I have received your letter of the 27 May1 and the duplicate with the prints for which I am much obliged and will embrace the first opportunity of transmitting one set of the prints agreeably to your request to general Schuyler. I have been anxious with respect to your being regularly informed of what is passing here. Many things have happened of which you ought to be acquainted. I perceive the minister of Spain is desirous to know the state of our Finances. They have undergone a considerable change since you left us, particularly with regard to the money or paper bills heretofore emitted for the purpose of carrying on the war.

On this subject, though I can explain myself to you, it will be no easy matter for you to give a satisfactory account to people in Europe, who are entire strangers to our paper money. And yet this ought to be done to prevent the ill impressions, that may be made by the clamours of disappointed men, who hoped to accumulate mountains of wealth from our misfortunes2

Congress having before your departure resolved not to emit a greater quantity of bills than two hundred millions dollars, and having, in order to stop a farther depreciation and fix the value that sum, settled the mode of redeeming it by an annual assesment for 18 years, found themselves under a necessity to call upon the states to raise by taxes the sum of 15 Millions a Month in order to carry on the war. But as the legislatures were slow in raising the taxes and the demands of the public were pressing, the people found they were solicited to sell, before the want of Money urged them, and consequently foreseeing that their taxes would be heavy, every one determined to ease himself & make his own particular burden as light as possible by raising the price of the commodities wanted. The result of this was, that the paper depreciated more than ever, and the monthly assessments when paid in, were found to be no way adequate to the public demands, as every thing wanted for the army was by the month of January raised to double the nominal price of what it was in the month of October, when you left us. The merchants and traders who imported foreign articles and who are always watchful to secure themselves, taking advantage of the depreciation, raised the price of their Commodities to an enormous degree, so that the commonwealth lay like a ship stranded, whose mariners instead of exerting themselves to save her, were wholly employed in securing to themselves as much of the cargo as possible, leaving her to the mercy of winds & waves.

In order to supply the wants of the army, which could not be provided for by taxes, Congress in the month of February called on the several states for specific supplies of provision & forage. But before these could be brought in, such advantage was taken of the public wants, which were wholly supplied by purchase on credit, that the nominal debt of the continent was encreased almost beyond calculation. Of this you will easily judge, when you are informed that in the month of March commodities were sold in the market of Philadelphia at four times the price they were in the month of Septr. In short a continental dollar was valued at no more than a penny half penny and in many instances at not more than a penny. So that the depreciation was fluctuating from 60 to 90 for one and nobody knew where it would settle.

Upon this our enemies took courage and flattering themselves that Congress must sink under these embarassments, they set every engine to work to continue and encrease them by counterfeiting the currency, multiplying their emissaries to decry its credit, tampering with our army and at the same time prosecuting the war with a greater degree of vigour than they had done from the commencement of it. To the honour of our country I must inform you, that history cannot produce such instances of fortitude patience and perseverance as were exhibited by our virtuous army. Though exposed to hunger & nakedness amidst the rigours of a most inclement winter, they struggled through with unparrelled firmness; and notwithstanding the tempting bribes and offers of the enemy, and the incredible hardships our soldiers suffered, the desertions were comparatively few. Congress finding it necessary, in order to baffle the designs of the enemy and curb intestine avarice, to adopt more decided measures, resolved on the eighteenth of March to call in by taxes in the course of one year and burn all the paper bills heretofore emitted to the amount of 200 Million dollars and in lieu thereof to issue ten millions new money which was to be issued as fast and no faster than the old was brought in, that is to say for every 20 of the old money paid into the treasury, one dollar of the new emission was to be perfected and lodged there for the purpose of the war. And it was further resolved that in the payment of taxes, gold and silver should be received at the rate of one for 40, at which rate also the new money was to be received, by which means its value was fixed, and those who had amassed large quantities of the old paper were disappointed in their hopes of converting it into gold, dollar for dollar. They proceeded farther and fixed the value of the certificates given for money loaned from Sept 1777 to March 1780 rating the value of the Continental Money on every day between those two periods that the lender might receive the full value of the money lent, both in principal and interest and that the public might not be loaded with a debt for which they had not received an equivalent. For it was judged to be contrary to every rule of right & justice, that the landed interest, which is the principal object of taxation should be loaded with the burden of paying of a certificate, (for instance) of two hundred dollars (which was procured with the price of three bushels of wheat or a bushel of salt and sometimes for less) with that number of silver dollars worth in reality from 603 to 100 times the value of the money lent. And yet this must have been the case had Congress persisted in the mode of redemption adopted in 1779. These regulations were deemed so just and equitable, that the people acquiesed and the states have generally enacted laws conformable thereto.4 By these means the debt incurred by a war of six years was fixed at about one or two and twenty million dollars—a War which has cost our enemies in the same time upwards of 60 millions sterlg. I ought to have observed to you that of the ten millions to be issued in lieu of the 200 which were ordered to be paid in by taxes & burned, Congress assigned 6 millions to the States to enable them to purchase the specific articles required of them, reserving 4 millions for paying the army and defraying the expences of transportation and other incidental charges. But while these measures were in agitation and before they could be carried into execution, our enemies pressing on the war with vigour, Congress found themselves exceedingly straitened for want of money & were from necessity forced upon a measure, which I fear will give you and our other Ministers in Europe some trouble, I mean that of drawing bills.5 But here I would just observe, that if old established nations populous rich and powerful, whose governments are fixed, whose revenues are settled, who have armies raised & fleets equipped, whose towns are fortified and whose arsenals & magazines are stored with implements & necessaries for war, if such nations find themselves under difficulties for want of money by one or two years war with a nation weakened and greatly exhausted; What wonder is it, if a young commonwealth, whose inhabitants are poor, & thinly scattered over a large extent of country & just emerging from the difficulties of cultivating a wilderness, having no government established, no revenues but the voluntary contributions of the people, and who being without arms without ammunition or military stores were forced into a war with one of the most powerful nations of the world, should after a war of six years find itself embarrassed in its finances and under a necessity of applying for aid to other nations, whose interest it is to humble the power with which it is contending? If England unassisted by a single ally can give such annoyance to the combined arms of France, Spain & America what must be the consequence if for want of a little assistance in money she is suffered to triumph over the United States of America and again subjugate them or a part of them to her yoke?6

To our want of Money may be ascribed the enemy’s success in Carolina. For although Congress had timely notice of Sir H. Clinton’s intentions last fall, and notwithstanding his tedious passage and the slowness of his proceedings after his arrival owing to the losses he had sustained by a violent storm on his voyage, yet for want of Money Congress could not forward with sufficient dispatch the succours intended and consequently the communication between Charlestown and the country was cut off and the enemy had time by regular approaches to force a surrender.7 After this general Gates was sent to take the command to the southward. The states of Virginia and North Carolina furnished a very considerable body of Militia, with which joined to the Maryland and Delaware regulars consisting of about 1200 men, who were on their march to the southward & had been destined for the relief of Charlestown, he began to move forward; but having no tents to cover his men, no magazines of provisions laid up, and no money to procure either, and the country through which he marched being thinly inhabited, he was exposed to incredible difficulties and hardships. Having entered South Carolina & broken up the enemy’s posts on Peedee, as his men were still without shelter and the rainy season approaching in which his troops must suffer greatly for want of tents, encouraged by sundry successful against the enemy’s outposts ^enterprizes^ he was induced to march towards Camden with the hopes of driving the enemy from thence & establishing his head quarters in that village where he would have been able to have put his troops under cover and supply them plentifully with provisions and confine the enemy to the low country; in which case they would have been obliged either to retire into Charlestown and leave him the command of the country, or by attempting to keep the field would have exposed their army in the sickly season to a loss by death as equal to a defeat. Unfortunately he failed in the attempt. The battle of the 16 of August, which you have a particular account of in the public papers, broke up the army he had collected and forced him back into North Carolina. The Maryland and Delaware regulars, who in the action did not amount to more than 1000 stood their ground with great firmness and acquired much honor and had they been properly supported by the Militia would in all probability have made it a glorious day for America. The character of the general has suffered by his rapid flight and a court of enquiry ordered on his conduct.8 The check however which the enemy had received prevented them from improving the victory they had gained. And the spirited conduct of the militia, a party of whom consisting of about 200 under col. Williams9 on the 19 of August engaged between four and five hundred british, killed 60 on the field and took 70 prisoners, and another party under Col. Marian10 rescued 150 of our regulars taken prisoners on the 16, and captivated the escort that was conducting them to Charles town—this spirited conduct with some other successful enterprizes of less note has reanimated our people and disheartened the enemy, so that the consequences of defeat are not so distressful as might have been apprehended.

The armies in this quarter have hitherto had an inactive campaign. The arrival of the first division of the french fleet and army gave us sanguine hopes of regaining New York: But the detention of the second division and the superiority of the british fleet have disappointed our expectations.11 The fleets in the West indies seem to have spent the summer in maneuvering. Upon the junction of the french and spanish fleets, they directed their course to Jamaica and had they improved the oppertunity, it is the general opinion, they would have succeeded and subdued that island without any difficulty as the garrisons were chiefly withdrawn and there was no fleet to defend the harbour. But by some unaccountable delay, they suffered a fleet under Walsingham12 to get there before them and a reinforcement of troops to be thrown into the island, which as the hurricane season was coming on rendered the attempt imprudent if not impracticable and secured that island at least for the present. Thereupon the combined fleet separated; the Spanish steered for Havannah and the french put into Cape Francois. The Count de Guichen after some stay left the Cape, directed his course northerly and coasted along our shores.13 This it is supposed alarmed Rodney to that degree, that anxious for the safety of fleet and army at New York he immediately left the windward islands and with a fleet of 14 or 15 sail of the line and some frigates steered for that place, where he now is.14

The late providential discovery of Arnold’s plot, which appears to have been for a considerable time in agitation has induced a belief, that Rodney had something farther in view than merely to counteract the designs of Count de Guichen. In a controversy and revolution such as this, where former friendships and intimacies subsisted between the contending parties and where men of upright intentions took different sides and men of all characters were engaged in the contest, it would not have been strange or uncommon, if conspiracies had been formed before this; But to the honor of the American Army Arnold is the first and I believe the only American officer, who has during this war ended into a conspiracy to betray his country. You know the character of the man. He was brave but avaricious, fond of parade who has during this war entered into a conspiracy to betray his country. You and not very scrupulous about the means of acquiring money to defray the expence of it. He had married a young woman who had been distinguished by genl Howes’ Meschianza knights15 and her father was not remarkable for his attachment to the American cause. The expensive manner in which he lived in Philadelphia reduced his finances, and the accounts he exhibited against the public under went a scrutiny at the board of Treasury much to the disadvantage of his honor and honesty. This joined to his disappointments in the case of the Active and the result of the court martial instituted on the complaint of the council of Pensylvania drove him to desperate measures and rendered him a fit object for Clintons views. By letters found among his private papers it appears that Major Andrè, one of Sr. H. Clinton’s aids had commenced a correspondence with Mrs. Arnold in 1779 under pretence of supplying her with millinary. Whether it was continued until it was ripened into the plot for betraying West Point into the hands of the enemy I will not undertake to say.16 But that the scheme had been some time in agitation appears evident from this, that while the enemy were making preparations for executing their purpose and giving out that their design was against Virginia the same reports were circulated in Lord Cornwallis’ camp in South Carolina, and measures were taken to make us believe that he meant to second the expedition by marching through North Carolina and forming a junction with Sir Henry on his arrival in Virginia. At this time Rodney arrived at New York and it is conjectured the design was as soon as they had gained possession of West Point and cut off the communication between the Eastern and southern states to turn their whole force against the french fleet and Army at Rhode island. This it is true is but conjecture. But it must be confessed the object was great and had Rodney succeeded, he would have finished the year with as much éclat, as he began it. The providential discovery of the plot blasted the schemes of our enemies. What their next object will be, time must unfold.17

I suppose you will be informed through another channel that after the surrender of Charles town Mr Laurens returned to Philadelphia for some time took his seat in Congress and that after a few weeks stay he embarked for Holland on his first Appointment You will also without doubt hear of Searle’s embarking for Europe. The design of his going is kept a profound secret, but it is conjectured he is sent on some business by the council of this state. I am misstaken in the Character of the Man if his business and Mission remain long a secret after his arrival18

Mrs. Thomson requests me to make her compliments to Mrs. Jay. You will please to add mine. I am with the truest sentiments of regard Sir Your obedt humble Servt.