To the Auditors
In Council Apl 9. 1781
The exchang[e] between Continental and hard money at Kaskaskias at the Date of the within having been at eight for one be pleased to issue to the bearer James Conand1 for Genl. Clarke on account a warrant for one thousand and forty Dollars continental money in discharge of this Bill.
RC (ICHi); in a clerk’s hand, signed by TJ, who also added the figure “1040 Doll.” below the text. This communication is on the verso of a sight draft on the Treasurer of Virginia, drawn by William Shannon “Fort Clark in the Illinois,” 25 June 1779, to the order of François Millehome for “the Sum of One Hundred & four Dollars (it being for Services Rendered the Common wealth of Virginia)”; Shannon’s draft is countersigned “G R Clark” and bears on verso an additional note signed by Clark: “Reducing this bill to the value in hard money at the time given the Bearer must be Entitled to the Exchange in paper Currency on the day of payment.”
This is one of three drafts presented by Conand; the other two were as follows: (1) 17 June 1779 in favor of Anthony Harmand for “three hundred and three & ⅘ Dollars”; and (2) 24 June 1779 in favor of Rago Bovay for “four hundred and forty four and ⅘ Dollars.” Since the rate of exchange between Continental money and specie “at Kaskaskias at the Dates of the said Draughts” had been “eight for one,” the Council ordered warrants issued for the present drafts in the amount, respectively, of $1,040, $3,038, and $4,448 Continental money “in discharge of the said Bills at eighty for one” (Va. Council Jour. description begins Journals of the Council of the State of Virginia, ed. H. R. McIlwaine description ends , ii, 330).
This ratio, of course, seems to be neither 8 to 1 nor 80 to 1, but 10 to 1. The explanation is to be found in the necessity of reducing each of the bills to the original value in hard money (see Clark’s directions quoted above) and then multiplying by eighty, the rate authorized by the Council. Thus Millehome’s original account in specie was $13, for which he was “Entitled to the [rate of] Exchange in paper Currency on the day of payment”; hence, at 80 to 1, Conand received $1,040. But the arithmetical explanation is far from being an explanation of the legal ratio that guided the Council “on the day of payment.” In January 1781 Continental bills had stood at 100 to 1 and by May had sunk so low as practically to cease to pass as currency. Virginia paper money in April was in about the same state. The Assembly in March had empowered the treasurer to issue treasury notes to the extent of £10,000,000 and, if Continental aids were not forthcoming or emergency demanded, the Governor and Council were authorized to emit an additional £5,000,000 in bills, redeemable in specie at the rate of forty to 1, a clearly unrealistic ratio even at the time the Act was passed (Hening, description begins William W. Hening, The Statutes at Large; Being a Collection of All the Laws of Virginia description ends x, 399). At the same time the Assembly endeavored to stem the tide by providing that all paper bills of credit theretofore issued or thereafter to be issued, either by Congress or by the Assembly then in session, should “be a legal tender in discharge of all debts and contracts whatsoever,” except in such cases where the contract specifically called for payment in specie or in some medium other than paper money (same, x, 398). This Act, which in effect repealed the Act of May 1779 that had removed the penalty imposed upon anyone who refused to accept bills of credit at face value and on a parity with gold and silver, was opposed in the Senate, where amendments were offered to restore some ratio of depreciation rather than to revert to the earlier and now completely impracticable system of parity of specie and paper money. These amendments were not accepted by the House and in the Senate the bill passed by the narrow margin of 7 to 5. Four of those who had voted against the bill-Richard Adams, Francis Lightfoot Lee, Nathaniel Harrison, and Henry Lee—presented a bitter protest against the Act. Their protest deserves to be quoted in full, particularly in view of the fact that the Senate journal in which it was spread on the minutes is not known to be extant (an attested copy of the proceedings of the Senate for 17 Mch., including the protest, appears in the Va. Gaz. description begins Virginia Gazette (Williamsburg, 1751–1780, and Richmond, 1780–1781). Abbreviations for publishers of the several newspapers of this name, frequently published concurrently, include the following: C & D (Clarkson & Davis), D & H (Dixon & Hunter), D & N (Dixon & Nicolson), P & D (Purdie & Dixon). In all other cases the publisher’s name is not abbreviated description ends , d & n, 31 Mch.):
“Because making treasury notes a tender for debts formerly contracted, without a due allowance for depreciation, is enabling debtors to defraud their creditors of as much of what they fairly owe, as the real difference may be at the time of tender, between the value of the money tendered, and that for which the contract was made.
“Because such a law is authorizing and even enforcing fraud, corrupting the morals of the people destroying all confidence between man and man, and perverting the very end of Legislation; which is to repress wrong and enjoin right. And being directly destructive of justice, subverts one of the most sacred articles of our Bill of Rights, which declares, that no free government or the blessings of liberty, can be preserved to any people, but by a firm adherence to justice.
“Because as it is confessed that a law to oblige a man to take one pound for a just debt of one hundred and fifty pounds, is such an outrage upon honesty, that it would be scandalous for any member of the community to avail himself of it: The continuing to pass laws for such a purpose, is as disgraceful to the Legislature as it is pernicious to the people.
“Because by authorizing a fraudulent payment of debts among our citizens, we shall give just cause of complaint to the subjects of our illustrious ally, the King of France, and to all other foreigners who trade among us; by which the commerce of this state must be essentially injured.
“Because we cannot assent to what is asserted that the general voice of the people calls for this law; as it would be the highest reflection, upon those we represent, to suppose that they desire that which is apparently unjust; and we are happy to find ourselves confirmed in this good opinion of our countrymen, by the present practice of the jury’s, who, actuated by a spirit different from that which prevails in this law, do make allowance for depreciation. But if the people could possibly possess such a depravity of disposition, it would be the indispensible duty of the Legislature to restrain and correct it.
“Because it is not enabling the people to pay their debts as is pretended, but evidently empowering a shameless debtor to defraud his just creditor, by not paying his debt.
“Because a law evidently tending to corrupt the morals of the people, and exposing orphans, widows, and other helpless persons, who subsist upon the interest of their money, to be reduced to absolute beggary for the benefit of those who are possessed of their property, is a crying sin, that may call down the vengeance of a justly offended Deity upon this unhappy country.
“Because the ambiguity of the tender will beget an infinity of law suits, and disturb the peace of the whole community.
“Because two amendments were offered to the bill by which the treasury notes to be emitted might have been a tender for their just and real value, or the interest stopped on refusal; as the former laws more equitably directed, which amendments were rejected, and the full blown evils of the law let loose among the people.
“Because we cannot comprehend how making this money a legal tender in discharge of all debts can give it any additional credit, since it is confessed that in its depreciated state no man can tender it without forfeiting all claim to honour and honesty. A quality, which if used, would occasion a total loss of character cannot be of any value.”
The Assembly in May recognized the situation by providing that the old issue should not be legal tender after 1 July except for taxes, and by autumn paper money was completely valueless, all commerce being transacted in tobacco. Some evidence of the Council’s attitude toward the actual, if not legal, ratio early in April is to be found in its order to issue £2,000,000 to Claiborne in response to his request for an urgent and immediate need of £20,000 in specie or its equivalent (Va. Council Jour. description begins Journals of the Council of the State of Virginia, ed. H. R. McIlwaine description ends , ii, 327; Claiborne to TJ, 2 and 6 Apr.). Even so, this was no doubt considerably below the rapidly rising actual ratio. At any rate, the hapless merchant from Kaskaskias who presented the bills that he had discounted received in return a bundle of paper that was certainly worthless, whatever the ratio, before he arrived back in the Northwest. In this, he was not alone. For a recent study of the effects of inflation in 1780 and 1781 on civil servants, see Elizabeth Cometti, “The Civil Servants of the Revolutionary Period,” PMHB description begins The Pennsylvania Magazine of History and Biography description ends , lxxv (1951), 159–69; see also Bezanson, Prices and Inflation during the American Revolution: Pennsylvania, 1770–1790 (Philadelphia, 1951).
1. The name François Millehome is deleted at this point and “James Conand” interlined. Millehome’s signature, intended as an endorsement of the draft, is written on verso.