From William Short
Paris June 3. 1791
I have had the honor of recieving a few days ago, the 3d & 4th. of your letter of April 13th.—one by the way of England, the other by the way of Holland. This is the only letter I have recieved from you since that of Sep. 1. 90. The 1st. & 2nd. have not yet arrived.
It gives me infinite pleasure Sir to find that the manner in which I proceeded in the business you confided to me, has met your approbation. It is the strongest & most agreeable presumption I can have that it will meet also that of the President.
I have the honor of inclosing you Sir, the copy of the letter of the bankers of the U.S. to me1 covering your 4th. of April 13 mentioned above. This will shew you the present situation of the loan lately opened there, the present value of American stock, & their hope of being soon able to reduce the rate of interest on loans there. I have written to them to inform me with as much precision as they can when they think a loan at a reduced rate of interest may be proposed.2 It may be proper to observe that I understand they mean 4½ p. cent as the reduced rate. Until I recieve their answer then it is impossible for me to say what measures I shall take in consequence of your authorisation to open a new loan.3 To proceed immediately to make a loan at 5. p. cent, after the opinion of the bankers that by postponing it it might be done at 4½ would seem highly improper, & yet I must own to you that I do not enter fully into the opinion of the bankers, notwithstanding the desire I shall have to see it realized. I think it necessary to mention this circumstance as well as the following considerations that you may not be misled by the enclosed letter of the bankers.
When I was at Amsterdam the 5. p. cent obligations of the Emperor sold at 2 or 3. p. cent above par, & still I never heard it supposed & am sure it was not supposed by any body that he could borrow at a lower rate of interest. If he could have done it he certainly would in order to have redeemed such as he had a right to reimburse.
The United States are in a less favorable situation than the Emperor for reducing their rate of interest because it is known at Amsterdam that they have a large debt to France of which a considerable part is already due & must be paid without regard to terms & that the price & interest of their domestic debt is such as to present them great advantages in purchasing it up by loans made abroad at 5. p. cent.
But it may be asked why have the bankers, to whom these considerations must have presented themselves, held out an opinion that the rate of interest might be reduced by postponing future loans? 1. It is possible that it may be their real opinion, & if so it is useless to search for any other reason for their holding out. 2. But if it was not their opinion or if they had doubts respecting it, still there are reasons which may have induced them to wish that we should be persuaded of it. They are acquainted with attempts which have been made to purchase our debt to France. They know that the consent of the U.S. will be necessary to the success of any of these attempts. The better the terms on which we suppose we can make new loans, the less we shall be disposed to consent to those which are asked by the persons wishing to purchase. It is possible also that they may be informed by means of the Genoese correspondents at Amsterdam of some disposition in them to make loans to the U.S. A hope that we could borrow at Amsterdam at a lower rate of interest would be the most effectual means of preventing us from giving the present rate at Genoa. Besides the business of loaning on the domestic debt of the U.S. is still carried on at Amsterdam. The house of V. Staphorst is immediately & ostensibly interested in them—that of Willink also indirectly in all probability. It is desirable therefore for them to postpone the loans of Congress as long as this business lasts, provided however that they should ultimately be made there. (It was calculated when I was in Amsterdam that this business would cease when the domestic debt rose to 75. p. cent, but as they alienated them proportionably higher in these loans, they were continued notwithstanding the rise in the domestic debt as mentioned in my letter to you of Jan 15.) Further the bankers contemplate a rise in the commission in proportion as the rate of interest is lowered. This rise in the commission they mentioned to me as being altogether in favor of the undertakers—whether so or not I cannot say, but I have no doubt they would prefer making a loan at an increased rate of commission & decreased rate of interest, to the inverse.
Thus enabled to appreciate fully the circumstances attending the opinion of the bankers you will not be surprized if the reduced interest should not take place as soon as they seem to hope. Still you may be persuaded Sir, that I shall cherish the idea & do whatever depends on me to have its realisation accelerated.
I shall have the less difficulty in delaying the proposition for a new loan also in order to see whether the rate of interest can be reduced, because I find that you use more delay in employing the money borrowed than I had supposed you would. It would have been an advantage if the last loan4 had been opened two or three months later, since the interest paid on a great part of it for four months viz from Feb. 1. till now might have been avoided, as well as that which has accrued on the rest from the time of the bonds being delivered. Such losses may be avoided on future loans if you were to give more early directions for the employment of the money as recieved. If on the contrary you do not give directions until you have notice of the loan being opened there will be always three or four months interest at least, as in the last instance, unnecessarily paid. I have already mentioned to you that when a loan is opened, constant usage obliges the bankers to recieve the money immediately, if the undertakers chuse to deposit it, & to allow interest from the first of the month. Three months after that, must be allowed for the notice going to America & orders being recieved thereon; so that four months interest, on a moderate calculation, will always be paid before the money is used. In the last loan 600,000 florins, I think, were recieved in the latter part of February—of course interest paid on them from the 1st. of that month although employed only now.
There is another inconvenience also with respect to the part which is intended to be paid this country. As they are always acquainted with the loans opened at Amsterdam & of course know that the U.S. have money there at their disposition, they cannot account for its not being paid them. They take up various ideas with respect to the delay & some of them far from being favorable to the U.S. As the exchange is becoming every day more disadvantageous in proportion as the assignats depreciate, many of them suppose it is a speculation, to hold back the payment as much as possible in order to take advantage of this depreciation. You will easily see how impossible it would be to convince of the contrary those who know that the U.S. have had at their disposition large sums for three months past during which time the assignats have gone on regularly depreciating.
If only the ministry meddled with this matter there would be much less inconvenience in it, but in the new organisation of affairs a great number of new people are brought into action, all of whom cast themselves to become as conspicuous as possible in clamouring for the public interest. The American debt has particularly excited the attention of a number of them & above all of the six new commissioners of the treasury.5 They have made several visits to M. de la fayette respecting it. They have sent me several messages through him, & one of them, M. de Condorcet,6 lately wrote him the letter inclosed No 1.7 which he sent me. He added that as an American, he could not help telling me how much he wished that the U.S. should do whatever they could to satisfy these exclamations. This was eight or ten days before I recieved your orders to pay the million of florins.8
From this letter & some other circumstances I feared there would be difficulty made by the new commissioners of the treasury in recieving their payment at the present rate of exchange, particularly as they desire it to be put into the hands of their bankers at Amsterdam, & as a part of it is to be applied to the loan made there by France for the U.S.9 On recieving your orders I informed M. de Montmorin10 that I was now ready to have another payment made. He desired I would take arrangements with the Director of the treasury;11 who without hesitation requested that it should be made in the same manner as the last & He will of course send his reciept to the bankers for the sum in livres equal to the million of florins according to the present rate of exchange which is much more favorable than it was at the time of the former payment, & which you are informed was highly advantageous to the U.S.
With respect to the ½ million of florins which you destine ultimately for this country & which are to wait for further directions, as I am not acquainted with the reasons which induced you to postpone these directions, I cannot conjecture when they will be given, & of course shall avoid being questioned about them here as much as possible. It is tautology to add that as this sum is already in the hands of the bankers the U.S. will be paying an unnecessary interest on it until employed.
There is another consideration also which is worthy of being taken into the account. The depreciation of the assignats so long as they continue to be a circulating medium is an advantage to those who have debts to pay to France by remittances from abroad. But this depreciation has been such for some time past as to give serious apprehensions that the time may come & that ere long, when it must be forced out of circulation. In that case the exchange would unavoidably turn in favor of France on account of the immense sums of specie which have been sent out of the country & the effort which would be then made to restore the equilibrium by their return. In such an event you will readily see the loss which the U.S. will sustain from having not extended to the utmost their payments under present circumstances.
It is impossible to give as certain any conjecture respecting these assignats & of course what I have said must be understood with that limitation. You will be able to form a more satisfactory opinion yourself perhaps from the following observations. The lands by which they are to be redeemed are selling every where without opposition. It becomes every day more evident that their mass exceeds the highest estimation—the assignats arising on those sales are entering regularly into the treasury & are publicly burnt. Upward of 120. millions (one tenth of the whole emission) have already gone through this process, & yet the depreciation continues regularly. There was one extraordinary moment when the difference between this paper & specie was 19. p. cent. It was brought back to ten & is now at twelve p. cent, with the probability of continuing to encrease. It is to be observed that this takes place in a time when they have not war either foreign or domestic, & before the experiment is made on the new system of taxation. To those who think with me, that the greater part of the taxes proposed would not be paid soon under any system of perception, & that the system adopted is the one the least likely to raise taxes of any kind whatever, the experiment when made cannot be considered as favorable to the credit of the assignats. There seems no doubt now that there will be a necessity for a new emission of assignats before the taxes voted some days ago (as you will see by the Journals sent to the Secretary of State) can be collected under the most favorable supposition. If to this cause of discredit should be added intestine dissensions & civil war which in the present state of parties & weakness of the government, cannot be considered improbable, it is impossible to say that the assignats will not so far depreciate as to be no longer capable of answering the purposes of a circulating medium.
I have thought it my duty to mention these circumstances to you as they may serve instead of a better guide, in examining the French debt & the mode of repaying it under the several aspects to which it will be presented to you. I gave you several ideas on this subject in my letter of April 9. As they consisted in transferring the debt from the French government to individuals either in France or Genoa, or some other foreign country, & as the assignats would be the necessary vehicle for that operation it is essential that you should be made acquainted with their present, & as far as can be done, their future situation. So long as they continue in circulation, the fall in their value & the rise of American credit will necessarily facilitate any such translation & render it more advantageous for the U.S. But should any disaster, or any of the circumstances mentioned above throw them out of circulation, before orders could be recieved from you, it of course would defeat any plan formed on them. It will be necessary therefore I think, if you should judge proper to make use of any of the ideas suggested to you either in this or a former letter, & adopt any system in consequence of them, to do it with a view to the possibility of the assignats ceasing to be a medium of circulation before your orders could be recieved & executed.
I have spoken to Mr. Grand the son (one of the house of that name which has always acted for the U.S., & which perhaps has as little confidence in their credit as any house in Paris) with respect to the plan of making loans in assignats here in order to pay off the French debt, & giving bonds to secure the lenders against further depreciation. He took time to consider of it. We have since spoken of it & he seems fully persuaded it might be done. I mentioned to him that I had no authority to set such a plan on foot—of course that I did not chuse it to become a matter of public consideration here—but that if after a proper examination he considered there was a probability of carrying such a scheme into effect for the advantage of the U.S., I would recommend it to your consideration. The caution he considered himself bound to use in his enqueries, has prevented his consulting with as many of the monied people as he would have chosen; still the opinion he seems to have founded on his own observations & those of a few others, induces me to renew to you my wishes that you would take the subject into consideration.
It is useless to mention that the advantages resulting from this plan would be to relieve the U.S. in a short period from the part of their debt already due to France—the placing it probably in a more advantageous rate of interest & the leaving the loans to be made in Holland free to be employed in the sinking of the domestic debt. In that case Congress would certainly find it advantageous to extend the operation beyond the two million of dollars already embraced by their act.12
Such foreigners, Dutch, Genoese, or others as are reimbursed here by this country in assignats, would probably prefer recieving the bonds of the U.S. payable either at Amsterdam or Genoa. In that case the assignats they would lend the U.S. would be estimated according to the existing rate of exchange & of course would be an advantageous operation for the U.S. The instructions you give must necessarily be such as to authorize the embracing the several combinations which may take place so as to sieze the most favorable. This will require that your instructions should be very full & very much in detail with respect to each contingent. It will be necessary also that your views with respect to the necessity of discharging without delay the foreign debt due & the propriety of changing that to become due & that this may [be] judged of, your ideas with respect to the operation of purchasing up the domestic debt, should be known. And after all the latitude which must still be left is such as no individual probably would be bold enough to act in. I mention this because I feel as to myself a total incapacity to act alone in a case of so much delicacy & where there would be so much room for censure, as that of changing entirely the nature of the foreign debt. It would seem to me essential in order that every advantage under every change of circumstances should be made use of, that those to whom this business may be confided should be at least two. They will be more likely in proportion to their number, to lose no opportunity of acting for the advantage of the U.S., from the timidity which every individual must unavoidably be influenced by in such a case. The several ministers which the U.S. have or may have at the courts of Europe might very well act together in this business either by assembling at Paris if it was thought necessary or by correspondence. The latter mode would most probably suffice; as after having decided on a view of the circumstances of the moment, which might be done by letter, what measures were proper to be taken, their execution might be left to the person who may reside here.
The following alternatives will probably present themselves to their examination & choice. 1. To pay off the French debt due or to become due, by loans made here in assignats, giving the bonds of the U.S. payable here for a certain sum of specie, either in weight or in crowns of six livres. 2. By loans made here giving bonds payable either at Amsterdam, Genoa, or elsewhere as may be agreed on with the lenders, & expressed in the money of that country agreeably to the value of the livre Tournois according to the then rate of exchange. 3. To open loans at Amsterdam Genoa or elsewhere & to recieve bills on Paris, or French stock such as the Government should agree to recieve, the bonds of the U.S. being expressed in the money of the country agreeably to the value of the bills or stock recieved. 4. To open such loans recieving part in cash, to be transmitted to you, & part in bills or stock of the above kind. Other alternatives may also present themselves; but these I think you may consider as sufficiently probable to merit your examination & instructions thereon. The circumstances of this country however are necessarily so unsettled & so subject to change, that it is impossible to say how long they will continue thus favorable for an operation much to be desired & highly beneficial for the U.S. It is for that reason Sir that I have taken the liberty of thus urging it on your consideration. You would no doubt regard it as an abuse of your time if I were to detain you longer by adding the propriety of discharging without delay, at least that part of the debt to France which has become due & the advantages of employing the loans made in Holland at 5. p. cent or lower, to the purchase of the domestic debt. The certainty that so long as money can be placed in the domestic funds at an high rate of interest by purchasing them under par, considerable sums will be diverted from the productive operations of agriculture & commerce to that kind of barren speculation, suffices alone to demonstrate the public benefit which would result from raising them at least to that point.
My letters which you mention having not recieved will not change your determination with respect to the offers of Schweizer & Jeanneret. The tariff to which they allude & of which you desire the explanation13 is that fixed by Congress for the rate at which foreign coin is to be recieved in the collection of the duties.14
Since my return to Paris I have been obliged to see these people because they were referred to me by the Minister15 as mentioned in my letter of May 4 although their character and reputation could not but render such interviews disagreeable. I told them at once that I did not think their propositions would be accepted. They urged me much to treat with them adding they had been informed that I had sufficient powers to treat conditionally subject to the ratification of the President. They offered in that case to change their terms for the advantage of the U.S. As I had every reason to believe that they were not in a condition to fulfill their engagements, & that they were made the ostensible persons merely that if the bargain turned out a bad one, it might be avoided on their part & further that they meant to make use of any conditional agreement they might induce me to sign, in order to draw after them those people on whom they counted for support, I declined any kind of treaty, adhering to what I had previously told them, that I would communicate to you any terms they might offer, & that if I thought them acceptable I would add my recommendation for their acceptance.
I observed to them however the propriety of their employing M. de Ternant who was about to embark for America,16 & who might recieve instructions from the minister to take definitive arrangements on this subject. I added that in order to insure the success of the operation it would be necessary 1. That M. de Ternant should be authorized to say that it was desired by the ministry. 2. That he should be fully satisfied that they (Schweizer & Jeanneret) had sufficient powers & a sufficient capital either of themselves or of those for whom they acted, to fulfill such engagements, & should be able to say so to the government of the U.S. 3. that the terms they offered should be acceptable, & therefore that a considerable latitude should be left to M. de Ternant in fixing them.
They had told me that they were willing now to change their former offers so as to give up entirely the commission asked & to diminish the number of florins to be recieved so as to give up to the profit of the U.S. one million on the whole operation provided the debt of the U.S. amounted to 40. million of livres, or at that rate for a smaller sum. I added that I would recommend to your acceptance, such proposals provided the conditions abovementioned with respect to M. de Ternant were fulfilled by them.
They accordingly sent me a supplement to their former offers accompanied by the papers marked No. 2.17 & herewith enclosed. On my observing to them that they mistated in their supplement their conference with me, they abolished that statement & sent me a new supplement together with the papers marked No. 3.18 This supplement therefore is to be considered as containing the terms they offer at present. They are 1. to obtain from the French government the bonds of the U.S. & to recieve from the U.S. in lieu of them at the rate of 18 millions of florins for 40 millions of livres, for the part already due & at the rate of f. 7,000,000, for 40,000,000 , for the part to become due.
By the standard fixed by Congress the calculation of these people makes 40,000,000 livres equal to f. 18,974,359—of course in fixing their demand at 18 millions they state this sacrifice at nearly a million, whereas in truth according to the par between Paris & Amsterdam 18,-000,000 florins are equal to 40,000,000 .
I saw M. de Ternant after they had written to me that they had satisfied him with regard to their powers & their ability to perform their engagements, & he told me they had given him no such satisfaction. M. de Montmorin told me also that he had recommended the plan19 of these people because M. Lambert20 the then Comptroller general approved it, but he seemed to think now that M. Lambert had adopted the opinion without examination, that these people had the funds to make good their engagements.
On the whole I believe myself, that they are two adventurers who have gone on this principle; that if they could engage the ministry to bind themselves to recieve assignats & the U.S. to give their bonds at par there would be such a gain that the Capitalists of Genoa, Paris or elsewhere would gladly support them as the fall in the value of the assignats would leave an immense profit, that if on the contrary they entered into a contract which should turn out ill, they having nothing to lose had nothing to fear. You will be able to learn from M. de Ternant how far these powers & abilities extend & to him alone I must refer you as they have given me no other proof of them than the letter of M. Lambert written last fall & forwarded to you from Amsterdam.21
This affair will after all present itself to you under the following conditions. 1. M. de Ternant will not undertake to answer for the abilities of Schweizer & Jeanneret, which I think will certainly be the case, & of course, it must end there. Or 2. he will answer for them & offer to enter into negotiation with you, & in that case, he will be authorized to give more advantageous terms than those proposed in the supplement. The exchange between Paris & Amsterdam is now more than 20. p. cent in favor of the latter. This is the real standard by which you should be guided. The expences of commission & the profit which the lenders of such a mass would have a right to expect must of course be taken into the account. In such a case I should think it highly advantageous for the U.S. to accept the terms, as it would be effecting at once a measure of which I have stated the benefit above. You may insist also on a part of the bonds being made payable at Genoa or elsewhere than Amsterdam, wch. you will certainly consider as desirable for the U.S.
I mentioned to you in my letter of Feb. 17. what had passed between Mr. Morris & myself respecting a loan for the U.S. in the low countries. I have lately satisfied myself that I had been mistaken in supposing that foreign powers were not allowed to borrow there. I am waiting now therefore with much impatience for your sentiments on that subject, which I may now expect without delay. I have no doubt myself that it would be advantageous for the U.S. to open a loan there for the money to be remitted to France, even if the terms were the same with those at Amsterdam, on account of having a credit at more than one place. Still as I may so soon expect to hear from you on that subject I have determined not to make the experiment there until then, unless I find that a loan can be obtained at an inferior rate of interest; which however is not to be hoped. As soon as I recieve an answer from the bankers therefore to whom I have written to know when they think the U.S. could with propriety propose the loan at the reduced rate they mention, I shall take measures for informing myself if I could now make a loan in the low countries at 4½ p. cent & in that case I shall think myself warranted to set it on foot. Should I find however that this could not be done at less than 5. p. cent, & should no answer come from you, I shall not think myself fully authorized to transfer your loans thither, as I am sure of being able to obtain the one ordered by you, at that rate at Amsterdam.
I have not for some time seen the Genoese minister22 who is now in the country. I imagine his constituents are making the proper inquiries with respect to the present situation of the credit of the U.S. & I take it for granted they will be fond of making them loans.
The information which you desire respecting the establishment of the mint in the United Netherlands,23 I fear it will be difficult to acquire with exactitude without being on the spot. The time of my being there will depend of course on the time of a new loan being made. Still I shall endeavour to collect the best information I can from thence whilst absent & will forward it, as also that which you desire concerning their E. India company. When I was there it was considered that their affairs were in the most declining posture, & since I have left that place, they have authorized individuals to partake in that commerce with them except only I think as to gun powder, arms, & some other articles, which is a proof that they do not consider the company’s resources as adequate to it. With respect to the present situation of the affairs of the Eng. East-India company you will see the most authentic details in their present Parliamentary debates which you recieve of course.
I inclose you an Appercu of the revenue & expences of this country for the present year & also a plan of Tontine which I have not yet read & of course know not whether it is worthy of your attention.
My former letters have said so much of the advantage of recieving from you authenticated copies of the revenues of the U.S., the state of their commerce & other papers of the kind,24 that I will not repeat it at present, as I do not doubt you will be fully convinced of it.
I have the honor to be with sentiments of the most perfect esteem & respect Sir your most obedient & most humble servant
P.S. The letters which I have written to you since those mentioned in that of Jan. 25. of which last you acknowlege the reciet are as follows: Feb. 7, 17, 22. March 4, 11. from Amsterdam—April 9, May 4. from Paris.
The Honble. Alexander Hamilton Secretary of the Treasury.
ALS, letterpress copy, William Short Papers, Library of Congress.
1. See enclosure.
2. Short to Willink, Van Staphorst, and Hubbard, May 26, 29, June 3, 1791 (ALS, letterpress copies, William Short Papers, Library of Congress). The letter of May 26 is printed as an enclosure to Short to H, June 10, 1791.
5. In March, 1791, the Assembly reorganized the public treasury. It placed authority in the hands of a committee of six commissioners appointed by the King.
6. Marie Jean Antoine Nicholas Caritat, Marquis de Condorcet, one of the Encyclopedists.
7. Enclosure not found.
9. For a description of this loan, see Willink, Van Staphorst, and Hubbard to H, January 25, 1790, note 3.
10. At this time the Comte de Montmorin was French Minister for Foreign Affairs.
11. Bertrand Dufresne.
12. See “An Act making Provision for the Reduction of the Public Debt” (1 Stat. description begins The Public Statutes at Large of the United States of America (Boston, 1845). description ends 186–87 [August 12, 1790]).
14. For the rates of exchange for foreign coins and currency, see Section 40 of “An Act to provide more effectually for the collection of the duties imposed by law on goods, wares and merchandises imported into the United States, and on the tonnage of ships or vessels” (1 Stat. description begins The Public Statutes at Large of the United States of America (Boston, 1845). description ends 167–68 [August 4, 1790]).
15. Comte de Montmorin.
16. Jean Baptiste de Ternant had been appointed French Minister Plenipotentiary to the United States.
17. Enclosure not found.
18. Enclosure not found.
20. Charles Guillaume Lambert had succeeded Jacques Necker as French Controller General of Finances in September, 1790, and was removed from office one month later by the Assembly.
22. Christoforo Vincenzo de Spinola.