Puzzling over money, and debt

by Chris Bertram on March 27, 2012

I’ve just sent back the proofs for the new edition of Rousseau’s _Of the Social Contract and Other Political Writings_ (edited Bertram, translated Quintin Hoare) that Penguin Classics are publishing in September. One of the “other writings” is the _Constitutional Proposal for Corsica_ . Reading through, I suddenly alighted on an sentence and thought, “hang on, that makes no sense!” The relevant phrase in French (OC3: 936) is

bq. …quand le Prince hausse les monnoyes il en retire l’avantage reel de voler ses créanciers …

For which we had

bq. …when the Prince raises the value of a currency he derives the real advantage of stealing from his creditors …

But, but …. Surely what the prince needs to do to steal from his creditors is the exact opposite? You inflate. You inflate away the debt. You make the currency worth less, not more. Isn’t Rousseau just writing nonsense then?

It turns out not, and, thanks to the help of the estimable Chris Brooke I now understand. My thinking on this, and that of just about all modern readers I suspect, is formed by thinking of fiat currency. But if we have currency that (purportedly) derives its value from its metallic content (such as gold) then you can debase the coinage by raising its _face value_ whilst keeping the metal content the same. (Or alternatively, you could adulterate the metal or clip the coin to get the same effect.) Finding out this kind of thing really is great fun.