Politique Internationale — What led to your being interested in the history of money? Was it a tropism, or by chance, or was it something else?
Daniel Dessert — For my doctoral thesis, I had chosen to work on the navy of Louis XIV. As I progressed, I realised that the principle architects of this navy were the financiers — individuals who were surprisingly complex on account of the diversity of their investments and the origin of their capital. Hence the reorientation of my university project towards the study of financiers under Louis XIV. I wanted to know them, to know their families and their relationships, as well as the way in which they came to control the machinery of State so as to become the major players in naval policy and in the military-metal-industry complex. These individuals were quite simply essential to the development of the kingdom, a belligerent State by definition, one could say. For between 1661 and 1715, it was at war for almost eight years out of ten. And close to seven years out of ten if one takes into consideration the period from the start of the Italian wars, in 1494, to the fall of the First Empire in 1815! Now, excessive warfare requires a lot of money. It was the financiers’ role to get hold of it for the king of France.
P. I. — Money, therefore, is used first and foremost for waging war…
D. D. — Of course. France under the ancien régime has only a single method for discharging all its expenses, whether they be sovereign or everyday: metallic money, that is to say, gold, silver or copper coins. In this context, notably during the reign of Louis XIV, the military budget drains the lion’s share of the supply of metallic money. One only has to remember the words of Montecuccoli, general-in-chief of the Habsburg armies and the adversary of Turenne: “To make war, the first requirement is money, the second is money, and the third is money.” It’s hard to be any more explicit! Without money flowing into the State’s coffers, maintenance of the armies would no longer be assured. Without money flowing in, they would be poorly equipped. Without money flowing in, there would be no war fleet, a new instrument greedy for investment and infrastructure. On top of all that, one has to add the expenditure that was useful for foreign diplomacy — Louis XIV paid his allies generously.
P. I. — So did money consist of metallic coins under the ancien régime?
D. D. — There were two types of currency in the kingdom: the unit of account — the Tours pound — and metallic money — the silver crown, the louis d’or and the billon, which was copper-based. These had no value expressed in Tours pounds. It was the royal power that fixed their accounting value. In theory, a crown was worth three pounds; a louis, eleven. But the State was tempted to modify this parity according to its needs. The system is all the more opaque in that the French coins existed alongside foreign ones. These, like the Italian or Spanish pistole, circulated freely and could be used to conclude any transaction. Financial paper would also establish itself in the XVIIth century because of a lack of coinage, certainly, but also because it was stipulated as a unit of accounting, thereby escaping the manipulations of metallic money. Consequence: within the kingdom, fiduciary money coexisted de facto with metallic money. In any case, the French remained attached to the use of metallic money. All the acts of life — to settle a dowry, to acquire land or an office of State, to borrow a sum… — were carried out in metallic money. It’s not always easy to use. Thus, when Mazarin bestows a dowry on his nieces, the 600,000 pounds paid with each marriage contract represents 200,000 crowns. Since a silver crown weighs 27 grams, more than five tonnes of silver had to be counted out and transported! And sometimes, it’s a lot more than that. In 1662, when Charles II of England ceded Dunkirk to Louis XIV, he requested five million pounds in cash: it took 46 carts escorted by the king’s musketeers to deliver them!
P. I. — Money, it’s also always more money. How did the State fill its coffers?
D. D. — Theoretically, the king benefits from several kinds of revenue. Firstly, those derived from his domains, which comprise the product of his real estate assets and the rights that pertain to them. Secondly, those derived from the rights he receives in his capacity as lord over all other lords, which translates into a deduction from the product of their domains. But since the Hundred Years’ War, this has no longer been sufficient to cover the military’s expenses. The monarchy has therefore instituted a direct tax that is raised on all its subjects, even if the clergy, the ‘first order’ of the kingdom, and the nobility, the ‘second order’ of the kingdom, are very largely exempt. In fact, the taille falls to the rest of the subjects, who make up the vast majority. Soon, however, the direct tax is no longer enough, and the monarchy starts to multiply its indirect taxes. These involve the production and exchange of merchandise, whether agricultural or manufactured. The most famous of them is the tax on salt: la gabelle. Once again, with the need for money growing ever more pressing, the monarchy, starting in the XVIth and especially the XVIIth centuries, invents another category: ‘extraordinary affairs’. These correspond to borrowings and rents, or loans secured by future State revenues; to the sale of offices of State; to the transfer of taxes on products or on groups of individuals. During particularly delicate moments, furthermore, the State has also acquired the habit of utilizing the recasting of coins, variations in the price of gold and silver, and changes in the rapport between accounting and metallic currencies.
P. I. — Direct taxes, indirect taxes, offices of State… the resources increase, but what about those who collect these revenues?
D. D. — In principle, each revenue has a specific category of collector. Direct taxes are the responsibility of the receveurs généraux (general agents), or the general treasurers in administrative regions like Languedoc or Brittany. They are accounting officers, ‘civil servants’ of the crown, as it were. Indirect taxes pertain to individuals, the fermiers généraux (general tax farmers), who take out a loan on the raising of taxes on everything, or just about. As for extraordinary affairs, these too fall to individuals by virtue this time of a contract, or treaty, agreed with the State — hence their name, les traitants. They are despised by the whole of France. But this apparent diversity hides a true homogeneity, with accounting officers able to be fermiers généraux or traitants, or both at once! They are ‘financiers’, a general term. They are defined by their capacity to finance the State in every circumstance, which means bringing it the precious metal that its functioning requires. Whether it’s a matter of direct taxes, indirect taxes or extraordinary affairs, that functioning depends on the advances, in ‘cold hard cash’, that they grant the royal Treasury. In short, the financiers are gold seekers: they have to convince those who hold capital to entrust this money to them in order to make it flourish in the service of the State. Their credit depends on loans taken out in a personal capacity from all those who hold liquidity, namely the high nobility of court, of the sword, the mitre, the bell or of parliament. In parallel with the use of metal, the rise of finance and taxation generates a mass of financial paper. Stipulated as an accounting currency, such paper provides protection from the manipulation of metals. As war-related budget difficulties increase, the relationship between metallic money and fiat money becomes ever more contentious.
P. I. — At what point did the banknote make its appearance?
D. D. — The distortion between accounting money and metallic money in circulation is what authorises the acrobatics of a State with its back to the wall. Thus, Louis XIV carries out 43 monetary changes and 36 variations in the rapport between gold and silver in the course of his reign. In concrete terms, by borrowing 120 pounds when the crown is worth 3, he pockets 40 crowns. But on the day of reimbursement, in deciding that the crown is worth 4, he pays back 30 crowns! The saving is far from negligible. Because of such fiddling, and the growing difficulty of squeezing money out of all the kingdom’s cashboxes, paper money emerges more or less as a substitute for metallic money. Nevertheless, this paper money does not always escape harm. For instance, loans taken out by the State in ready cash ought to be acquitted in ready cash. Issued in the form of financial paper, these credits are assigned on the basis of crown receipts and are reimbursable at maturity. Failure to honour them as expected means they are extended and reassigned on the basis of other revenues. The same goes for the loans that the financiers place with the public. Taken together, such issuance generates a mass of effects that become the subject of incredible speculation. Quantities of depreciated financial paper are purchased at the lowest price in the hope of reselling them at the highest price when a revenue office, momentarily solvent, takes them back. These papers are not banknotes, but they fulfil a need that will bring about their invention in the context of an extreme shortage of precious metals.
P. I. — What are the consequences of such speculation?
D. D. — Clearly, well-informed individuals know when to liquidate their assets or, on the contrary, when to snap up everything they can, knowing that the value will increase. This presupposes collusion between business people and politicians, a collusion that is eminently profitable for some. The proof? Enrichment as rapid as it is scandalous. Mazarin’s fortune illustrates this process to a point that has never been equalled. In March 1661, the cardinal left a vertiginous but inexplicable fortune: more than 40 million pounds. That is half the annual budget of the richest kingdom in the West. Prime minister for twenty years, he accumulated these millions during his last eight, that is to say, after his return to power once the Fronde had been defeated (1652). This spectacular success leaps out against the backdrop of a country bled dry by twenty-five years of conflict (1635-1659 against the Habsburgs, and 1648-1652 against the Frondeurs). At a time when metallic money is cruelly lacking at the public Treasury, the cardinal amasses more than 9 million pounds in gold and silver, distributed among various locations chosen to facilitate its export in the event of fresh trouble… His Eminence’s stash is greater than the holdings of the bank of Amsterdam, the biggest credit instrument of the age! Mazarin also possesses 10 million pounds in paper that is just as suspect. How better to illustrate the mixing of genres between the milieu of the financiers and the sphere of the ministers? Confronted by urgent demands for military financing, the world of money handlers was able to control the State and society in spite of the sensational declarations of a monarch who claimed to be absolute.
P. I. — How are the financiers, and by extension, the money handlers, looked upon?
D. D. — These people certainly do not enjoy an unblemished reputation! They are accused of every evil. They are suspected of ignoble origins and culpable embezzlement. When all’s said and done, they are envied. Despite opprobrium and punishment, this is a group that weathers all storms, apart from the Terror, when a number of fermiers généraux would lose their heads. And yet, just like the powerful people for whom they invested funds, the financiers were able to recover. Dispersed by the tumult of revolution, the priests of the golden calf would change their religion while preserving their credo.
P. I. — And confidence in the currency, what exactly is that?
D. D. — Under the ancien régime, French society remains faithful to metallic money and precious metal. Inventories after death are unambiguous. The humblest person has a gold cross and a few coins. The richest, jewels and liquidity. The volume can be impressive. It is true that it is easier to conceal a few louis or crowns than a chest. In fact, in turbulent times ‘metallic’ fortunes are easy to hide. In 1661, fearing imminent disgrace, the superintendant Nicolas Fouquet entrusts 450,000 pounds in cash to a friend to ensure his children are fed. Similarly, a number of ecclesiastical establishments, including the convents of Paris, receive considerable amounts of liquidity, acting in this way as deposit banks. This fondness for precious metals and metallic currency partly explains the failure of John Law. His efforts would last five years, from 1716 to 1720. The goal of this Scottish financier was to extinguish the astronomical debt created by perpetual war. He wanted to demonetise precious metal and replace it with a new, trust-based currency secured by the kingdom’s naval and colonial enterprises. It meant the abolition of the earlier, fisco-financial system that ensured the dominance of the tax collectors and their backers. It was, however, impossible to get rid of the first stage, the one that was attractive to investors: maintaining the notes’ convertibility into gold. That was the weak point. Business people saw the flaw. The edifice was weakened by extravagant speculation by people who were well informed. They were close to power, or even at the seat of power, like Louis Henri de Bourbon-Condé, prime minister and first blood-prince. They encouraged speculation, then demanded repayment in precious metal, which emptied the coffers and halted convertibility. In this way the programme collapsed. Its failure made a deep impression on the collective unconscious. And it explains the predilection of the French — one still current today — for the yellow metal.