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Assignat

Assignats were bank notes issued by the National Constituent Assembly in France during the French Revolution. The assignats were issued after the confiscation of church properties in 1790 because the government was bankrupt. The government thought that the financial problems could be solved by printing certificates representing the value of church properties.

Originally meant as bonds they evolved into a currency used as legal tender. Although it wasn't, you can describe it as massal speculation with bonds.

As there was no control over the amount to be printed, the value of the assignats exceded that of the confiscated properties. This caused massive hyperinflation.

In the beginning of 1792 they had lost most of their nominal value.

This hyperinflation was stirred up by repeating food shortages. Instead of solving the financial problems, the assignats became a catalyst for (food) riots.

As instability continued after the abolition of the monarchy and war had to fought. This situation impeded the implementation of good financial policies reducing debts, though inflation was regulated by the Maximum Price Act in 1793.

When the Directoire came into power in 1795 the Maximum Price Act was lifted. Hyperinflation reemerged and in the next four years Paris was the stage of riots.

The inflation was finally solved by Napoleon in 1803 by introducing the franc as the new currency.

As a conclusion you can say that this is an early example of a big economic mistake related to bank notes: printing money to fill the treasury.



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