From Rufus King
London Mar 8. 1797
On the 28 ulto. the Bank of England stopped payment in Specie.1 And since every Bank in Great Britain has followed the Example; the Directors say the Bank is more than Solvent, exclusive of their capital Stock invested in the Funds. Committees of the two House of Parliament, which have examined the affairs of the Bank, confirm by their Report the Declaration of the Directors,2 and Associations are forming throughout The Kingdom to receive and circulate Bank notes. Many whom I meet profess to believe that the Bank will soon be able to resume their former Course of Payments. But I see so few of the causes (if they exist) which are to effect this Restoration that I am somewhat skeptical—and my want of Faith is in some measure excuesed by circumstances that I think will for the present prevent the return of the Golden Age. No nation has supported a more perfect Credit than England: none has been able to substitute in so great a degree Paper in lieu of Coin—and in no Country therefore is the quantity of Specie comparatively so small as in England. This Fact was not practically believed—the Bank have now proved it to the conviction and dismay of the country: Besides Parliament have authorised the Bank to issue notes under £5—and they have also repealed the Laws prohibiting individuals from making and circulating their notes payable on Demand for Sums under £5.3 The consequence is, that the Banks are throwing into Circulation 20/. & 40/. notes to Supply the Absence of Guineas; and the manufacturers and private Bankers are likewise issueing to their workmen & Customers small Bills of every Denomination, which supply the absence of Shillings and Six penny Pieces.4 Before the Bank stopped payment, the merchants and Bankers were for a long time unable to obtain the usual quantity of Discounts with which they had been accustomed to be accomodated; immediately after this event every body was accomodated, and no one asked and was refused a Discount; thus a very large augmentation of the Notes of the Bank had taken place, and by the continuation of the emission of these Notes, aided by the numberless species of small notes issued by private Bankers, Manufacturers, and Projectors, the Quantity of Paper now afloat, and which will increase, forbids the expectation that the Bank will be able to open their Specie Vaults. Bank notes are already at a depreceation, which is proved by the reluctance with which every one parts with a Guinea by the sudden rise of for Exchange, and by the Demand for the amer. Stocks; which have risen in the course of a week Bk stock from £103. to £117 per Share—6 pr C. from 80 pr Ct. to 90. 3 pr Cts from 49 pr Ct. to 55. while the British three per Cents vibrate between 50 and 52.
Farewell yr’s very sincerely
P S. Since ⟨the capture of Mantua,5 the Austrians have notified this court of⟩6 their resolution to prosecute the war, relying on the cooperation of G B. What Effect the pecuniary State of England may have upon their Disposition to persevere, I will not conjecture—without money the Emperor will not be able to go on. Thus you see a very interesting subject brought within a narrow compass. France will harass and work our commerce regardless of Justice. She makes our Treaty with Eng. the Pretence—had we made no Treaty her conduct wd. be the same. She has recently required of Hamburgh & Bremen to suspend and prohibit all commerce with Engld. As yet she has not succeeded in her views, tho she has recalled her Minister from Hamburgh.7 The Demand has likewise been repeated at Copenhagen,8 and a refusal to comply has produced a diplomatic Altercation as pointed perhaps as that between Col. Pickering and Mr. Adet.9
Our Affairs in the mediterranean are settled or nearly so. Col. Humphries10 informs me that we stand well with Algiers. We have concluded a Treaty of Peace with Tripoli,11 and it is probable shall soon make a similar treaty with Tunis:12 the Dey of Algiers having invaded the Tunissean Territories principally says Col. Humphries to compel the Bey to conclude a Peace with the U States of Amer. for the accomplishment of which the Dey offers to advance the money from his own Treasury and engaged to guaranty this Treaty as he has done that with Tripoli. Strange event.
ALS, Hamilton Papers, Library of Congress.
1. On February 25, 1797, the reserves of the Bank of England were so low that its directors asked the government to intervene. On the next day the Privy Council issued the following order: “Upon the Representation of the Chancellor of the Exchequer stating that, from the Result of the Information which he has received, and of the Enquiries which it has been his Duty to make respecting the Effect of the unusual Demands for Specie that have been made upon the Metropolis, in consequence of the ill-founded or exaggerated Alarms in different parts of the country, it appears that unless some measure is immediately taken there may be Reason to apprehend a want of a sufficient Supply of Cash to answer the Exigencies of the Public Service; it is the unanimous Opinion of the Board, that it is indispensably necessary for the Public Service that the Directors of the Bank of England should forbear issuing any Cash in Payment until the Sense of Parliament can be taken on that Subject, and the proper Measures adopted thereupon, for maintaining the means of Circulation, and supporting the Public and Commercial Credit of the Kingdom at this important Conjuncture; and it is ordered that a Copy of this Minute by transmitted to the Directors of the Bank of England, and they are hereby required, on the Grounds of the Exigency of the case, to conform thereto until the Sense of Parliament can be taken as aforesaid” (The London Gazette, February 25–28, 1797).
2. For the report of the committee of the House of Commons on March 3, 1797, see Parliamentary Register description begins The Parliamentary Register; Or, History of the Proceedings and Debates of the House of Commons; Containing an Account of the most interesting Speeches and Motions; accurate Copies of the most remarkable Letters and Papers; of the most material Evidence, Petitions, &c. laid before and offered to the House (London, 1775– ). description ends , LX, 747–48.
3. See “An Act to remove Doubts respecting Promissory Notes of the Governor and Company of the Bank of England for Payment of Sums of Money under Five Pounds” (37 Geo. III, C. 28 [March 3, 1797]).
4. On February 27, 1797, a meeting of merchants and bankers resolved “That We, the undersigned, being highly sensible how necessary the Preservation of Public Credit is at this time, do most readily hereby declare that we will not refuse to receive Bank Notes in Payment of any Sum of Money to be paid to us, and we will use our utmost Endeavours to make all our Payments in the same Manner” (The [London] Times, February 28, 1797).
On February 6, 1797, Count Ludwig Joseph Max von Starhemberg, the Austrian Ambassador to England, wrote to Lord Grenville: “Quoique le courier que j’attends de Vienne, et qui doit me rapporter les instructions nécessaires à l’égard de la convention qui concerne vos avances mensuelles, ne soit point encore arrivé, je me fais un vrai plaisir d’avoir l’honneur de vous annoncer que j’ai appris, par une voie sûre non-officielle, qu’on a accueilli vos dernières propositions avec l’amitié reconnaissante qu’elles méritaient. Cette information me rassure un peu sur le fâcheux effet que pourra produire la mauvaise nouvelle de la défaite d’Alvinzy. J’ai de nouveau la certitude que les Français veulent faire des offres avantageux à ma Cour pour la détâcher de l’Angleterre. J’aime à croire à la bonne foi; et la conduite constante de mon maître me raffermit dans cet heureux sentiment. Mais je plains l’Empereur et son ministre; ils auront des rudes attaques à soutenir. Il’ s’agira, je crois, de défendre seulement le Tyrol, et de porter des plus grandes forces encore vers le Rhin. N’y aurait-il pas moyen pour nous fournir la possibilité de détacher beaucoup de troupes de l’Italie, de forçer le Roi de Naples à rentrer en jeu? Il a une armée assez considérable prête à marcher. Je ne voudrais pas qu’il vous en coutat beaucoup plus que des menaces; mais l’Amiral Jarvis venant près de Naples, comme fit Truguet au commencement de la guerre, pourrait bien produire le même effet. Ceci est peut-être un songe creux; pardonnez-le à mon zèle.
“Vous pourriez, en autre, nous prouver d’une manière bien digne de vous dans ce moment combien vous vous occupez de nos intérêts. Il était convenu entre nous que vous nous payeriez les 300,000 livres du mois de Janvier immédiatement. Cet argent a été mis à notre disposition; mais vous vous rappellerez en même temps, qu’en nous promettant de nous faire encore au mois de Février une avance semblable, vous vouliez attendre notre réponse pour mettre cette somme à notre disposition. Cette réponse ne peut plus tarder, et sera conforme à vos désirs. Ainsi si vous m’autorisiez à mander par votre courier que nous pouvons, dès à présent, tirer ces 300,000 livres, ce procédé, rempli de grace de votre part, serait apprécié comme il doit l’être dans la circonstance, et vous ne courrez aucun risque. Je me flatte que vous m’applaudirez vous-même d’avoir suggéré cette idée à votre désir constant de nous être utile, si votre bon esprit ne m’avait pas déjà prévenu.” (Dropmore Papers description begins The Manuscripts of J. B. Fortescue, Esq., Preserved at Dropmore (Historical Manuscripts Commission, Vol. 30), III (London, 1899). description ends , III, 297.)
7. In this and the preceding sentence, King was repeating rumors which proved to be incorrect. See Eli F. Heckscher, The Continental System (Oxford, 1922), 57.
8. On February 7, 1797, the following item appeared in The [London] Times, dated Copenhagen, January 21: “A report is current here, that the French Minister, [Philippe Antoine] Grouville, in concert with the Spanish Envoy, Chevalier de Normandez, has proposed to our Court to refuse the English for the future of a free passage through the Sound, and consequently to exclude them from the Baltic trade. But this report seems to be without foundation.”
9. For the “diplomatic altercation” between Timothy Pickering and Pierre Auguste Adet, see ASP description begins American State Papers, Documents, Legislative and Executive, of the Congress of the United States (Washington, 1832–1861). description ends , Foreign Relations, I, 559–88. See also George Washington to H, November 2, 3, 21, 1796, January 22, 1797; H to Washington, November 4, 5, 11, 19, 1796, January 19, 25–31, 1797; H to Oliver Wolcott, Jr., November 1, 1796; Wolcott to H, November 17, 1796.
10. David Humphreys was appointed United States Minister Resident to Portugal in 1791, commissioner in Algerine affairs in 1793, and Minister Plenipotentiary to Spain in 1796.
11. This treaty was signed at Tripoli on November 4, 1796, and at Algiers on January 3, 1797 (Miller, Treaties, II description begins Hunter Miller, ed., Treaties and Other International Acts of the United States of America (Washington, 1931), II. description ends , 349–85).