Say’s Law and the Riots in France

There is much commentary purporting to explain the recent French riots. (I write this article on October 24, 2026.) But so far I have seen no explanation that attempts to lay at least part of the blame to faulty economic theory. I will attempt to do that here.

France Is Running Out of Other People’s Money

The riots erupted at the same time that France’s ability to borrow in the capital markets hit a brick wall. I do not think this was just a coincidence. France’s state finances are out of control. In other words, France cannot borrow at reasonable rates to finance its bloated welfare state. France and other members of the European Union do not have total control of their own currency. Whereas, America and Great Britain have the dollar and the pound sterling, the European Union countries have the euro, and the euro money supply is controlled by the European Central Bank. When French finances go deeply negative France cannot simply demand that the Bank of France print more francs out of thin air. The franc is gone and the Bank of France, which still exists, is an intermediate entity between French banks and the European Central Bank. The power to print more euros and buy French bonds is difficult because the other members of the European Union have power to oppose what they easily see as monetization of French debt that probably will not be repaid in euros of purchasing power as lent. If they accede to a new round of bond buying at all, the interest rate will be much, much higher.

The Welfare State Hits a Brick Wall, too

This is the financial background. The economic background is that French citizens and, I’m sure, almost everyone else in the European Union, have a growing welfare problem which has at its base a failure to understand Say’s Law of Markets. They believe that money is all that is needed for a successful economy; whereas, we Austrian School economists understand that money is a medium of exchange. (Store of value and unit of account are ancillary characteristics and completely dependent upon money’s primary and necessary characteristic as a medium of exchange.) Say’s Law of Markets explains that supply must precede consumption. This is intuitive. One cannot consume what has not been produced. A popular definition of Say’s Law is that “supply creates its own demand.” Close but not quite true. When an Iowa farmer gazes proudly upon his field of corn, he really sees all the necessities of life that the harvested corn will allow him to buy once his commodity has been sold for the local medium of exchange, which now allows him to pay for his lifestyle. If the corn crop fails, he can buy nothing. Likewise, if I produce a supply of water color paintings, it is doubtful that a demand for them will materialize. So, again it is self-evident that I must produce a supply of something that is in demand.

Keynesian Macroeconomics Purports to Refute Say’s Law

J. M. Keynes turned this almost intuitive understanding of money and its purpose on its head when he wrote his now famous 1936 treatise The General Theory of Employment, Interest and Money which carefully ignored Say’s Law by positing that money created out of thin air would bring forth additional production. On first blush this seems reasonable. The government prints money, which the public spends. There is greater demand for goods. All is well. But on further thought, one asks the question “If this is all that is required, why isn’t Zimbabwe the richest nation on earth? It printed money by the hundreds of trillions. In fact, I have a five hundred trillion Zimbabwean dollar bank note, given to me by a former student. He bought a packet of them for a few dollars on the internet. It now starts to become clear that a central bank has no more ability than a counterfeiter to create wealth out of thin air. I asked the following question at a Federal Reserve public relations forum a few the years ago. “Since you admit that the Fed does print money out of thin air and that doing so is good for the economy, why do you prosecute counterfeiters?” The forum was gaveled closed without answering.

Fiat Money Is NOT Production

The welfare state’s counterfeit money is NOT production. Rather it is a means of stealing production. Gold is production that has been in high demand for thousands of years. The market discovered thousands of years ago that it is the most desirable commodity for indirect exchange. Furthermore finding and minting gold is an expensive enterprise. Mining stocks fluctuate as new veins are discovered that may or may not be economically viable to exploit. This is NOT the case for counterfeit money, which is the backbone of the crumbling welfare state. The supply of fiat money can be produced in infinite supply at the stroke of a computer key at the central bank. It is a supply of nothing and is the most notorious violation of Say’s Law of Markets probably in human history. Nothing has been produced except fiat money, which is not production itself. It is not capital, the product of savings of real production, which will become the basis for future production. It simply is stealing from those who have produced something of value which is then given to others in exchange for nothing of value.

The End of the Line for Fiat Money and the Welfare State

Fiat currencies have made the welfare state possible, at least for awhile. But all welfare states violate Say’s Law and are coming to the end of the line. France may lead the way, but all are following right on her heels, including the United States. As the riots in France make clear, it is a very dangerous time.
 

© Patrick Barron 2026 Website