To William Short
November 5th, 1792.
The last letter which I have had the pleasure of receiving from you is dated the 6th of August. By letters from Mr Morris to the Secretary of State, down to the 16th of that month, it appeared that he had, on the 6th, ordered a payment, to the French Treasury, of one million six hundred and twenty five thousand B. florins. But nothing is said which can enlighten me as to his opinion whether the last change in the affairs of France, namely the suspension of the King, ought to suspend further payments on account of the United States to the government of that country.1 Hence, though I entertain a persuasion, as mentioned in my letter of the 1st of October, a fourth copy of which is inclosed, that no further payments after that event will have been deemed proper, and, consequently that a considerable sum of money will have been left undisposed of in the hands of our Commissioners, yet the want of some certain indication on that point is a cause of perplexity to me.
The dispositions heretofore announced contemplated the payment of interest on the foreign debt to individuals only up to the end of the present year out of funds accruing in Europe, and render it possible that all others might be applied in payments to France. Yet, under present circumstances, to add, by remittances from this country, to the considerable funds which probably are already on hand there unemployed, and a part of which has been so long in that situation, would be too disadvantageous to the United States.
Upon the whole, I elect to forbear, till further advices, any remittances from hence, considering that on any emergency you will be able to procure either a temporary or permanent loan equal to the demand. On the 1st of January 1793 there will be due in Hollund 120000 florins for interest, on the 1st of February £30000 for interest and 100000 for premium, on the 1st of March 125000 for interest, on the first of June 470000 for interest and 1000000 for the first instalment of the 5000000 loan.2
For facing these engagements it appears adviseable that you endeavour to contract a loan for 2000000 of florins. In the present state of French affairs it is proper to postpone any further borrowing with a view to reimbursements there.
Should it appear, as I expect from your future advices, that there will remain moneys unapplied and subject to dispositions from hence, I shall take care so to regulate the drafts which may be made as to leave at your disposal at least a sufficient sum for paying the interest in January and February, so as to afford time for such further operations as may be requisite.
I am now anxious, as soon as possible, to adopt a regular plan for paying the interest on our foreign debt by remittances from this country. On full reflection I have concluded that the doing of it by means of bills of exchange is preferable to any other mode. But for this purpose some auxiliary arrangement is necessary. Bills are not always to be had at the moment they are wanted. If I am to depend wholly on a casual supply I shall often be obliged to force the market or remit specie. To avoid being pressed at any time I have conceived that it would be eligible to adopt the following plan: To stipulate with some competent house for a contingent credit, equal to the sums payable for interest at the several periods, that is, the house to be obliged to furnish the sums when due, if required so to do, for a certain term of credit, say six months, upon the conditions of receiving, absolutely, a small premium, whether the money be called for or not, with a certain rate of interest if called for on the sum actually advanced, from the time of its being advanced to the time of its reimbursement.
Suppose the contract were made and the premium stipulated ½ per cent, the rate of interest five per cent, the operation of the plan would be as follows: On the first of January next there is a sum of 120000 florins payable, on account of interest. It would be in my option to remit the sum at the period or not. If I remitted it the contractor would then be entitled only to ½ per cent of the 120000 florins. If I remitted no part of it, he would be obliged to advance the money at the time it became due, and would be entitled to ½ per cent by way of premium, and at the rate of five per cent per annum on the 120000 florins from the time it was advanced to the time it was reimbursed, the term of reimbursement not to exceed six months. If I remitted a part but not the whole, he would be obliged to advance the residue, and would be entitled to ½ per cent premium on the entire sum, say 120000 florins and at the rate of five per cent per annum, as before, on the sum actually advanced, as that should happen to be. And so from period to period through the year.
I have supposed that the rate of premium and interest which have been mentioned would obtain the credit desired. And I will thank you, if it can be done, to effect the arrangement to begin after the 1st of June next. I should not wish it, in the first instance to extend beyond a year. Offers of a similar credit have been intimated to me from London, but, as the payments are to be made in Amsterdam, I deem it preferable to simplify the business by a direct operation.
I shall endeavor to engage the Bank of the United States to undertake the payment of our foreign interest, combining it with a plan for keeping our foreign exchange within certain determinate limits; a measure which will unite a moderate profit to the Bank with the advantage to trade of a steady course of exchange and to the government of a convenient and oeconomical mode of remitting its foreign interest. But some little time will be requisite to mature mens ideas on the subject.
With respectful consideration, I have the honor to be, Sir, Your obedt Servant
William Short Esquire
Minister Resident from the United States, at
JCH Transcripts description begins John C. Hamilton Transcripts. These transcripts are owned by Mr. William H. Swan, Hampton Bays, New York, and have been placed on loan in the Columbia University Libraries. description ends ; LS, marked “Triplicate,” Widener Library, Harvard University.
1. For the controversy concerning this payment, see the correspondence between Short and Gouverneur Morris enclosed in Morris to H, September 25, 1792. See also Short to H, September 25, 1792; Jefferson to H, October 31, 1792.
2. This was the Holland loan of 1782. For a description of this loan, see Willink, Van Staphorst, and Hubbard to H, January 25, 1790, note 15.