation to the motion of Mirabeau. What both accounts agree on is that on 2 November 1789 the Constituent Assembly resolved that all Church property be placed at the disposal of the Nation, and that the lands thus made biens nationaux were to be auctioned.

Backing and issue mechanism

The assignats were backed by properties now held by the nation: crown lands taken over on 7 October 1789 and Catholic Church lands placed at the Nation's disposal by the Assembly on 2 November 1789. The value of a property was divided into assignats as one would divide a company into shares. Anyone wanting to buy part of the biens nationaux had to do so through assignats, and assignats returned to the state as purchase-money were to be cancelled and destroyed so that the issue would disappear as the land was distributed. A decree of 21 December 1789 ordered the issue of assignats as certificates of indebtedness in April 1790. On the interest rate of the first issue the sources differ: one English account gives 5 percent, secured and repayable from auctioning the biens nationaux, while the French account and another English passage give 1,000-livre notes at 20 deniers per day, that is 3 percent a year. The New York Fed's independent account also gives 3 percent. The rate should be presented with attribution rather than as a settled figure.

Transition to money

Originally meant as bonds, the assignats were redefined as legal tender in April 1790 to address the liquidity crisis (declared legal tender on 17 April 1790, with interest reduced to 3 percent), and by September 1790 they had become a true circulating paper currency. A further 800 million livres of non-interest-bearing notes were added, in denominations of 50 to 2,000 livres. The French account dates their becoming a circulating currency to 1791.

Debate and opposition

The assignats were politically controversial from the outset. Constitutional monarchists such as Maury, Cazalès, Bergasse and Duval d'Eprémesnil opposed them. Proponents argued that land was a more stable source of value than gold or silver; opponents saw the notes as resting on an illegitimate seizure of property. Necker argued before the National Assembly on 27 August 1790 that they were paper money that would bankrupt France, and resigned on 3 September. Talleyrand warned that they risked John Law's fate, while Condorcet and Du Pont de Nemours argued that they would drive out silver, raise prices and restrict commerce.

Enforced legal tender and Terror repression

To sustain the assignat, increasingly harsh laws followed. A decree of 27 June 1793 provisionally closed the Paris Bourse, and publication of exchange rates was ended that year to limit speculation. Heavy fines and imprisonment were imposed on anyone caught selling gold or silver coins, treating paper money and precious metals differently, or refusing payment in assignats. On 8 April 1793 the Convention ruled that all purchases and contracts with the state be stipulated only in assignats, extending this to the private sector three days later. From 8 September 1793, at the start of the Terror, non-acceptance of the assignat was made punishable by death, with property confiscated and the denouncer rewarded. Delamarche, a director of assignat manufacture, was guillotined on 8 November 1793 after being caught in a plot affair; the English account also gives his name as Simon-François Lamarche. In May 1794, anyone who asked in which currency a contract would be concluded could be condemned to death.

Controls and shortages

The Maximum Price Act of 1793 sought to address rising prices and food shortages. When the maximum was extended to all commodities on 24 February 1794, confusion increased, trade was paralysed and manufacturing establishments closed. The French account notes that price control did not lower prices but created shortages, and that the cause of inflation was the over-production of assignats.

Enforcement gap and depreciation

The assignats were issued in large denominations unsuited to daily exchange, and the Assembly never mandated par exchange between assignats and Old Regime coins. Already in the fall of 1790 the Assembly itself paid a 7.5 percent commission to exchange large notes for small coins, and by the end of 1791 the discount was often 20 percent or more. By September 1791 the assignats had depreciated 18 to 20 percent; on 1 February 1792 the depreciation approached 50 percent. Between 1790 and 1793 the assignat lost 60 percent of its value.

Issue volumes and collapse

The issue figures should be given with their dates and units. In livres, the French account gives 2.7 billion in September 1792, 5 billion in August 1793, 8 billion in early 1794, 10 billion in August 1795 and nearly 45 billion in January 1796, against a total that should never have exceeded 3 billion, the value of the Church lands. In francs, the English account gives 2,400 million in circulation on 17 October 1792; a total approaching 8 billion by June 1794, of which only 2,464 million had returned to the treasury and been destroyed; 10 billion at the end of May 1795 and 14 billion at the end of July; and issues of 45.5 billion francs by 1796 excluding counterfeits. The 3.75 billion francs of further issues in the English account belongs to the 1790 to 1792 depreciation context and is not part of one cumulative series with the later circulation figures. The assignat fell from 31 percent of face value in August 1794 to 24 percent in November, 17 percent in February and 8 percent in April 1795. After the Thermidorian Convention lifted the Maximum in the name of economic freedom, the assignats lost almost all value over the next year.

Counterfeiting

Counterfeiting of assignats was widespread in France and abroad. Researchers have documented French royalists working with British authorities, including senior ministers and military commanders, to manufacture paper for counterfeit assignats at mills across England, after which the paper was distributed for printing. The French account states that large numbers of counterfeit assignats were made in Belgium, Holland, Germany, Switzerland and Great Britain with the complicity of the British government, then a principal enemy of France interested in accelerating its economic crisis.

Replacement by the mandats territoriaux (1796)

The Directory issued mandats territoriaux in February 1796, paper notes and land-warrants supposedly redeemable in lands confiscated from royalty, the clergy and the church. To replace the 24,000,000,000 francs of assignats then outstanding, 800,000,000 francs were issued as legal tender; about 2,500,000,000 francs of mandats were issued in all. The exchange rate was set at 30 assignats for 1 mandat, while the sources give their real value as about 300 to 1 in the English and French accounts and about 400 to 1 in the Korean account. The mandats could be used to purchase biens nationaux, but they were heavily counterfeited and depreciated rapidly within six months. They lost legal-tender quality in February 1797 and were worth virtually nothing by May. The French account dates the abolition of the assignat's legal-tender status to the law of 21 May 1797 (2 prairial an V), and the printing plates and matrices were burned publicly on 19 February 1796 (30 pluviôse an IV).

Outcome and social incidence

The supply of land was insufficient for the value of mandats issued and quickly became exhausted, leaving the currency as worthless paper. Those holding large quantities of assignats who converted early could access cheap lands, while citizens of limited means saw their poverty increase. The assignats effected a major transfer of property in a short time, attaching the purchasers of biens nationaux, a new landed bourgeoisie, to the new regime, which would thereafter fear a monarchist restoration. The auctioned biens nationaux remained expensive and only the well-off could buy them, so some enriched themselves by buying vast lands and buildings for almost nothing relative to their real value. The Korean account adds that the Directory's attempt to withdraw assignats by forcibly allocating bonds was heavily criticised, and that the mandat exchange rate amounted to selling national land to the wealthy, causing the left-wing Babouvist conspiracy.

Assessment

The assignat is generally considered a financial and economic failure. The state's inability to combat inflation through ever harsher sanctions is cited as illustrating the harmful character of price-control policy. On the financial level, however, its creation prevented the French state's bankruptcy, contributed to reducing the debt and made it possible to find the money needed to finance the war in the difficult hours of Year II.

Easily confused currencies

The term assignat resembles the Russian assignatsia (banknote). The assignatsionny rubl (assignation ruble) was used in Russia from 1769 until 1 January 1849 and had no connection to the French Revolution. Earlier land-backed paper such as colonial scrips from 1709 in the British Thirteen Colonies and the 1775 Continental dollar likely influenced the French assignat project. The French-established Roman Republic also issued assignats (Italian assegnati) between 1798 and 1799, by the law of 23 Fructidor VI (14 September 1798), denominated in paolo or giulio, the older currency of the Papal States.