II. On Finance, 4 May 1784
II. On Finance
A Short Account of the Finances of the United States.
A want of Specie has been felt in America since the first settlement of the Colonies.
Several Governments, in order to get a medium, struck paper-money, and let it out on the mortgage of lands to half the amount of their value, at the interest of five p.c., and part of the capital to be paid and destroyed annually. This paper never depreciated.
Massachusets first abolished this currency, when she felt herself rich enough to do without, a few years before the troubles commenced. She forced the other New England States, by her example, into the Same measure.
In the Southern States, where the Produce suited the mother country so well, commerce was nothing more than an immediate barter. Bills of Inspection were sufficient for the little circulation of thin settled slave countries.
When the Colonies united in their opposition to Great-Britain, when their federal Assembly was to carry on war, and to collect their respective abilities in one common defence; nothing could be done without a general coin, acknowledged and accepted every where.
Taxes upon the people would not have raised the sums required for a strong defence, and it would have been imprudent to abate the general enthousiasm by a heavy taxation.
People were accustomed to a Paper-medium, and they placed at that period an unbounded confidence in congress.
1. Therefore the measure of striking Paper-money was resolved upon by congress as a most expedient one.
Whenever a State was backward in her quota, the print easily supplied the want. Afterwards every want was supplied from there. This paper, however, depreciated. Sometimes a happy turn in the affairs raised it a little and for a short time. In 1780 it died.1 Very long it had been at 75 for 1. In Virginia, where no other money existed it was kept up longer, it went 500, even 1,500 for 1, untill the french army carried some silver there.
Congress had in their emission kept pace with the depreciation, and such a sum was in the hands of the public as never could be redeemed. They emitted then another paper in order to call in the old one.
Every State was recommended to call in their quota. The new currency was to the old, according to a resolve of congress, as 1 to 40. This paper, called continental state’s money, was emitted by the Several States and endorsed by congress.
But few States called in a considerable part of the old currency. Much of it, they knew, was destroyed by various accidents. They looked with a jealous eye upon each other.
At present there are many private Gentlemen holding large sums of Paper money, that is to be called in. But when this will happen, at what a rate it will be redeemed, congress do not yet agree upon.
2. The States in order to furnish their quota to public expences, and to have funds for private undertakings, opened loan-offices, where the citizens carried their money for certificates fetching an interest of 6 p.c. and to be redeemed by the State after a number of years expressed on the bill.
Congress in imitation of them opened continental loan-offices on the same footing, but in order to prevent their paper’s multiplying too fast, they received also paper-money in their offices. These certificates express the nominal value of the paper received. At present, in order to reduce this debt to its real amount, a table of depreciation is fixed upon, and the nominal Value of a certificate will be paid according to the depreciation at the period of its date. Certificates, however, were given not only for money, but also for supplies of any kind, as horses, cattle, produce of the soil, imported goods, that were valued, taken from the proprietor and paid with such assurances.
The army has received its deficient pay from the Several states till 1780, since that period from congress, and their commutation also, in that manner. But as the States issued certificates according to circumstances and not in proportion to their quotas, some may have contributed beyond their share, and others may be deficient. Therefore the accounts are now settling between the united States and each particular state.
And as many inhabitants are possessed of a great number of certificates, the Pay-master general is collecting them in order to give one final certificate.
3. Since R. Morris directs the finances the army has been supplied by contracts. Whatever sums were wanted, he paied for in notes drawn on Mr. Swanwick, who was enabled to such an exactitude that these bills, though sometimes depreciating, got the highest credit. A bank established in 1782 gave also a new life to the finances.
The sums contracted for were not regularly paid. But the contractors will be reimboursed.
The notes of the Financeer are now liquidated, because the taxes coming in every month are more than sufficient to pay them. For all the new bills, funds are placed in the bank.
The bank gets all the taxes as they come in, and bank notes are received in payment, by the Receivers which the Financeer has appointed in the Several States.
The present expences of the United States consist in the civil List, and the payment of Interests of the Public debt. The States are called for their Quotas, untill they all will agree to a 5 p.c. impost on Importation.
MS (Rijksarchief: Hogendorp Papers, The Hague); 4 pages, entirely in Hogendorp’s hand, together with a slip containing a correction and commentary in TJ’s hand as indicated in note 1. At foot of text, in margin, is the following in Hogendorp’s hand: “May 10 examined and approved of by John Swanwick Esqr.” A covering leaf bears the following caption written in a 19th century hand: “Financie en Banken 4 Mei 1784”; the source of this date is not ascertainable. Underneath the caption there is a note in Dutch to the effect that TJ had made a correction; that John Swanwick, “a learned and respectable merchant in Philadelphia,” had approved the paper; and that a second paper on the Bank of North America had been similarly “approved by Mr. Robert Morris, minister of finance.” The editors are indebted to Miss Katharine S. Pearce of the staff of the Princeton University Library for translating this and other memoranda in Dutch in these papers.
1. With MS is a single sheet on which TJ wrote:
“pa. 2. 1. 12. strike out ‘In 1780 it died. &c. to the bottom of the page [i.e., to and including the sentence “They looked with a jealous eye upon each other”], and insert ‘When it had depreciated so far as that 40 Continental dollars were worth but one silver dollar, Congress conceived <it possible to stop all further> a hope of arresting the depreciation at that point by calling in all the paper bills then in circulation, giving in exchange for them another paper expressing their true worth in silver, declaring the quantity should never be increased, fixing precise times for their redemption and calling on the states to furnish by taxation all the monies necessary in future. By this means a sum in paper would have been out equal only to the real value of what was out before. But while the plan was under reference to the states depreciation was going on; it received partial checks only, by their successive adoptions and in fine the old paper lost all value. This happened in the different states at earlier or later periods from the beginning of 1781. to Apr. 1782. and at higher or lower rates from 75 to 1000 for 1.’”