To Joseph C. Cabell
Monticello. Sep. 23. 14.
Your favor of the 17th is just recieved. I shall answer it, as usual, frankly, adding my suggestions to those you may recieve from others, or concieve yourself, that your own good judgment may examine all things and hold fast that which is good. having before imposed on you the Corvée of reading my general sentiments on the subject of our finances, I may be the shorter now. I then thought it so important for the nation to enter into it’s rights in the circulating medium, that I proposed the legislative resumption of them, and the gradual abolition of the banks of paper-discount1 and of their paper. it would have been a difficult task; but to get along with the war otherwise I thought more difficult. Providence has now done the work for us. the banks from North to South, are all bankrupt, and have so declared themselves; covered indeed under the thin2 pretext of preventing our enemies from drawing off all our specie, and their assurance that they will reassume business at a proper time. but I presume they will not invite the public authorities to inspect their books and vaults to see if the latter contain one third of what the former will prove they have in circulation. their notes, already rejected by some, recieved with hesitation by others, may drag on a few weeks longer, for want of all other circulation. but they are essentially defunct; and it is incumbent on the public authorities to act on that ground. to Congress it certainly should belong exclusively; and I presume they will immediately commence supplying the circulation with treasury notes. if bottomed on taxes, they will be recieved as willingly as gold and silver. if not so bottomed, they will soon, if not at the first, be on a footing with the bank notes & old Continental. they should, in the first place, issue as much as would repay all they have borrowed from the banks, requiring the banks to throw them3 into circulation, in exchange for their own notes:4 & they should issue as much more as will carry us thro’ the ensuing year. if they were to buy up with treasury notes, the certificates of all their former loans, they would scarcely furnish as much medium as is necessary to let us down easily from the present excess. taxes then redeeming annually one tenth of their issues, would gradually reduce them to a competent circulation; and whenever they should fall below that, the metals would come in & keep it up to it’s wholsome level.
But these measures may not perhaps be adopted by Congress, and would besides be too dilatory for the wants of our state, which you represent as urgent. the question then is whether we ought not to do ourselves what I have said it is the more peculiar duty of Congress to do? I acknolege a difficulty arising from the words of the constitution of the US. and the construction which some may put on them, and that construction too which is safest for the general interest. the states are prohibited from ‘emitting bills of credit.’ it is impossible however but that these words must have some limitation to their meaning. they cannot mean, for instance, that a state may not give to those to whom it owes a debt which it cannot yet5 pay, an acknolegement of what it owes. our state, for example, has been in the constant practice of issuing by it’s Auditor, certificates of what it owes to the bearer, whether the treasurer can pay them immediately or not; and this has never been deemed a breach of the constitution. continue this practice then. you owe the banks 300,000.D. give them Auditors’ certificates of from 50. down to 5.D. declaring that ‘the state owes them so many dollars, which shall be paid to them or bearer out of the proceeds of such a tax, within such a term, or as much sooner as may be from other resources.’ and let the banks give out these certificates in exchange for so much of their own notes. you owe present sums also to your militia, contractors & furnishers, and will be incurring new debts thro’ the ensuing year. authorise the giving them due-bills countersigned by the Auditor, to a corresponding effect. suppose these, with the debt to the banks, amount to 400,000.D. lay taxes of 40,000.D. annual amount for 10. years, appropriate them sacredly to the sole object of paying off that amount of these bills annually, and let them be recievable moreover in taxes. were bank bills in credit, it might be necessary to make the Auditors notes bear interest. but they will be taken now of necessity, and greedily,6 without interest, as the bank notes were. their bearing an interest would produce two great evils. 1. they would be hoarded and the circulation starved. 2. you would be 20. instead of 10. years redeeming the debt, by the same tax, were you to allow the same interest which the United States give.
But the United States owe you 400,000.D. as soon then as this is paid, call in our own notes in exchange for those of the US. let the tax cease from that moment, and with it the example of being in contact with the constitution. that example continued might lead to new deluges of paper circulation, and to new revolutions and convulsions in private fortunes. we shall now experience these in a higher degree than on the death of the old Continental money: but this evil is incurred and cannot be cured; and it was long ago visible to experience & observation that the bank mania had siesed our citizens so universally as to admit no other remedy than ruin. that is now upon them, and will I hope convince the legislatures that it is the interest of all that all should relinquish the right of establishing banks of paper-discount, and that neither should that power be given to Congress; because it is an expedient which runs so certainly to abuse & the ruin of private fortunes, that no such power ought to be granted by the people to any of their public functionaries. the proceedings I propose, in order to secure us permanently against the recurrence of this catastrophe, should declare that no bank note should be ever again transferable, or ever again be evidence of a debt, or effect the discharge of a debt. but for this the legislature will not be ripe until they are overwhelmed by the abyss of ruin, now only beginning.
Accept these suggestions, which have been invited by your own request; use them for your own consideration only, or that of confidential friends, and be assured of my great friendship and respect.
RC (ViU: TJP); at foot of first page: “Joseph C. Cabell esq.”; endorsed by Cabell, with his additional notation: “on the Finances of Virginia.” PoC (NN: James Monroe Papers). Enclosed in TJ to James Monroe, 24 Sept. 1814.
Article 1, section 10 of the United States Constitution prohibits states from emitting bills of credit.
1. Reworked from “of discount for paper.”
2. TJ here canceled “veil.”
3. Word reworked to “these notes” in PoC.
4. Word canceled in PoC.
5. Word interlined.
6. Comma supplied from PoC.
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