Chapter 433: The Franc and the Gold Standard
As the crowd in Bastille Square heard about the currency regulatory body, which included the involvement of the bank and the Chamber of Commerce, their worries quickly subsided. They began to nod and discuss among themselves.
In reality, Joseph had absolute control over this regulatory body—the royal family and financial officials would naturally follow his directives. He was also the largest shareholder of the Banque de Réserve, and even the French Chamber of Commerce, currently controlled by the capital-owning nobility, was still loyal to him.
Thus, monetary policy was essentially his decision. This wasn't about monopolizing power; rather, Joseph's financial ideas were ahead of the world by more than 200 years. Instead of letting contemporary economists experiment haphazardly, he preferred to implement a comprehensive system from the start.
Of course, this regulatory body would eventually need to be standardized to create a scientifically effective monetary management system. After all, he wouldn't be around forever to rely on his "great foresight" for financial management.
The journalists present were furiously scribbling notes, and the crowd buzzed with conversation. While they knew the government had announced an important economic policy, few realized that this would mark a revolutionary moment for the French economy.
The series of monetary policies Joseph announced were the foundation of the gold standard system, which would later be revered by every major global power from the mid-19th century onwards.
For ordinary people, it might seem like they could now use paper money for purchases, while the livre continued to circulate as before—nothing seemed to have changed.
However, from a national perspective, the fundamental logic of money and the economy had shifted.
From this point on, all of France's currency would be based on gold valuation.
The livre could be used in transactions not because of its silver content but because the French government decreed that one livre could be exchanged for 0.3 grams of gold.
In other words, if the French Treasury declared that livres could no longer be exchanged for gold, people would have to sell their silver coins for francs to continue using them in circulation.
To someone accustomed to the relatively stable currency values and mature exchange rate systems of the 21st century, this might seem commonplace, but in the 18th century, it was a groundbreaking reform that would significantly improve the national economic environment!
At that time, the concept of a legal tender was virtually non-existent in any country. Whether it was livres, florins, ducats, North African rials, or Ottoman akçes, as long as it was real gold or silver, it could circulate freely in the French market. Even British pound notes were accepted by some, as they could be exchanged for gold at the Bank of England.
This led to a chaotic trade environment.
For instance, if a shipment was supposed to be paid in ducats, but when the payment was made, half of it was in rials with some écus mixed in, the whole day would be spent on currency conversion.
Different regions had varying exchange rates for these currencies. For example, along the Mediterranean coast, one rial might exchange for 22 livres because it could be directly used to buy goods from North Africa. But in northern France, it might only be worth 20 livres and 10 sous—purely based on its gold content.
As a result, merchants in the south were very reluctant to sell goods to the north. Even neighboring towns with different preferred currencies were hesitant to trade with each other, severely hindering national commerce.
This might seem like a minor inconvenience, but commerce relies on the smooth flow of money and goods. Even a small disruption in this flow can drastically reduce trade volume, let alone when such disruptions are widespread.
Moreover, issues like currency wear and tear, substandard coinage, and fluctuations in the gold-silver exchange rate all impacted the value of currency. The gold standard system could eliminate these problems.
At that time, the world was still primarily using precious metals for transactions, with the exception of Britain, where Sir Isaac Newton (yes, the same Newton who was hit by an apple) had introduced a partial gold standard system. This gave Britain an unmatched commercial environment in Europe, coupled with excellent tax policies, paving the way for the British Empire's rise.
Now, Joseph was about to introduce a complete gold standard system to France. The crown of having the best business environment in Europe might soon change hands.
Additionally, the gold standard gave the government more tools to regulate the financial market while ensuring stable exchange rates. This system was so effective that many countries continued to use it well into the 1970s.
Joseph had been planning to implement the gold standard for a long time, and he chose this moment carefully.
Firstly, France had recently gained access to numerous overseas markets. According to reports from the previous week, Moreau and Ney's army had fully occupied Tripoli and were advancing eastward.
Seventy percent of Tripoli's population lived in Tripoli city and its surrounding areas, while the eastern region was sparsely populated. Moreau and his men were unlikely to encounter significant resistance. By now, they should have reached the eastern region of Sirte[note 1].
In addition to Tunisia and the Annaba region of Algeria, France now had a solid foothold in the central part of North Africa. While these areas were not large, they were fertile, rich in resources, and served as key transit points for Mediterranean trade, making them highly valuable.
Furthermore, in the Walloon region of the Southern Netherlands, French investment had already laid the foundation for numerous coal mining and coking companies. This wealthy region's economy was nearly equivalent to that of all of Tunisia.
Meanwhile, after more than a year of Joseph's relentless efforts, French industrial development had achieved significant progress.
Currently, Lyon had over 200 automatic looms and nearly 3,000 spindles in operation, with more being added. With wool from New Zealand and cotton from Russia, the cost of textiles in Lyon had dropped to around 120% of British prices.
A year ago, that figure was at least 150%. Considering France's influence in fashion and design, Lyon's textiles were poised to take a large bite out of Britain's market share in Europe.
In addition, Bordeaux and Champagne's wine industries, Nancy's steel and steam engine industries, and Paris's paper, luxury goods, and machinery industries had all made great strides. Other industries, such as gas lighting, chemicals, and furniture, were also waiting to "go live."
Now, numerous factories and immigrants eagerly awaited funding.
Joseph could take advantage of this moment to have banks issue large amounts of paper money as loans.
Factories would use these francs to purchase equipment and raw materials or pay workers. Immigrants would use them to buy essential goods from locals or hire local labor.
In this way, it wouldn't be long before the franc became widely accepted.
[Note 1]In the late 18th century, the wealthy Benghazi region was still under the control of the Egyptian Mamluks, so it didn't belong to Tripoli. The territory of Tripoli extended westward to Sirte, and its area wasn't very large.
(End of Chapter)
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