To William Short
Treasury Department April 16th 1792
The fluctuation of the price of the Stocks in the United States is a circumstance that cannot have failed to attract your attention nor to excite a temporary feeling in the minds of foreigners.1 Tho’ I doubt not it will be well explained by the Agents of those Citizens of other Countries who have vested their Monies in our funds, I think it necessary that some ideas should be communicated to you on which you can found a true opinion either for your own satisfaction or that of persons interested in our National Welfare, with whom you may have occasion to confer.
The moderate size of the domestic debt of the United States appears to have created the most intemperate ideas of speculation in the minds of a very few persons, whose natural ardor has been encreased by great success in some of the early stages of the melioration of the market value of the Stock. To combinations of private Capitals thus acquired or increased, Sums of specie, obtained as well at the most extravagant rates of premium as at common interest, were added, and to these were joined purchases of stock on credits for various terms so as to create a delusive confidence, that the concentration of so much Stock in a few hands would secure a very high Market rate. This expectation was increased by comparing the Market values of the several species of our funds with those of the same species of Stock in Great Britain, the United Netherlands and other parts of Europe, without due allowance for the deductions which should have been made on account of the great difference in the value of Money and the objections arising from our Distance from those European Money holders, whose capitals they expected to attract and other relative circumstances. At the time when many heavy engagements thus formed were becoming due, some contentions among the dealers in and proprietors of the debt took place, and counter combinations were formed to render the crisis of payment and speculation as inconvenient and disadvantageous as possible. By these means, those eventual contracts, it was probably hoped, could be more cheaply complied with, and moreover that a reduced Market would afford further opportunities of beneficial speculation. The extreme indiscretion of the first mentioned speculations and the distress, which, it was manifest, they must produce, excited perhaps and animated the movements of the other party and brought on a scene of private distress for money both Artificial and real which probably has not been equalled in this Country. It happened in the Winter Season when the influx of Cash articles of trade, as returns from abroad, is nearly suspended, and when quantities of specie were sent from the Sea ports to the interior Country for the purchase of produce, to supply the demand for the Spring exportation.
The Banks, who can always perceive the approach of these things, were influenced to limit their operations, and particularly the Bank of the United States, which was then preparing for the opening of its Branches, or offices of discounts and deposit in Boston, New york, Baltimore and Charleston.
The United States, you would presume, could not be insensible of so fit a moment to make purchases of the public Stock, and the Treasurer was accordingly authorized to buy; but tho’ the appearances of private distress for money were so great he could not obtain for several days the sum of fifty thousand Dollars, at the highest rates at which the public purchases had before been made. The holders who were free from engagements were averse to selling—the principal persons, who were under engagements, they could not comply with, were obliged or disposed to place their effects in the hands of their Creditors, who did not chuse to add to their own disappointments of great profits actual losses, by unseasonable sales of the Bankrupts property.
The Stock in the Market therefore was really made scarce. A quarters interest has just been paid. Some of the cautious monied people have begun to purchase. The specie is returning from the Country and the heaviest private engagements having now fallen due, the declension of Stock may be considered as arrested. There is little doubt that the difficulty for money among the dealers in the debt will be at no time so great as it has been, after the present week, and that changes of a favorable complexion are to be confidently expected. At first moderate perhaps, afterwards such as will carry the funds up to their due value.
Should you be of opinion that the State of things in France will render some intimation of these events useful there, you will be good enough to communicate them to Mr Morris our Minister at that Court.2
I have the honor to be with great consideration Sir Your most obedt Servant
Willm Short Esqr
LS, Hamilton Papers, Library of Congress; LC, William Short Papers, Library of Congress; LS, marked "Triplicate," Widener Library, Harvard University
1. The “fluctuation of the price of the stocks” followed the panic precipitated by William Duer’s business failure in early March, 1792. For background to the panic, see Duer to H, March 12, 1792, note 3; H to Duer, March 14, 23, 1792; Robert Troup to H, March 19, 1792; Philip Livingston to H, March 24, 1792; Philip Schuyler to H, March 25, 1792; William Seton to H, March 21, 1792.
2. Gouverneur Morris had been appointed United States Minister Plenipotentiary to France in January, 1792; however, he did not arrive in Paris until May 6, 1792.