VOLNEY TO JEFFERSON ON CREDIT MARKETS
"Aequitas, aequilibrium, aequalitas, sont tous de la même famille" — Volney

AM | @HDI1780

Writing from Philadelphia in January 1796, Volney tells Thomas Jefferson that "Le Systeme de Notre gouvernement est different de celui qu'il etait il y a un an". For the first time in French history, the 1795 Constitution embraces bicameralism. Later that year, again from Philadelphia, an ecstatic Volney describes the sea-change in credit market conditions: "... nos affaires intérieures Vont bien, la Valeur de Nos biens fonds a doublé en Numéraire en 3 Mois: l'on Vend à terme de 90 jours, chose inouïe depuis 3 ans".

In other words: bond prices have doubled, confidence has soared, and credit now flows normally throughout the economy. From a credit market perspective, the Robespierre years were indeed dreadful. What I like about Volney's letter is the implicit link between governance and ... interest rates. Good governance brings about increasing levels of confidence and credit; tyranny destroys them. This is one of the key lessons of Histoire des deux Indes, a book that Volney read with passion.

(*) The Papers of Thomas Jefferson, Vol. 29. Princeton University Press, 2002.
______________