James Madison Papers

Notes for Speech Opposing Paper Money, [ca. 1 November] 1786

Notes for Speech Opposing Paper Money

[ca. 1 November 1786]

Agst. Paper money. Novr. 1786 Virg: Assy.1

Unequal to specie.
1. being redemble at future day and not bearing interest.2 2. illustrated by tax of Bank notes—Stock in funds—paper of Spain issued during late war [see Neckar on finance]3 Navy bills—tallies. 3. being of less use than specie which answers externally as well as internally—must be of less value, which depends on the use.
1. to Creditors if a legal tender. 2 to debtors if not legal tender, by increasing difficulty of getting specie. This it does by increasing extravagance & unfavorable balance of trade—& by destroying that confidence between man & man, by which resources of one may be commanded by another—3 illustrated 1. by raising denomination of coin 2. increasing alloy of do. brass made as silver by the Romans according to Sallust4—3 by changing weights & measures. 4. by case of Creditors within who are dbtors without the State
1. affects Rights of property as much as taking away equal value in land: illustrd. by case of land pd. for down & to be conveyd. in future, & of a law permitting conveyance to be satisfied by conveying a part only—or other land of inferior quality—2. affects property without trial by Jury.
Right of regulating coin given to Congs. for two reasons. 1. for sake of uniformity. 2. to prevent fraud in States towards each other or foreigners. Both these reasons hold equally as to paper money.
1. Produce of Country will bring in specie, if not laid out in superfluities. 2. of paper, if necessary, eno’ already in Tobo. notes, & public securities—3. the true mode of giving value to these, and bringing in specie is to enforce Justice & taxes.
1. by fostering luxury, extends instead of curing scarcity of specie—2. by disabling compliance with requisition of Congs. 3. serving dissentions between States. 4. destroyg. confidence between individuals. 5. discouraging commerce—6 enrichg collectors & sharpers—7 vitiating morals—8 reversing end of Govt. which is to reward best & punish worst. 9. conspiring with the examples of other States to disgrace Republican Govts. in the eyes of mankind.5
paper money good before the War.
1. not true in N. Engd. nor in Va. where exchange rose to 60 per Ct. nor in Maryd. see Franklyn on paper money6 2. confidence then not now—3. principles of paper credit not then understood—Such wd. not then, nor now succeed in Great Britain &c.

Ms (DLC). The one-page document is an expanded version of JM’s Outline (ca. 1 Nov.). On the recto JM copied Notes for Debate on Commercial Regulations by Congress, ante 31 Oct. 1786.

1This heading was added by JM at some later time. The paper-money debate took place on 1 Nov., and a resolution rejecting the proposition passed 85 to 17 (JHDV description begins Journal of the House of Delegates of the Commonwealth of Virginia; Begun and Held at the Capitol, in the City of Williamsburg. Beginning in 1780, the portion after the semicolon reads, Begun and Held in the Town of Richmond, In the County of Henrico. The journal for each session has its own title page and is individually paginated. The edition used is the one in which the journals for 1777–1786 are brought together in two volumes, with each journal published in Richmond in either 1827 or 1828 and often called the “Thomas W. White reprint.” description ends , Oct. 1786, p. 15).

2In his “Observations” on money written in 1779–1780 JM reasoned that paper money would always circulate without depreciation if it were redeemable in specie on demand. Otherwise, the acceptance of currency at its nominal value depended upon public confidence in the issuer and the time fixed for its redemption (Papers of Madison description begins William T. Hutchinson et al., eds., The Papers of James Madison (9 vols. to date; Chicago, 1962——). description ends , I, 304–5).

3Bracketed by JM. Jacques Necker, Compte rendu au Roi (Paris, 1781).

4Gaillard Hunt attributed this allusion to Sallust as found in the Conspiracy of Cataline, chap. 33 (Madison, Writings [Hunt ed.] description begins Gaillard Hunt, ed., The Writings of James Madison (9 vols.; New York, 1900–1910). description ends , II, 280 n.).

5There was no joint, concerted effort by the several states to make paper money legal tender, but the effect of such laws was to undermine the efforts to solve the nation’s fiscal woes, which in turn made the U.S. a defaulter on its public securities and certainly a risk—if not “in the eyes of mankind”—to the Dutch bankers who had advanced considerable sums to the U.S. (Papers of Madison description begins William T. Hutchinson et al., eds., The Papers of James Madison (9 vols. to date; Chicago, 1962——). description ends , IV, 391–92; VI, 493, 497 n. 31; Ferguson, Power of the Purse, pp. 128–29). The resolution of 1 Nov. condemning paper money concluded with the admonition “that virtue … is the basis of a republican government.”

6JM was citing Franklin’s earlier work, “Remarks and Facts concerning American Paper Money” (1767) which was a rebuttal to the Board of Trade arguments advanced on behalf of the restrictive Currency Act of 1764 (Smyth, Writings of Benjamin Franklin, V, 1–14). In his essay Franklin admitted paper money had depreciated after the French and Indian War in New England and Virginia owing to the great quantity issued and the fact that in Virginia “the War made Tobacco a poorer Remittance, from the higher Price of Freight and Insurance” (ibid., V, 4).

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