AHC and WI: Paper Money in the Ancien Regime (lasts)

How can the 1716 money reforms of John Law last, and remain the (or a?) basis for legal tender in France until at least the century's end? Basically, how can the Mississipi Bubble either not form, not burst, or just not burst in such a way as to end the paper money experiment in France?

And now given the PoD -- what are the effects? How is France changed, now that it uses paper money? How is the global economy, and balance of powers in general? And what about Mississippi -- depending on how the bubble is affected, does French America fare better? And, as always, what else?
 

BlondieBC

Banned
All Fiat systems die. So do all metal systems, but slower. The whole point of the paper money was to allow the King to live beyond his means, so really you have a self defeating question. Sure the King could have chosen to live within his means and use paper money, but then I can't see any real reason to switch from silver to paper. Now if the King spending (printing money) is less extreme, then the paper system last longer. And you can have legal reforms to prevent land speculation in Mississippi, but then the bubble would just be somewhere else in something else.
 
All Fiat systems die. So do all metal systems, but slower.

While true in a historical sense, such a death can be a relatively simple transition from one system to another. Bretton Woods managed to die without the US undergoing violent revolution.

The whole point of the paper money was to allow the King to live beyond his means, so really you have a self defeating question. Sure the King could have chosen to live within his means and use paper money, but then I can't see any real reason to switch from silver to paper. Now if the King spending (printing money) is less extreme, then the paper system last longer. And you can have legal reforms to prevent land speculation in Mississippi, but then the bubble would just be somewhere else in something else.

There's only so much that can be done to manage the King's desire to spend, unfortunately. If Law gets his way in some respects, France's debts ought to become more manageable though. At best, a monetary expansion through fiat currency could avoid directly accommodating royal deficits, instead focusing on the needs of commerce in general.

You can though avoid the particulars of the Mississippi bubble itself if Law doesn't establish a trading monopoly over it with the Royal Bank, or if the generation of paper notes involved is simply slower. If the bubble pops earlier, the fallout might be more manageable.

I do agree that bubbles were a likely consequence of the development of inflationary paper currency, but the bubbles involved don't have to be catastrophically large or as narrowly focused as in the Mississippi Bubble. A couple smaller failures and burst bubbles could shake confidence and lead to lessons-learned without junking the entire system... if they're lucky.
 
There's only so much that can be done to manage the King's desire to spend, unfortunately. If Law gets his way in some respects, France's debts ought to become more manageable though. At best, a monetary expansion through fiat currency could avoid directly accommodating royal deficits, instead focusing on the needs of commerce in general.

You can though avoid the particulars of the Mississippi bubble itself if Law doesn't establish a trading monopoly over it with the Royal Bank, or if the generation of paper notes involved is simply slower. If the bubble pops earlier, the fallout might be more manageable.

I do agree that bubbles were a likely consequence of the development of inflationary paper currency, but the bubbles involved don't have to be catastrophically large or as narrowly focused as in the Mississippi Bubble. A couple smaller failures and burst bubbles could shake confidence and lead to lessons-learned without junking the entire system... if they're lucky.

Good stuff to start with. My next question, then, is where France goes from there? Would, for example, their capabilities during the Wars of Polish and Austrian succession be affected, if the king was able to pay for (part of) France's contribution to the conflicts using fiat currency? And say Law doesn't get a full trading monopoly over the Mississippi -- does that make the settlement and development of Louisiana easier? And how would all of these changes affect the wider European economy and geopolitics?
 
A good part of the problem was the amount of the economy that wasn't taxable, being owned by the nobles or the church. Wholesale revision of the system is what's needed, not clever frills on top.
 
A good part of the problem was the amount of the economy that wasn't taxable, being owned by the nobles or the church. Wholesale revision of the system is what's needed, not clever frills on top.

Well bear in mind, I'm not necessarily asking for paper currency to just outright solve France's financial issues of the later 18th Century (though it's a good thing to keep in mind that it most likely will not). The question is: how can said paper currency be stable in itself, and what would the effects therein be? (Unless, of course, you're saying France's underlying economy and political structure -- not taxing the church or nobles, etc -- don't allow for that kind of monetary policy, but in that case I'd appreciate a longer answer :eek:)
 
They Did!
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