The data and press commentaries studied in this paper call for a reinterpretation of the French inflationary crisis and its stabilization in 1926. In contrast with T. J. Sargent's (1984) interpretation, there is evidence that the budgetary situation was well in hand and that only fear of a capital levy made the public unwilling to buy government bonds. As a result, the government had to repay the bonds coming to maturity with monetary financing. Only when Poincare introduced a bill to shift the tax burden off bondholders did the demand for government bonds recover and inflation stop.
- E31 - Prices, business fluctuations, and cycles - Price level ; Inflation ; Deflation
- E65 - Macroeconomic policy, macroeconomic aspects of public finance, and general outlook - Studies of particular policy episodes
- E52 - Monetary policy, central banking, and the supply of money and credit - Monetary policy
- N24 - Economic History: Financial Markets and Institutions: Europe: 1913-
- Federal Reserve Bank of Minneapolis. Research Department.
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