Thomas Tooke

How did the French “livre” fair during the 1721 John Law paper money debacle. Where is the 1-15 official ratio of Gold Silver originating from.

In Inflationary Periods, Monetary depreciations on January 1, 2013 at 3:48 pm

Recently I was asked to go on assignment to find out what was the French “livre” worth back in 1708 and 1721.

After erring a bit on the assignment I found good data which are interesting and noteworthy.

First of all, it worth recalling that “livre” were a unit of account with a reference to coinage, but in fact the unit of account was on purpose not coined into one “livre” coin. The “livre” had a fluctuating reference to coinage, so indeed it was an abstraction like any other currency with reference to coinage.

The system of unit of account was inherited from the middle age under a format of 1-20-240 or 1 “livre” worth 20 “sols”, each sol worth 12 deniers. In Britain the system was similar with 1 pound worth 20 shillings and each shilling worth 12 pennies. So 240 pennies for 1 pound in Britain and 240 deniers for 1 “livre” in France under the “Ancient Regime” (before the revolution).

In fact France was operating under a dual currency system of livre “Tournois” which were used below the “Loire” and livre “Parisi” which were used above the Loire. In 1667 Louis XIV officially abolished the Livre parisi. At the time 5 “livres tournois” were needed for 4 “livres parisi”. This is for the currency parities, but it does not tell their precious metals equivalent.

In 1266 one ~livre~ corresponded really to its weight of 409 grams of Silver. In 1790, it was so debased that it was 1/18th of its weight of 1266. During the period of interest we have a lot of fluctuation in the parity to fixed coinage and new coinage of inferior weight at the same.  Fortunately there are records of constant coin parity to “livre” during the period.  One such example is the Louis d´or.

Monetary reform in 1709:

The edict of May 1709, one of the great monetary reforms of the early century, went the following for Gold Coinage “aux” 8 L 22 karats fine, 30 to the marc and current at 10 livres. The counterpart in Silver was the écu 3 couronnes, at 12 deniers “argent-le-roi”, 8 to the marc and current at 5 “livres”. The reform was new because it put a fixing between the prices of Gold and Silver. (Isaac Newton was observing floating ratios between Europe –wider– and Asia –Tigther–). The marc of Gold was put at 531 “livres” 16 “sols” 4 4/11 deniers, that of silver at 35 “livres” 9 “sols” and 1 1/11 deniers. This produced a Gold to Silver ratio of 1:15.

Given that the marc was at 244.75 grams, under this regime, we have “livre” effectively at 6.90 grams with a ratio of 5 to Silver Ecu in 1709. The ratio went to 6 in 1726 and we can infer something like 5.75 gram of Silver per nominal unit of account “livre”.

Now what was the devaluation of the unit of account “livre” in 1721 looking like? Here the constant coin is helping us. The louis d´or coing was at 10 “livres” abstract denomination in 1640. In 1709 after the many wars from Louis XIV it went to 20 livres. In 1721, due to the crisis going on, it went to 54 “livres” before the “Volcker moment” and coming back to 24 “livres”. So the Gold price of the coin measured in unit of account “livre” went up 54/20 = 2.7 times between 1709 and 1721. That translates into the weight equivalent of Silver of the “livre” going from 6.9 grams to 2.55 grams, before coming back to 5.75 grams. This is for the constant weight parity. Now the government at the time also used lower weight per écu as evidenced by weight of coins back in 1719.





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