The Emperor's Four Conduits for a War Fought with Metal

In 1803, France sold Louisiana in North America to the United States for eighty million francs. However, what Napoleon, then First Consul, wanted was not some distant security, but metal in his hands, right now. The United States had no cash, so payment was made in government bonds.

This is where London's Baring & Co. and Amsterdam's Hope & Co. stepped in. The two banks took up the bonds for 52 million francs and, in April 1804, delivered the remaining 40.35 million francs to France in cash, in a single payment. Herein lies a paradox. France and Britain had been at war again since the previous year. Yet, a bank from the enemy nation had furnished the war funds to fight against Britain. The British government at first tacitly approved this, then at the end of 1803 ordered Barings to stop paying; Hope & Co. took over the rest of the payments. Land that could not be defended was exchanged for metal with which to fight.

Paper Not Printed, Paper Relied Upon

The emperor did not print paper money like the assignat. However, not printing paper did not mean not using the credit of paper. This contradiction became apparent during the crisis surrounding the financier Ouvrard.

He was a giant of military procurement. In 1804, Ouvrard formed the Négociants réunis with directors of the Bank of France and advanced cash to the Treasury. In return, he was promised silver that was supposed to arrive from Spanish America. But that silver was still on the Atlantic, and the British fleet controlled the seas.

The company issued bills of accommodation against the yet-to-arrive silver as collateral, and obtained funds by having them discounted at the Bank of France. The emperor's finances, which were supposed to have sealed away paper, had come to rely heavily on paper in the form of private bills.

A Financial System Fueled by Victory

In the autumn of 1805, the Bank of France was on the verge of collapse. Its vaults held very little specie, not even enough to cover a sixth of the deposits for which redemption was demanded, and people rushed to its windows. What saved it from this crisis was a victory in battle. December 2nd, Austerlitz. Indemnities were collected from the defeated coalition, and that metal filled the state coffers, preventing the bank's failure at the last moment.

In the following year, 1806, the emperor remade the bank. In place of a committee of shareholders, the emperor appointed the governor and doubled the capital. He is said to have stated that the bank did not belong to the shareholders alone, but also to the state.

The state's coffers were also filled by collections from conquered lands. One source was war contributions imposed on defeated nations. Another was requisitions, the seizure of food and horses on the spot. It is said that these collections were managed by a treasury known as the Domaine extraordinaire. The emperor is believed to have had direct control over the contributions from conquered territories. This money was transformed into rewards for marshals and generals, a mechanism to buy the army's loyalty.

The Premise of Continuous Victory

The fourth conduit was an economic war. In 1806, the Berlin Decree banned the import of British goods into the European continent. If you cannot win at sea, kill them economically. But it was a double-edged sword. From 1810 to 1812, Britain suffered high unemployment and rising prices. French ports, too, lost their markets and were exhausted.

Eventually, Russia, unable to bear the blockade, resumed trade, which led to the expedition of 1812. The proceeds from the Louisiana sale, the control of the bank, the plunder from conquered lands, and the Continental Blockade were all conduits premised on continuous victory. When they broke in the snows of Russia, the leading role in finance shifted from the plundering emperor to the bankers who moved money through credit.

Although the emperor's finances collapsed, the standard for gold coins he established outlived his empire. The 20-franc gold coin, commonly known as the Napoleon, was established by the Germinal Law of 1803. Its gold weight remained unchanged as the form of government shifted from empire to monarchy, and then to a republic.