Speculations on Value

Abstract

Before the outbreak of World War I, France was the second most wealthy nation on earth. Everyday shopping was carried out using gold and silver coins, and the franc-or was internationally recognised as a guarantee of monetary security, witness to the stability of the French economy and the authority of the Banque de France, which had even come to the rescue of Britain and the USA during the financial crisis of 1906–07. Some could claim never to have seen a paper banknote as such, but international travellers were assured by the Baedeker guide that ‘Le billet de la Banque de France est partout negociable au pair de l'or’. However, the franc was taken off the gold standard in 1914, gold coins were withdrawn from circulation, and inflation soared as the government printed money to finance the war effort. By the end of the war, the weakness of the country's industrial base was manifest in comparison to that of Germany, and its financial supremacy was a mere illusion. Post-war reconstruction subsequently took its toll. The 1920s were marked by nostalgic attempts to restore ‘le franc perdu’ as the population was forced to face the fact that the value of the coins in their pockets could vary and even be manipulated by financial, economic or social forces beyond their control. Exchange rate fluctuations between international currencies became a major preoccupation: economists began to acknowledge that ‘le jeu des comportements psychologiques’ could have as much impact on the value of the franc as the figures for the balance of payments.