Your favor of the 12 Sepr last reached me a few Days ago. In the Proposition of S[chweizer] J[eannerett] & Co: I saw the Means of saving Somewhat to the United States without incurring the Odium of a Payment in depreciated Paper but from the Moment a Determination to pay in Value is adopted I heartily and entirely approve of the Rejection of their Offer.

Before the Receipt of your Letter, Mr Short communicated to me (in general Terms) the Intention to make good the Depreciation on the Money paid heretofore, and told me at the same Time that it seemed to be in Contemplation to pay in Specie, about which he felt himself much embarrassed; for in that Case there would be a loss of about 5 p% which with the Commission on Loans &ca &ca would increase the Debt about one tenth instead of paying it with Advantage. And this arises from a Circumstance which is I beleive the common attendant of paper Money, viz. that Specie is higher in proportion than foreign Exchanges. This will be best understood by assigning what I conceive to be the Cause of that Difference. I begin by rejecting the Theories of speculative Men, who suppose that Bills of Exchange are drawn and purchased for Payment of reciprocal Debts and the like. I reject equally the Stock jobbing Operations of Bankers and confining my View to the ordinary Course of Things I observe that when a Man purchases in France Goods which are to be sold in England, he pays for those Goods by the Proceeds of Bills drawn on England; and as he makes the Acquisition of the Goods with a View to the future Sales, he governs himself by the usual Price of such Goods in the Country to which they are to be sent. The Rate of Exchange therefore enters into his Consideration, only so far as by Means thereof the Price he is to pay for his Goods may be affected. On the other Hand, he who has bought Goods on Credit in England which he vends in France regards the Exchange only in so far as it governs the Price at which he must sell his Goods. Thus, the Pound Sterling being worth about 25 livres, if the Exchange is at 30 livres for the Pound Sterling he must advance one fifth or twenty per Cent of the Price of English Goods, and for the same Reason the English Agent can afford to give an advance of twenty per Cent in french Wines. Now in Proportion as the Price of English Goods advances, the Consumption of them lessens, as Consequently the Purchase of Bills on London to pay for them diminishes; and in Proportion as the Exchange advances, which is of Course a Decrease in the real Price of French Goods, the Purchase of them encreases and of Course the Sale of Bills on London to pay for them: And thus the Depreciation of the paper Currency checks by eventual operation, its immediate Effect on foreign Exchange. But the Price of Specie depends on a different Cause. Specie in Time of Peace and good Government is but the Sign of Wealth, and not the Substance; so that no more of it is found in a Country than is necessary for the Interchange of those Commodities which form the real Wealth of such Country. And by the bye it follows, that in Proportion to the Degree of Credit resulting from a vigorous Execution of good Laws the Necessity of Money decreases, and of Course it becomes plentiful from being scarce by the Establishment of order, or scarce from being plentiful by the Prevalence of Confusion, without any actual Encrease or Decrease of the Mass. But when a paper Circulation is forced forward, prudent Men first, and all Men afterwards, desire to realize their Property. Land is not always a convenient Object for this Purpose, because the subsequent Sale is difficult; and Merchandizes are objectionable from their Bulk and Decay. The precious Metals therefore naturally obtain a Preference, and as their Quantity is by no Means proportionate to the real Wealth of the Country, their Price is encreased more rapidly than that of other Things. But the foreign Merchant observing this Advance declines drawing Bills unless he can get Something near the Price which his Corn, if brought into the Country, would produce; and thus the exchange follows the Price of Corn, in the Course of Depreciation instead of preceeding it. If I were to hazard a Conjecture, as the Corollary of this Reasoning, it would be that the Quantity of the precious Metals rather encreases than diminishes in a Country where Paper Money circulates.

I make no Apology for this Digression because if it conveys no Information it tends at least to explain one fact, and to place some others in a different Light from that in which they are usually viewed. To return then to the Subject of your Letter I must tell you that about the same time that Mr Shorts Dispatches arrived, a Plan was imagined by the Colonists of St Domingo, and proposed to the Administration, for repairing the Ravages committed by their Slaves in the late Insurrection by Appropriating to that Purpose the Debt of the United States to France. One of them came to Converse with me on the Subject, but supposing it to be some new Scheme of Speculation I refused to listen to him. A few Days after, however, the Minister of the Marine told me that he had sent him, and desired me to consider the Matter, and see if Something could not be done. In consequence of this I mentioned to Mr Short (who is now in Holland) a Plan which appeared to be useful to the two countries, and before his Departure we agreed on certain principles to govern in that Business, conformably to which the Minister is now acting. I shall send you his Address to the Assembly on the Subject, and if the Thing he has in View is effected, I will detail it to you; if not I will spare you the Perusal of so much useless writing.1

As to the State of Things here, I would convey it to you as fully as Propriety will admit, but I know not yet by what Opportunity this Letter will go, and the Post Office was never more abused under the most despotic Ministers than it is at present; notwithstanding the Decrees to the contrary. Every Letter I receive bears evident Marks of patriotic Curiosity. This anxious Spirit of pettifogging Villainy proves the Fear of those who make Use of it; and truly they have Reason to fear, for every Day proves more clearly that their new Constitution is good for Nothing. Those whom I had warned in Season of the Mischiefs they were preparing, endeavor now that it is too late to lay the Blame on others by way of excusing themselves; but the Truth is that instead of seeking the public Good by doing what was right, each sought his own Advantage by flattering the public opinion. They dare not now propose the amendments which they perceive and acknowledge to be indispensible. They have besides no Confidence in each other, for every one feels a Reason against it, and meets moreover with daily Proofs that his Copatriots are no better than himself. The Assembly (as you who know such Bodies will naturally suppose) commits every Day new Follies, and if this unhappy Country be not plunged anew into the Horrors of Despotism it is not their Fault. They have lately made a Master Stroke to that Effect. They have resolved to attack their Neighbours unless they dissipate they Assemblies of french Emigrants who have taken Refuge in their Dominions. These Neighbors are Members of the German Empire and France threatens to carry into their Country, not Fire and Sword, but la liberté. Now as this last Word does not in the Acceptation of German Courts means so much Liberty as Insurrection you will see that the Pretext is given for Hostilities, without violating the Law of Nations. Add to this that three french Armies of 50000 Men each are ordered to assemble on the Frontiers, one under your old Acquaintance Rochambeau in Flanders, one under our friend Lafayette in Lorraine, so as to penetrate by the Moselle River into the Electorate of Treres, and one under Monsieur Luckner in Alsace.2 This last I am told has but slender Abilities, and the other two you are acquainted with. Putting all other Things out of the Question it is self evident that the Empire must bring Force to oppose the Force thus ordered, and in Consequence it is not to be doubted that 50000 prussian and 50000 Austrian Troops will make their Appearance as speedily as Circumstances can permit. Now I am thoroughly convinced that if this Country were united under a good Government and in Peace with England, they could set the Rest of Europe at Defiance; but you have no Idea my dear Sir of a Society so loosely organized. America in the Worst of Times was much better, because at least the criminal Law was executed, not to mention the Mildness of our Manners. My Letters predicting their present Situation may perhaps have appeared like the Wanderings of exagerated Fancy, but beleive me they are within the coldest Limits of Truth. Their Army is undisciplined to a Degree you can har[d]ly conceive. Already great Numbers desert to what they expect will become the Enemy, and their gardes nationales who have turned out as Volunteers are in many Instances that corrupted Scum of overgrown Population of which large Cities purge themselves, and which without Constitution to support the Fatigues, or Courage to Encounter the Perils of War, have every Vice and every Disease which can render them the Scourge of their Friends and the Scoff of their Foes. The Finances are so deplorably bad that the Bankruptcy which actually exists by the Depreciation of the Paper Money must soon be declared by stopping Payment in some Quarter or other unless those effectual Remedies be applied which seem to be beyond the Power of the Government and beyond the Talents of those who administer it. The Discontent is general but it does not break out; partly because the Antipathy to the Aristocrats, and the Fear of their Tyranny still operates, and partly because no safe Opportunity offers. Every one is bewildered in his Meditations as to the Event, and like a Fleet at Anchor in a Fog; no one will set Sail for fear of running foul. If they come to Blows on the Borders a curious Scene will I think present itself. The first Success on either Side will decide the Opinions of a vast Number who have in Fact no Opinion but only the virtuous Determination to adhere to the strongest Party; and you may rely on it that if the Enemy be tolerably successful, a Person who shall visit this Country two Years hence will enquire with Astonishment by what Means a Nation which in the year 1788 was devoted to its Kings, became in 1790 unanimous in throwing off their Authority, and in 1792 as unanimous in submitting to it. The Reasons are given to you in my Letter of 29th of April 1789 and my Fears exprest in that Letter seem now to be on the Eve of Reality. The King means well and may perhaps by his Moderation finally succeed in saving his Country. I hope much from this Circumstance; but alas the Moderation of one who has been so wounded so insulted seems to be but a slender Dependence, and yet I verily believe it to be the best and I had almost said the only Dependence. I am my dear Sir with true Regard yours

A Courier arrived last Night with Dispatches which are to be communicated to the Assembly this morning. The Emperor informs the King that he has given Orders to Genl Bender (who commands in the low Countries) to protect the Electorate of Treres with all his Forces. I did not mention, as I ought to have done, that the Courts of Berlin and Vienna have concluded a Treaty for the Protection of the German Empire and Maintenance of its Rights. You will have seen that the Emperor having adopted the Determinations of the Diet respecting the Claims of those Princes who have certain feodal Rights preserved to them by the Treaty of Westphalia in Alsace and Lorraine reminded the King that the Dominion of France over those Provinces is conceded by that Treaty.3 The Dutch Government has proposed a Treaty with the Emperor as Sovereign of the low Countries for mutual Aid and Protection in Case of Insurrection which Offer is accepted. All this is explained by the Intrigues of France to excite Revolt in Holland and Flanders and the Completion of such a Treaty will place the Emperor at Ease should he operate against this Country next Spring.