When the French Monarchy was short of funds during the French Revolution and France’s debt was mounting, the National Assembly introduced assignats in an effort to ease some of the country’s financial woes. The assignat was a paper monetary instrument that was first issued as a government bond. As a bond, the assignat did not achieve the results hoped for, however. Soon thereafter, the assignat was re-released as currency. The currency was printed in massive quantities, and is largely credited for the extreme inflation France suffered towards the close of the Revolution.
The original assignats were sold as bonds securing primarily church property. The French government started seizing church buildings and lands in the early part of the French Revolutionary Wars as a way to generate funds. The original assignats were issued in values that corresponded with the assessed value of the seized churches.
A citizen who purchased one of these early assignats was essentially purchasing a government bond. In a sense, he was loaning money to the government, and the government promised to repay that amount after a fixed period of time, with interest. The interest promised on the first assignats was around 3%.
The funds generated by these bond-like assignats floated the government for only a few months. Before long, the government had devised a new plan: re-issue the assignat as banknotes that would function as legal tender. The National Assembly dropped the interest payment, and ordered the printing of nearly double the number of assignat notes that had first been printed with the understanding that they were to be released into the market as currency for any use.
The pattern repeated itself. The assignat’s introduction into the market momentarily added financial stability, but that stability was short-lived. Twice more, the government ordered the printing and release of assignat notes, and twice more, the infusion was but a temporary lift.
Assignats, perhaps predictably, suffered extreme depreciation as a result, and the marketplace became hyper-inflated. Inflation occurs when the price of goods increases such that the value of money — that is, the amount of goods that money can buy — goes dramatically down. When the assignats were issued, money was prolific, and costs went up. When the assignats’ value collapsed, however, the prices, for the most part, remained high.
Many of the images of the French Revolution popular today depict riots, food shortages, and major economic calamities. While not all of these were caused by the assignat crisis, the assignat’s generally negative effect on the French economy was certainly a factor in the swift decline of the national climate.
The last assignats were printed in 1795. The next year, the government created a currency known as the mandat, which was meant to slowly phase out the assignat. Both currencies became obsolete when Napoleon came into power and, in 1801, introduced the franc. The franc was the national currency of France until the introduction of the European Union-wide euro in 1999.