Chapter 631: 540: Money, or Principle

Chapter 631: Chapter 540: Money, or Principle

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Their words immediately drew dissatisfaction from several nobles around them.

Someone looked at them and scolded, “Gentlemen, you should be ashamed of your nonsensical talk. I almost go to Louvre Square every day, and all I see there are despicable Tax Farmers, not decent people at all.”

Another, clearly influenced by Rousseau’s ideas of equality, retorted, “The people of France should not be called lowly, at least not in the eyes of Jesus. When called by the divine, there is no distinction between noble and commoner.”

“Humph, in my opinion, those Tax Farmers deserve the shame. His Highness is absolutely right. Look at Mr. Vianner, he was nearly killed by those people in Saint Anthony District.”

“I see, you are sympathizing with those Tax Farmers? Ha, these last few years they have overtaxed me by hundreds of francs…”

...

Those who previously expressed dissatisfaction with the method of execution were relentlessly pushed back but continued to protest softly, “I don’t like those fellows either, but perhaps one day, the dignity of other nobles will be stripped away as well…”

“That is, after all, the rule, and should not be changed just like that.”

Seeing that the two groups were about to quarrel, a middle-aged man quickly stepped forward to mediate, “Gentlemen, calm, please calm down.

“Yes, you are right, they are all vile death row inmates, whether commoners or nobles, what’s the difference? All proper nobles still maintain their deserved dignity.”

“Oh, I’m not saying that rules should not be respected. Actually, have you not noticed? His Majesty the King has cared for the dignified stature of the punished nobles in another way.”

“Oh? How so?”

“It’s the newly introduced guillotine.” The middle-aged man blinked, “Though it finishes the job swiftly, just a snap and it’s over, it lacks any sense of ceremony.

“Now, to have the Executioner perform the execution, they have to be paid separately.

“They will execute before the cold machine of the guillotine, recite an oath before acting, display a hereditary execution sword, and even chat with the condemned. Such a traditional and ceremonious method of execution is reserved especially for nobles. Oh, the commoners can’t afford to hire Executioners.”

Several nobles’ eyes lit up on hearing this, “Indeed, it’s true. No wonder His Majesty invented the guillotine, something to deal perfunctorily with the commoners!”

“Long live His Majesty the King! His Majesty has indeed expended much effort to maintain the dignity of the nobles.”

“Only a solemn Executioner is worthy of the nobles’ heads!”

Joseph could never have imagined that his father’s guillotine would so quickly give rise to a unique “execution economics.”

Nobles, in order to display their status, even bought fancy uniforms for their Executioners, had them recite brief elegies, and hired assistants to sprinkle flower petals on their spilled blood.

These acts’ prices, half a month after the executions continued at Louvre Square, had already risen to between 500 and 800 francs per Executioner, becoming one of the core incomes of the court.

Tuileries Palace, second floor.

Joseph, looking at the report from the Tax Farming Bureau, couldn’t help but frown slightly.

With the massive purge of the Tax Farmers revealing significant illegal earnings, along with fines, the total had added 67 million francs to the national treasury.

You have to understand, this is unlike having to pay principal and interest on government bonds and loans; this is pure income!

But it’s now January 1791, and considering the funds he had raised earlier, there was still a shortfall of over 30 million to meet the minimum financial requirements of the government.

This was far from his initial estimates.

According to Robespierre’s report, knowing that they couldn’t escape their crimes, many leading Tax Farmers had transferred their assets, intending to leave them to their families.

This era still valued cash as king. By burying silver coins or banknotes in a secluded place, it would be difficult for either the tax office or the intelligence bureau to uncover them.

Only the assets kept by the Tax Farmers in the banks were completely confiscated.

For instance, that Borelay, he held massive shares in more than ten Tax Farming Bureaus, and according to Robespierre’s estimate, his tax farming income last year should have been 13 million francs.

Yet, the confiscation and forfeiture of his assets amounted to only 9 million francs, the rest unknown.

——————

By the end of the 18th century, banknotes re-emerged in many different forms, and financiers developed secured banknotes and various complex forms of bonds. These complex financial innovations provided means to transform illiquid assets into liquid securities. This might sound technical, but as we will see, the development of secured loans played an important role in the economy of the American colonies and the American Revolution. We’ve already seen how John Law issued currency thus causing disastrous inflationary consequences.

The argument here is that dematerialized banknotes and paper bonds required investors to demand real assets as collateral for their investments. This new technology involved consolidating trust assets and issuing securities through pooled assets. These securities were merely a repackaging and reselling of an asset. Repackaging could involve pooling multiple assets, structuring cash flows over time to smooth out future payments, or in some way grading these cash flows to make the assets more attractive to investors.

Undoubtedly, this story began in the Netherlands. The first diversified investment fund was created by 18th-century Dutch financial engineers based on a lifetime annuity pool. In the 1770s, around the time of the American Revolutionary War, Dutch investment bankers started marketing portfolios similar to “maiden bonds.”

Some components within “Comprehensive Securities” were not just simple bonds. For instance, plantation loans in Dutch colonial territories that mortgaged both the Suriname plantations and the slaves therein as collateral. The loan income came from forward contracts targeted at the plantation produce, assuming that the products could be sold at a good price hence securing the loan yield. Similarly, income from tolls, canals, and postal services within the asset portfolio could also secure a stable cash flow, thus assuring investors’ returns.

Bad luck could doom any single underlying bond: a reduction in sugarcane production in the southern Americas could decrease the income from plantation loans, Russia might default, and the Danish American Islands might be transferred causing its debts to be declared invalid. However, if you held enough of these potentially fatal securities, the law of large numbers would make the performance of your defaulted bond portfolio predictable.