Effects of the War on Money, Credit and Banking in France and the United States

By Benjamin M. Anderson | Go to book overview

CHAPTER VI
The Effects'of the War on the Medium of Exchange in
France: Coin, Bank Notes and Checks

At the outbreak of the war, gold money in France quickly disappeared from circulation. France had had a large circulation of gold coin and also a large volume of silver. The silver franc and five franc pieces, though no longer issued under free coinage, had unlimited legal tender privilege, not only in France, but also through the other countries of the Latin Monetary Union: Switzerland, Belgium, Italy and Greece, while the silver coins of these countries had the same privilege in France. How much gold was in circulation before the war is difficult to say. Widely varying estimates are given by French writers. Gide thinks that 6,000,000,000 francs in gold were in circulation.1 This seems incredible. The Governor of the Banque de France estimated in 1908 that France had from 5,000,000,000 francs to 6,000,000,000 in gold, of which the Banque held about 3,200,000,000,2 leaving only about 1,800,000,000 to 2,800,000,000 for general circulation. The gold holdings of the Banque increased substantially after 1908, and presumably also the gold in circulation. Edmond Théry3 estimates the total gold money (coin and bullion) in France at 7,487,000,000 francs in 1912. Raphaël-Georges Lévy estimates the gold in France at the outbreak of the war at about seven billions, of which four billions were in the hands of the Banque, and three billions in the hands

____________________
1
Gide, Charles: "Issues of Paper Money in France, and Prices", in Kirkaldy's volume on Labour, Finance and the War, published by authority of the British Association for the Advancement of Science, London, undated (date in preface, August, 1916), pages 251-252. It seems clear that Gide can not be talking about the total amount of gold money in France, including the holdings of the Banque de France, first, because the six billions is too small for that, and, second, because he states explicitly that he is estimating the money in circulation, in the effort to determine whether from a quantity theory viewpoint there is "inflation."
2
Laughlin. op. cit., page 171.
3
London Economist, March 2, 1918, page 387.

-82-

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