Thomas Jefferson Papers

Thomas Jefferson’s Plan for Reducing the Circulating Medium, [23 November 1819]

Plan for Reducing the Circulating Medium

[1819. Nov. 23.]

The plethory of circulating medium which raised the prices of every thing to several times their ordinary and standard value in which state of things many and heavy debts were contracted; and the sudden withdrawing too great a proportion of that medium, & reduction of prices far below that standard, constitute the disease under which we are now laboring, and which must end in a general revolution of property, if some remedy is not applied. that remedy is clearly a gradual reduction of the medium to it’s standard level, that is to say, to the level which a metallic medium will always find for itself so as to be in equilibrio with that of the nations with which we have commerce.

To effect this

Let the whole of the present paper medium be suspended in it’s circulation after a certain and not distant day.

Ascertain by proper enquiry the greatest sum of it which has at any one time been in actual circulation.

Take a certain term of years for it’s gradual reduction. suppose it to be 5. years. then let the solvent banks issue ⅚ of that amount in new notes, to be attested by a public officer, as a security that neither more or less is issued, and to be given out in exchange for the suspended notes and the surplus in discount.

Let of these notes bear on their face that the bank will discharge them with specie at the end of 1. year; another 5th at the end of 2 years; a third 5th at the end of 3. years, and so of the 4th and 5th they will be sure to be brought in at their respective periods of redemption.

Make it a high offence to receive or pass within this state a note of any other.1

there is little doubt that our banks will agree readily to this operation. if they refuse, declare their charters forfeited by their former irregularities, and give summary process against them for the suspended notes.

The bank of the US. will probably concur also. if not, shut their doors and join the other states in respectful2 but firm applications to Congress3 to concur in constituting a tribunal, (a special4 convention e.g.) for settling amicably the question of their right to institute a bank, and that also of the states to do the same.

A stay-law for the suspension of executions, and their discharge at five annual instalments should be accomodated to these measures.

Interdict forever, to both the state and national governments the power of establishing any paper bank. for without this interdiction we shall have the same ebbs and flows of medium, and the same revolutions of property to go thro’ every 20. or 30. years.

In this way the value of property, keeping pace nearly with the sum of circulating medium, will descend gradually to it’s proper level, at the rate of about ⅕ every year, the sacrifices of what shall be sold for payment of the first instalments of debts will be moderate, and time will be given for economy and industry to come in aid of those subsequent. certainly no nation ever before abandoned to the avarice and jugglings of private individuals to regulate, according to their own interests the quantum of circulating medium for the nation, to inflate,5 by deluges of paper, the nominal prices of property, and then to buy up that property at 1/ in the pound, having first withdrawn the floating medium which might endanger a competition in purchase. yet this is what has been done, and will be done, unless stayed by the protecting hand of the legislature. the evil has been produced by the error of their sanction of this ruinous machinery of banks, and justice, wisdom, duty, all require that they should interpose and arrest it before the schemes of plunder and spoliation desolate the country. it is believed that Harpies are already hoarding their money to commence these scenes on the separation of the legislature; and we know that lands have been already sold under the hammer for less than a year’s rent.

MS (DLC: William C. Rives Papers); entirely in the hand of Ellen W. Randolph (Coolidge); undated, with dateline supplied from FC. FC (ViW: TC-JP); in TJ’s hand; mutilated and water stained, with many passages illegible; at head of text in an unidentified hand: “Plan for reducing the Circulating Medium.” Enclosed in TJ to William C. Rives, 28 Nov. 1819.

1Unmatched opening parentheses at the beginning of this and the following paragaraph, and pairs of parentheses around the paragraphs beginning “The bank” and “Interdict forever,” may have been added by someone else at a later date and are editorially omitted. None of these parentheses are in FC.

2MS: “respectfull.” FC: “respectful.”

3Preceding two words interlined in FC.

4Word interlined in FC.

5Comma in FC only.

Index Entries

  • Bank of the United States, Second; constitutionality of search
  • banks; currency issued by search
  • banks; TJ on search
  • Congress, U.S.; and banks search
  • Coolidge, Ellen Wayles Randolph (TJ’s granddaughter); as TJ’s amanuensis search
  • currency; amount of in circulation search
  • currency; paper search
  • currency; TJ’s plan for reducing circulating medium search
  • Jefferson, Thomas; Opinions on; banks search
  • Jefferson, Thomas; Opinions on; paper money search
  • Jefferson, Thomas; Writings; Plan for Reducing the Circulating Medium search
  • United States; economy of search
  • Virginia; banks in search
  • Virginia; economy of search
  • Virginia; General Assembly search