After World War I, the French Government, forced to deal with its fiscal crisis, adopted a policy of paper-currency inflation. The French announced their abandonment of the gold standard, drawing back the curtain on the currency war.
The French were the first to play this game, and no one had been prepared. At the time, the Franc was the world's second-most widely circulated international currency. Vast numbers of Franc holders paid the bill for them and suffered devastating losses.
However, the French Government's original plan had not succeeded. Ideally, they had only intended to issue at most twice as much currency and devalue the Franc by half.
In the end, because governments everywhere had kicked them while they were down, the market lost faith in the Franc. It plunged without stop, and its value did not stabilize until it had depreciated tenfold.
Yet the amount of Francs overissued was nowhere near ten times the original amount. The losses involved included the loss of credibility, the inflation it caused, and the profits from the government printing additional currency. Most of it still ended up in the capitalists' hands.
This currency war further cemented Pound Sterling's position as the financial hegemon, while the Lev came from behind to replace the Franc's position, becoming the world's second-largest circulating currency.
Though the French action could not be called a complete success, they had indeed escaped the fiscal crisis. They paid out enormous war pensions and avoided government bankruptcy.
Even in the economic activity that followed, as the Franc depreciated sharply, French goods became far more competitive in price—a benefit that still remained effective now.
But the aftereffects were equally severe. France's private wealth was stripped clean, and both petty capitalists and the middle class suffered grievous losses.
This was also a feature of European