Alexander Hamilton Papers

To Alexander Hamilton from George Joy, 16 October 1791

From George Joy

Alexander Hamilton Esqre.

London 16th. Octr. 1791


I beg leave to submit to you the following Calculations and Observations wch led to the Conclusions in my letter of this date—and first in Corroboration of what I have there said respecting the french debt that “’tis pity the opportunity of paying it at so very favorable an Exchange as the present should be lost.”

The sum due to foreign Officers Vizt: 186,427 Dollars* pays an annual Interest of 6 pr Ct; of this debt therefore

100 Dollrs. now pay 6 Drs.
100 Dollrs. @ 22 Excha. (say 22d stlg pr demi Ecu or 3 livres) would be equal to or be paid for at 73 Drs. 66⅔ cents the Interest on wch if loand at 4 pr Ct: would be only }
2–94⅔ Cents
leaving a benefit to the U.S. of more than half the
Annuity Viz
3 Drs 5 ⅓ Cents
   Pr Ct.
Again 100 Dollrs now pay 6–
73–66⅔ @ 4½ pr Ct: would pay 3–31½
Annual benefit to the U.S 2–68½

The above Calculations are at what the Excha: has stood at for some time past, it is now risen to 23 ⅛ at wch rate the following are computed

Vizt: 100 Drs. now pay 6.
@ Excha: 23⅛ the principal might be discharg’d for 77–8⅓ Cts loaned at 4 pr Ct 3– 8⅓
   Annual benefit to the U.S 2–91⅔
Again 100 Dollrs. now pay 6–
77–8⅓ loan’d at 4½ would pay 3–46⅞
bonus 2–53⅛
We will now suppose the Excha: to rise to 24
   At this Excha: 100 Drs wch now pay 6–
   might be discharged for 80 wch at 4 pr Ct. would pay 3–20
leaving a benefit to the U.S. of 2–80
Again 100 Dollrs. pay 6–
80 Drs. loaned at 4½ would pay 3–60
leaving to the U.S. an annual bonus of 2–40
That part of the French Debt wch pays 5 pr Ct: may be thus stated
100 Dollrs pay 5–
Excha: 22: 73–66⅔ loan’d at 4 pr Ct: would pay 2–94⅔
Annual bonus to the U.S. 2– 5⅓
Again 100 Dollrs. pay 5– –
73–66⅔ @ 4½ pr Ct: would pay 3–31½
Annual bonus to the U.S. 1–68½
Again 100 Drs. now pay 5–
Excha: 23 1/8 77–8⅓ @ 4 pr Ct: 3 –8⅓
Annual bonus to the U.S. 1–91⅔
Again 100 Dollrs now pay 5–
77–8⅓ @ 4½ 3–46⅞
Annual bonus to the U.S. 1–53⅛
Again 100 Dollrs. now pay 5–
Excha: 24 80 Dollrs. loaned at 4 pr Ct: would pay 3–40
Annual Bonus to the U.S. 1–80
Again 100 Dollrs. pay 5– –
80 Drs. @ 4½ pr Ct: 3–60
Bonus to the U.S. 1–40

I cannot but remark here how fully the application of the smallest of those Surpluses to the reduction of the principal would evince the Doctrine in your report of Janry. 17904 that the great secret of Finance is to obtain an Excess of Revenue beyond the Expenditure; and if this were effected in Consequence of the present Government holding inviolable existing Contracts, how fully would it confirm the Assertion in the General’s Circular Letter to the Governors of the different States on leaving the Army that Honesty in States as well as Individuals must ever be found the best and soundest policy.5 I quote from Memory—perhaps not literally but I am confident I am not mistaking in the substance.

The following Calculations are consonant to my Suggestion of benefits to be derived to the U.S. by admitting a proportion of the unsubscribed Debt in part payment of Loans to be contracted &ca:—and I shall confine myself to that part of the unsubscribed Debt wch pending the ascertaining of the Ability of the Government to discharge all its Obligations, and while there was hazard of inability received a temporary provision very inadequate to what was made for other parts of the Debt having on no principle a higher Claim. The advantages to result to the U.S. are on a Comparison of what they now pay (not what the unsubscribing Creditor is entitled to receive) with what they would pay in the Event of loans being contracted on the following principles.

300 Dollrs. 6 pr Ct Stock now pay 18
100 Drs. Indents      do:  3
400 Dollrs. loaned at 5 pr Ct: (¼ receivable in Indents) would pay 20
being less than is now paid  1 Dr. pr Annum
on 400—equal to ¼th pr Ct:

On every 100 Dollrs. you pay 2 Drs. pr ann: of the Principal, stopping thereby an Interest of 12 Cents for wch if you hire the Money at 5 pr Ct: you pay 10 Cents* leaving to the U.S. to operate a reduction of the principal 2 Cts pr 100 Dollrs. whereas by the above mode you would have 25 Cts pr Ann: to apply to this purpose. It will be needless to repeat the Increase of benefit in this View under the following Calculations.

Again as above 21
   400 Dollrs. loan’d @ 4½ (¼ receivable in Indents) 18
   being less than is now paid  3 or ¾ pr Ct.
Again as above 21
   400 Drs. loan’d at 4 pr Ct: (¼ receivable in Indents) 16
   being less than is now paid  5 or 1¼ pr Ct:
Again 200 Dollrs. 6 pr Cts now pay 12–
100 Drs Indents  3
300 Drs. loan’d at 5 pr Ct: would pay the same Sum 15.

(a) If this plan should meet the Acquiescence of the Creditors therefore the Object would be valuable but no specific gain on a Comparison with what is now paid

Again as annex’d 15
Dollrs. loaned at 4½ pr Ct
(⅓rd payable. in Indents) would pay
leaving on 300 Drs. Principal an Annuity of 1–50 equal to ½ pr Ct:
Again as above 15–
300 Drs. loaned at 4 pr Ct: would pay 12
Annual Bonus  3 equal to 1 pr Ct

The following Calculations apply to that part of the Debt wch now pays 5 pr Ct: Vizt:

400 Dollrs. 5 pr Ct: foreign Debt now pay 20–
100 Drs. Indents  3–
500 Dollrs. loaned at 4½ (1/5th Indents) would pay 22–50
leaving a Bonus to the U.S. of –50 or ¹⁄₅₀
say ¹⁄₁₀ pr Ct.
Again As above 23
500 Drs. loaned at 4 pr Ct: (1/5th Indts) 20
Annual Bonus  3 or ⅗ pr Ct:
Again 300 Drs 5 pr Cts now pay 15
100 Do. Indents   “  3
400 Drs. loaned at 4½ (¼ Indts) would pay the same 18– – so that

(a) The observation (a) annex’d applies here.

Again as above 18– –
400 Drs. loaned at 4 pr Ct: (4¼ Indts) would pay 16
   Annual Bonus   2. equal to ½ pr Ct

118 Dollars Omnium or 100 Dollrs Registered Debt bearing Interest from 31st Decr 1787 have been funded and may be computed as follows Vizt:

66⅔ rds pay annually 4 Dollrs.
33⅓ deferr’d for 10 years computing the value of money at 5 pr Ct: is worth ⅓rd of 61 drs 39 cts & abot: 3/16 of a Cent (this being very nearly the Value of 100 Dollrs. on the above principle) say 20 Drs 46 6/16 Cts wch at 5 pr Ct: (the same rate of Interest) pay annually 1 Dr. 2⅓ Cts.
 18 Drs back Interest at 3 pr Ct:    54
118 Dolls: thus pay what is equal to an annuity of 5–56⅓

being 4 Drs 71⁴⁷⁄₁₀₀ Cts (say 4 Drs. 71½ Cts) pr Ct:—computing the value of Money at 6 pr Ct: and the Interest also wch is nearer the Value at the time of subscribing and (considering the irredeemable quality of the deferred as well as the 6 pr Ct Stock) perhaps a more proper mode of ascertaining the comparative benefit—instead of 4–71½ this would amount to 4 Drs. 78⁹⁄₁₀ Cts (say 4–79) and without considering the subscribability of a great part of it to the national Bank, the benefit resulting from the irredeemable quality of the Debt under the actual fall that has taken place and the fair prospects of a farther fall in the Market rate of Interest may be fairly computed at 21 Cents pr Ann: at least; making 5 pr Ct:. I will not trouble you with a long round of Calculations on the benefits the U.S. might derive from opening new Loans for the discharge of the unsubscrib’d Debt on a Comparison of such loans with what they have paid as above, but will observe that if loans were opened to the full Amount at 5 pr Ct for those purposes receivable either in specie or in any part of the Debt and any specie received thereon appropriated bona fide to the redemption of such part of the Debt as may not be subscribed and the stock created by these loans made redeemable at the pleasure of the Government; or (wch would on some Accots be better) on one, two or three Years Notice being given to the Creditors; the benefit wch the Government would thus derive from the fall in the Market rate of Interest would very shortly shew this to be far the more profitable Arrangement. Loans at 4½ would be far within either of the above, independent of other advantages; but were it not that the sound of a six pr Ct: Interest might alarm the Legislature and occasion delay, singular tho’ the opinion may appear, had I had as great a propensity to, as I have had aversion from, embarking in political pursuits and had I even acquired reputation therein I should not be afraid to risque it on the opinion, that to fund it at 6 pr Ct: at once redeemable ad libitum, or on short Notice, would have the advantage of every other plan. Among others it would have that of raising them so rapidly as to prevent foreigners getting them at an under value. It would increase and hasten the Ability of the Government to loan at a low Interest from the Circumstance of it’s thus meeting the tenor of the Contract at the moment of their finding themselves able to do it (and I hope and trust that the Government of the U.S. is now in a Condition above asking favors of its Creditors). It would enable the Agents of the U.S. to promote and benefit by a fair Competition of the Money lenders without leaving it in the power of a few interested persons to discourage them by insinuations of broken faith. In short, beside the Convenience of having a large proportion of the debt redeemable on the fall of the Market rate of Interest, it would give that spring to the Credit of the U.S. that can only be derived from the Assurance that the Government is able and ever has been willing to meet it’s Obligations with respectability, magnanimity and honor.

With much respect and Esteem   I remain,   sir,   Your very hble servt:

Geo: Joy

ALS, Hamilton Papers, Library of Congress.

1Article 2 of the “Contract between the King [of France] and the Thirteen United States of North America, signed at Versailles July 16, 1782,” reads as follows: “… His Majesty … has consented that the payment of the capital in ready money at the royal treasury be in twelve equal payments of 1,500,000 livres each, and in twelve years only, to commence from the third year after a peace.”

Article 4 of the contract reads as follows: “The payment of the said eighteen millions of livres tournois shall be in ready money at the royal treasury of His Majesty at Paris, in twelve equal parts and at the terms stipulated in the above second article. The interest of the said sum, at five per cent per annum, shall commence with the date of the treaty of peace, and shall be paid at every period of the partial payments of the capital, and shall diminish in proportion with the payments; the Congress of the said United States being left, however, at liberty to free themselves sooner from this obligation by anticipated payments in case the state of their finances will admit” (Miller, Treaties description begins Hunter Miller, ed., Treaties and Other International Acts of the United States (Washington, 1931–1948). description ends , II, 51–52).

2Article 3 of the “Contract between the King [of France] and the Thirteen United States of North America, signed at Versailles February 25, 1783,” reads as follows: “The new loan of six millions livres tournois, the subject of the present contract, shall be refunded and reimbursed in ready money at His Majesty’s royal treasury in six equal portions of a million each, with interest at five per cent per annum, and in six periods, the first of which shall take place in the year 1797, and so on from year to year until 1802, when the last reimbursement shall be completed.”

Article 5 reads as follows: “The interest of the capital of the six million shall diminish in proportion to the reimbursements … Congress and the United States reserving, however, the liberty of freeing themselves by anticipated payments, should the state of their finances admit” (Miller, Treaties description begins Hunter Miller, ed., Treaties and Other International Acts of the United States (Washington, 1931–1948). description ends , II, 120–21).

3A silver coin equal to two livres ten sous.

5See George Washington’s circular to the states, June 8, 1783 (GW description begins John C. Fitzpatrick, ed., The Writings of George Washington (Washington, 1931–1944). description ends , XXVI, 483–96).

Authorial notes

[The following note(s) appeared in the margins or otherwise outside the text flow in the original source, and have been moved here for purposes of the digital edition.]

* I think you contemplate this and all the debt payable in France as redeemable at the pleasure of our Government. I observe there is an express provision for it in the loan of the 16th. July 1782 for 18 millions of livres.1 I have no Copy of that for 6 millions for 1783 but presume it must contain the same proviso.2

 0d. Stg pr demi Ecu3 (the rate here contemplated as the par of Exchange) is the precise rate of Excha: used at our Treasury Vizt: 108 sous pr Dollar of 4/6 Sterlg.

* If you have an Excess of revenue that will do this so be it; but it does not in any degree alter the principle of Calculation while the Market rate of Interest or the benefit that the Government might derive from the Use of it is not less than 5 pr Ct:

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