AHC: Have Louis XVI avoid the French Revolution

@Viriato: The statistics you posted on the French national debt are both fascinating and frightening. With such a dire financial situation it was foolish for Louis XVI to involve France in the American Revolution. The billion livres would have clearly been better spent on the national debt.
 
Where did you get your information from, Viriato? I am interested in whatever source you used (If it turns out to be a simple Wikipedia article, I'll have to slap myself on the forehead for my question. . .). :)

You know your country is doomed if you spend more than half your budget paying down the INTEREST for the national debt. I learned some about this in my Western Civ classes from years ago, but I didn't remember France being that far gone. How did France get rid of that debt after the Revolution, by the way? Did France default, or did Napoleon pillage enough to pay it back, or did they repay it another way? I'm curious.

"Études sur le régime financier avant la Révolution de 1789" by Adolphe Vuitry

Unwilling to raise taxes, the National Assembly nationalized Church Properties in November of 1789. The confiscated land in turn was sold beginning in December of 1789 for 400 million livres. However, interest rates began to rise in 1791 and by mid-1792 the outbreak of war increased inflation dramatically. By 1795, France was experiencing hyperinflation and in 1796 the Directory issued paper money.

The military successes and war indemnities imposed on defeated enemies helped in part cover military expenses, however these were only a short term solution. The Directory declared bankruptcy on September 30, 1797 and a law erased two-thirds of France's sovereign debt. However, this made it so that no one would lend to the French government. By June of 1799, the government imposed forced loan lending. With the ascension of Napoleon in November of 1799, the created the Banque de France in 1800 and the Caisse d'amortissements. Napoleon helped put into place a rigid monetary system. Revenue collection increased, and the French government no longer issued as much paper money, however Napoleon's debt payments were often in arrears. In 1812, the French government once again defaulted due to its military campaigns.
 
I might be wrong but I think that they defaulted. After all, if your at war with most of Europe there's no real need to pay foreign bankers.

That may be true, but remember much of the debt is internal to domestic bankers. Also, when a country defaults, no one will be willing to lend you money in the future. If a country is at war and defaults, it will be in dire straits as usually its revenue cannot cover military expenditures. In the age of specie currency this leads to the issuance of paper money, however this eventually becomes worthless as people begin demanding gold or silver. The end result is hyperinflation.
 
That may be true, but remember much of the debt is internal to domestic bankers. Also, when a country defaults, no one will be willing to lend you money in the future. If a country is at war and defaults, it will be in dire straits as usually its revenue cannot cover military expenditures. In the age of specie currency this leads to the issuance of paper money, however this eventually becomes worthless as people begin demanding gold or silver. The end result is hyperinflation.

True. Maybe it was a combo of defaulting on foreign bankers, creating the franc as the standard currency and switching over to a decimal system to manage the money. As to domestic bankers, in Revolutionary France I think they'll know that refusing to lend to the government could mean being accused of being a traitor. You could say there was some good to come out of the Reign of terror in that regard.
 
True. Maybe it was a combo of defaulting on foreign bankers, creating the franc as the standard currency and switching over to a decimal system to manage the money. As to domestic bankers, in Revolutionary France I think they'll know that refusing to lend to the government could mean being accused of being a traitor. You could say there was some good to come out of the Reign of terror in that regard.

Between 1770 and 1789 foreign creditors only held on average 18% of France's sovereign debt. Most of these were from the Dutch Republic and Geneva. Most government debt was held by French bankers and merchants who bought government paper as an investment. One of the principal reasons for the bourgeois backing of the revolution was that France had defaulted on their debt in 1788.

Also they could in theory be "forced" to lend, but often they would send capital abroad (capital flight was a huge problem in France between 1789-1800. Also, if they knew capital would be confiscated, often they would simply buy up durable goods which could be bartered, or sold at a later date. Even the revolutionary government was not so stupid to try these tricks.
 
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