This letter will be of Politics only. for altho’ I do not often permit myself to1 think on that subject, it sometimes obtrudes itself and suggests ideas which I am tempted to pursue. some of these relating to the business of finance, I will hazard to you, as being at the head of that committee, but intended for yourself individually, or such as you trust, but certainly not for a mixt Committee.2

It is a wise rule, and should be fundamental in a government disposed to cherish it’s credit, and at the same time to restrain the use of it within the limits of it’s faculties, ‘never to borrow a dollar without laying a tax in the same instant for paying the interest annually, and the principal within a given term: and to consider that tax as pledged to the creditors on the public faith.’ on such a pledge as this, sacredly observed, a government may always command on a reasonable interest, all the lendable money of their citizens, while the necessity of an equivalent tax is a salutary warning to them & their constituents against oppressions, bankruptcy, & it’s inevitable consequence Revolution. but the term of redemption must be moderate, and at any rate within the limits of their rightful powers. but what limits, it will be asked, does time prescribe to their powers? what is to hinder them from creating a perpetual debt? the laws of nature, I answer. the earth belongs to the living, not to the dead. the will & the power of man expires with his life, by Nature’s law. some societies give it an artificial continuance, for the encouragement of industry, some refuse it, as our aboriginal neighbors, whom we call barbarians. the generations of men may be considered as bodies, or corporations. each generation has the usufruct of the earth during the period of it’s continuance. when it ceases to exist, the usufruct passes on to the succeeding generation, free and unincumbered, and so on successively from one generation to another for ever. we may consider each generation as a distinct nation with a right, by the will of it’s majority, to bind themselves, but none to bind the succeeding generation, more than the inhabitants of another country. or the case may be likened to the ordinary one of a tenant for life, who may hypothecate the land for his debts during the continuance of his usufruct; but at his death the reversioner (who is also for life only) recieves it exonerated from all burthen. the period of a generation, or the term of it’s life is determined by the laws of mortality, which, varying a little only in different climates, offer a general average, to be found by observation.3 I turn, for instance, to Buffon’s tables of 23,994. deaths, and the ages at which they happened, and I find that of the numbers of all ages living at one moment, half will be dead in 24. years, 8. months. but (leaving out minors, who have not the power of self government) of the adults (of 21. years of age) living at one moment, a majority of whom act for the society, one half will be dead in 18. Y 8. M. at 19. years then from the date of a contract, the majority of the contractors is dead, and their contract with them. let this general theory be applied to a particular case. suppose the annual births of the state of N. york to be 23,994. the whole number of it’s inhabitants, according to Buffon, will be 617,703. of all ages. of these there would constantly be 269,286. minors. and 348,417. adults, of which last 174,209. will be a majority. suppose that majority, on the 1st day of the year 1794. had borrowed a sum of money equal to the feesimple value of the state, and to have consumed it in eating, drinking & making merry in their day; or, if you please, in quarreling & fighting with their unoffending neighbors. within 18. Y 8 M one half of the4 adult citizens were dead. till then, being the majority, they might rightfully levy the interest of their debt annually on themselves & their fellow revellers, or fellow champions. but at that period, say at this moment, a new majority is come into place, in their own right, and not under the rights, the conditions, or laws of their predecessors. are they bound to acknolege the debt, to consider the preceding generation as having had a right to eat up the whole soil of their country in the course of a life, to alienate it from them (for it would be an alienation to the creditors) and would they think themselves either legally or morally bound to give up their country, and emigrate to another for subsistence? every one will say No: that5 the soil is the gift of God to the living, as much as it had been to the deceased generation: and that the laws of Nature impose no obligation on them to pay this debt. and altho’, like some other natural rights, this has not yet entered into any Declaration of rights, it is no less a law, and ought to be acted on by honest governments. it is at the same time a salutary curb on the spirit of war and indebtment which, since the modern theory of the perpetuation of debt, has drenched the earth with blood, and crushed it’s inhabitants under burthens ever accumulating. had this principle been declared in the British bill of rights, England would have been placed under the happy disability of waging eternal war, and of contracting her thousand millions of public debt. in seeking then for an ultimate term for the redemption of our debts, let us rally to this principle, and provide for their paiment within the term of 19. years, at the farthest. our government has not, as yet, begun to act on the rule of loans & taxation going hand in hand. had any loan taken place in my time, I should have strongly urged a redeeming tax. for the loan which has been made since the last session of Congress, we should now set the example of appropriating some particular tax, sufficient to pay the interest annually and the principal within a fixed term, less than 19. years. and I hope yourself and your committee will render the immortal service of introducing this practice. not that it is expected that Congress should formally declare such a principle. they wisely enough avoid deciding on abstract questions. but they may be induced to keep themselves within it’s limits.

I am sorry to see our loans begin at so exorbitant an interest. and yet, even at that, you will soon be at the bottom of the loan-bag. we are an Agricultural nation. such an one employs it’s sparings in the purchase or improvement of land or stocks. the lendable money among them is chiefly that of orphans & wards in the hands of executors & guardians, & which the farmer lays by till he has enough for the purchase in view. in such a nation there is one, and one only, resource for loans, sufficient to carry them thro’ the expence of a war: and that will always be sufficient, and in the power of an honest government, punctual in the preservation of it’s faith. the fund I mean is, the mass of circulating coin.6 every one knows that, altho’ not literally, it is nearly true that every paper dollar emitted banishes a silver one from the circulation. a nation therefore making it’s purchases and paiments with bills fitted for circulation thrusts an equal sum of coin out of circulation. this is equivalent to borrowing that sum, and yet the vendor recieving paiment in a medium as effectual as7 coin for his purchases or paiments, has no claim to interest. and so the nation may continue to issue it’s bills as far as their wants require, and the limits of the circulation will admit.8 those limits are understood to extend with us9 at present to 200. millions of Dollars, a greater sum than would be necessary for any war.10 but this, the only resource which the government could command with certainty the states have unfortunately fooled away, nay corruptly alienated to swindlers and shavers under the cover of private banks. say too, as an additional evil that the disposable funds of individuals, to this great amount, have thus been withdrawn from improvement, and useful enterprize, and employed in the useless, usurious, and demoralizing practices of bank directors & their accomplices.11 in the war of 55. our state availed itself of this fund by issuing a paper money bottomed on a specific tax for it’s redemption, and, to ensure it’s credit, bearing an interest of 5. percent. within a very short time not a bill of this emission was to be found in circulation. it was locked up in the chests of executors, guardians, widows, farmers Etc. we then issued bills, bottomed on a redeeming tax, but bearing no interest. these were readily recieved, & never depreciated a12 single farthing. in the revolutionary war the old Congress and the states issued bills without interest, and without tax. they occupied the channels of circulation very freely, till those channels were overflowed by an excess beyond all the calls of circulation.13 but altho we have so improvidently suffered the field of circulating medium to be filched from us by private individuals, yet I think we may recover it in part, and even in the whole if the states will cooperate with us.14 if treasury bills are emitted on a tax appropriated for their redemption in 15 years and (to ensure preference in the first moments of competition) bearing an interest of 6. per cent. there is no one who would not take them in preference to the bank paper now afloat, on a principle of patriotism as well as interest: and they would be withdrawn from circulation into private hoards to a considerable amount. their credit once established, others might be emitted, bottomed also on a tax, but not bearing interest: and if ever their credit faultered, open public loans, on which these bills alone should be recieved as specie. these, operating as a sinking fund, would reduce the quantity in circulation, so as to maintain that in an equilibrium with specie.15 it is not easy to estimate the obstacles which, in the beginning, we should encounter in ousting the banks from their possession of the circulation: but a steady & judicious alternation of emissions & loans, would reduce them in time. but while this is going on, another measure should be pressed to recover ultimately our right to the circulation. the states should be applied to to transfer the right of issuing circulating paper to Congress exclusively, in perpetuum, if possible, but during the war at least, with a saving of charter rights. I believe that every state West & South of Connecticut river, except Delaware, would immediately do it: and the others would follow in time. Congress would of course begin by obliging unchartered banks to wind up their affairs within a short time, and the others as their charters expired, forbidding the subsequent16 circulation of their paper. this they would supply with their own, bottomed, every emission, on an adequate tax, & bearing, or not bearing interest as the state of the public pulse should indicate. even in the non-complying states, these bills would make their way, and supplant the unfunded paper of their banks, by their solidity, by the universality of their currency, and by their receivability for customs, and taxes. it would be in their power too to curtail those banks to the amount of their actual specie, by gathering up their paper, and running it constantly on them. the national paper might thus take place even in the non-complying states. in this way I am not without a hope that this great, this sole resource for loans in an agricultural country, might yet be recovered for the use of the nation during war: and, if obtained in perpetuum, it would always be sufficient to carry us thro’ any war; provided that in the interval between war & war, all the outstanding paper should be called in, coin be permitted to flow in again and to hold the field of circulation until another war should require it’s yielding place again to the National medium.17

But it will be asked, are we to have no banks? are merchants & others to be deprived of the resource of short accomodations found so convenient? I answer, let us have banks: but let them be such as are alone to be found in any country on earth; except Gr. Britain. there is not a bank of discount on the continent of Europe, (at least there was not one when I was there) which offers any thing but cash in exchange for discounted bills. no one has a18 right to the trade of a money lender but he who has the money to lend. let those then among us, who have a monied capital, & who prefer employing it in loans rather than otherwise, set up banks, and give cash, or national bills for the notes they discount. perhaps, to encourage them, a larger interest than is legal in other cases might be allowed them, on the condition of their lending for short periods only. it is from Gr. Britain we copy the idea of giving paper in exchange for discounted bills: and while we have derived from that country some good principles of government & legislation; we unfortunately run into the most servile imitation of all her practices, ruinous as they prove to her,19 and with the gulph yawning before us into which those very practices are precipitating her. the unlimited emission of bank paper has banished all her specie, and is now, by a depreciation acknoleged by her own statesmen, hurrying20 her rapidly to bankruptcy, as it did France, as it did us, and will do us again, and every country permitting paper to be circulated, other than that by public authority, rigorously limited to the just measure for circulation. private fortunes, in the present state of our circulation are at the mercy of those self-created money lenders, and are prostrated by the floods of nominal money with which their21 avarice deluges us. he who lent his money to the public22 or to an individual, before the institution of the United-States-bank, 20 years ago, when wheat was well sold at a dollar the bushel, and recieves now his nominal sum when it sells at two dollars23 is cheated of half his fortune: and by whom? by the banks which since that have thrown into circulation 10. Dollars of their nominal money where was one at that time.24

Reflect, if you please, on these25 ideas, and use them or not as they appear to merit. they comfort me in the belief that they point out a resource ample enough, without overwhelming war taxes, for the expence of the war, and possibly still recoverable, and that they hold up to all future time a resource within ourselves, ever at the command of government, & competent to any wars into which we may be forced. nor is it a slight object to equalize taxes thro’ peace and war.

I was in Bedford a fortnight in the month of May, and did not know that Francis and his cousin Baker were within 10. miles of me at Lynchburg. I learnt it by letters from themselves after I had returned home. I shall go there early in August and hope their master will permit them to pass their Saturdays & Sundays with me. ever affectionately Yours

Th: Jefferson