The effects of inflation and defaltion in revolutionary France

Essay by ilkaytonyUniversity, Bachelor's March 2005

download word file, 8 pages 4.3

Downloaded 31 times

Revolutionary France from 1789 onwards experienced large political and economic upheavals. 1789 marked the beginning of the Revolution over an already crumbling monarchy, in London lay stored away the greater part of the world's stock of gold and silver, and, as after the Seven Years' War nearly every country in Europe had to borrow from London, the basis of European economic structure was changed from wealth to debt. Among these nations France became the more heavily involved, as she was compelled to borrow large sums in order to pay for British colonial imports and her own share of the cost of the war of the American Rebellion . Soon she was reduced to borrow in order to pay interest on former loans, this worsening of the economic situation partly led to the collapse of the Ancien regime. After 1789, the French experienced acute inflation and in the first part of this essay I will be detailing what inflation is and will explain how it came about and its effect in Revolutionary France in the period 1789-1796.

In 1796 war was declared against the empire, there followed a period of blockades and collapse of French colonial trade these times were accompanied by marked deflation. In the second part of this essay I will be discussing the causes of this deflation and its effects on France.

In order to answer this question we must first understand what inflation is, the causes of it and its effects. Inflation is simply a rise in the price level. There is link between nominal money and the price level, and hence between nominal money growth and inflation Persistent inflation must be accompanied by continuing money growth. Printing money to finance a large deficit is a source of inflation, when a government can no longer finance deficits...