The Diplomatic Correspondence of the American Revolution Volume V Part 17

I think there can be little need of ill.u.s.tration; but two or three examples may make my meaning more obvious. A farmer has now four thousand dollars for a pair of oxen, which he sells to a commissary to subsist the army. When the money was issued in 1775, he would have been glad to have taken one hundred. A laborer has now twenty dollars a day for his work; five years ago, he would have been rejoiced to have received half a dollar. The same with the artisan, merchant, and all others, but those who have fixed salaries, or money at interest.

Most of these persons would be willing to take hard money for his work and his produce, at the rate he did six years ago. Where is the reason, then, that Congress should pay them forty times as much as they take of their neighbors in private life?

The amount of an ordinary commerce, external and internal, of a society, may be computed at a fixed sum. A certain sum of money is necessary to circulate among the society, in order to carry on their business. This precise sum is discoverable by calculation, and reducible to certainty. You may emit paper, or any other currency for this purpose, until you reach this rule, and it will not depreciate.

After you exceed this rule, it will depreciate; and no power, or act of legislation hitherto invented, will prevent it. In the case of paper, if you go on emitting forever, the whole ma.s.s will be worth no more than that was, which was emitted within the rule. When the paper, therefore, comes to be redeemed, this is the only rule of justice for the redemption of it. The Congress have fixed five millions for this rule. Whether this is mathematically exact, I am not able to say; whether it is a million too little, or too much, I know not. But they are the best judges; and by the accounts of the money being at seventy for one, and bills of exchange at fiftyfive for one, it looks as if five millions was too high a sum, rather than too small.

It will be said, that the faith of society ought to be sacred, and that the Congress have pledged the public faith for the redemption of the bills, at the value on the face of them. I agree that the public faith ought to be sacred. But who is it that has violated this faith?

Is it not every man, who has demanded more paper money for his labor or his goods than they were worth in silver? The public faith, in the sense these words are here used, would require that Congress should make up to every man, who for five years past has paid more in paper money for anything he has purchased, than he could have had it for in silver. The public faith is no more pledged to the present possessor of the bills, than it is to every man, through whose hands they may have pa.s.sed, at a less value than the nominal value. So that according to this doctrine, Congress would have two hundred millions of dollars to pay to the present possessors of the bills, and to make up to every man, through whose hands they may have pa.s.sed, the difference at which they pa.s.sed between them and silver.

It should be considered, that every man, whether native or foreigner, who receives or pays this money at a less value than the nominal value, breaks this faith. For the social compact being between the whole and every individual, and between every individual and the whole, every individual, native or foreigner, who uses this paper, is as much bound by the public faith to use it according to the terms of its emission as the Congress is. And Congress have as good a right to reproach every individual, who now demands more paper for his goods than silver, with a breach of the public faith, as he has to reproach the public or their representatives.

I must beg your Excellency's excuse for calling your attention a little longer to this head of public faith, because I cannot rest easy, while my country is supposed to be guilty of a breach of their faith, and in a case where I am clear they have not been so, especially by your Excellency, whose good opinion they and I value so much. This public faith is in the nature of a mutual covenant, and he who would claim a benefit under it, ought to be careful in first fulfilling his part of it. When Congress issued their bills, declaring them, in effect, to be equal to silver, they unquestionably intended that they should be so considered, and that they should be received accordingly. The people, or individuals covenanted, in effect, to receive them at their nominal value; and Congress, in such case, agreed on their part to redeem them at the same rate. This seems to be a fair and plain construction of this covenant, or public faith; and none other I think can be made, that will not degenerate into an unconscionable contract, and so destroy itself.

Can it be supposed, that Congress ever intended, that if the time should come when the individual refused to accept and receive their bills at their nominal value, and demanded, and actually received them at a less value, that, in that case, the individual should be ent.i.tled to demand, and receive of the public, for those very bills, silver equal to their nominal value? The consideration is, in fact, made by the public at the very instant the individual receives the bills at a discount; and there is a tacit and implied agreement springing from the principles of natural justice or equity, between the public and the individual; that as the latter has not given to the former a consideration equal to the nominal value of the bills, so in fact, the public shall not be held to pay the nominal value in silver to the individual. Suppose it otherwise, and how will the matter stand? The public offers to an individual a bill, whose nominal value is, for example, forty dollars, in lieu of forty silver dollars; the individual says, I esteem it of no more value than one silver dollar, and the public pays it to him at that value; yet he comes the next day, when the bill may be payable, and demands of the public forty silver dollars in exchange for it. And why? Because the bill purports on the face of it, to be equal to forty silver dollars. The answer is equally obvious with the injustice of the demand. Upon the whole, as the depreciation crept in gradually, and was unavoidable, all reproaches of a breach of public faith ought to be laid aside; and the only proper inquiry now really is, what is paper honestly worth? What will it fetch at market? And this is the only just rule of redemption.

It becomes me to express myself with deference, when I am obliged to differ in opinion from your Excellency; but this being a subject peculiar to America, no example entirely similar to it, that I know of, having been in Europe, I may be excused, therefore, in explaining my sentiments upon it.

I have the misfortune to differ from your Excellency, so far as to think, that no general distinction can be made between natives and foreigners. For, not to mention that this would open a door to numberless frauds, I think, that foreigners when they come to trade with a nation, make themselves temporary citizens, and tacitly consent to be bound by the same laws. And it will be found, that foreigners have had quite as much to do, in depreciating this money, in proportion, as natives, and that they have been in proportion much less sufferers by it. I might go further and say, that they have been in proportion greater gainers by it, without suffering any considerable share of the loss.

The paper bills out of America, are next to nothing. I have no reason to think, that there are ten thousand dollars in all Europe; indeed, I do not know of one thousand. The agents in America of merchants in Europe, have laid out their paper bills in lands, or in indigo, rice, tobacco, wheat, flour, &c.; in short, in the produce of the country.

This produce they have s.h.i.+pped to Europe, sold to the King's s.h.i.+ps, and received bills of exchange, or s.h.i.+pped to the West India Islands, where they have procured cash, or bills of exchange. The surplus they have put into the loan offices from time to time, for loan offices have been open all along, from 1776, I believe, to this time. Whenever any person lent paper bills to the public, and took loan office certificates, he would have been glad to have taken silver in exchange for the bills, at their then depreciated value. Why should he not be willing now? Those who lent paper, when two paper dollars were worth one in silver, will have one for two; those who lent, when forty were worth one, will have one for forty; and those who lent, when paper was as good as silver, will have dollar for dollar.

Your Excellency thinks it would be hard, that those who have escaped the perils of the seas and of enemies, should be spoiled by their friends. But Congress have not spoiled any; they have only prevented themselves and the public from being spoiled. No agent of any European merchant, in making his calculations of profit and loss, ever estimated the depreciated bills at the nominal value; they all put a profit upon their goods sufficient to defray all expenses of insurance, freight, and everything else, and had a great profit besides, receiving the bills at the current, not the nominal value.

It may not be amiss to state a few prices current at Boston the last and the present year, in order to show the profits which have been made. Bohea tea, forty sous a pound at L'Orient and Nantes, fortyfive dollars; salt, which costs very little in Europe, and used to be sold for a s.h.i.+lling a bushel, forty dollars a bushel, and in some of the other States, two hundred dollars, at times; linens, which cost two livres a yard in France, forty dollars a yard; broadcloths, a louis d'or a yard here, two hundred dollars a yard; ironmongery of all sorts, one hundred and twenty for one; millinary of all sorts, at an advance far exceeding. These were the prices at Boston. At Philadelphia, and in all the other States, they were much higher.

These prices, I think, must convince your Excellency that allowing one half, or even two thirds of the vessels to be taken, there is room enough for a handsome profit, deducting all charges, and computing the value of bills at the rate of silver at the time.

There are two other sources from which foreigners have made great profits. The difference between bills of exchange and silver. During the whole of our history, when a man could readily get twentyfive paper dollars for one in silver, he could not get more than twelve paper dollars for one, in a bill of exchange. Nearly this proportion was observed all along, as I have been informed. The Agent of a foreign merchant had only to sell his goods for paper, or buy paper with silver at twentyfive for one, and immediately go and buy bills at twelve for one. So that he doubled his money in a moment.

Another source was this; the paper money was not alike depreciated in all places at the same time. It was forty for one at Philadelphia, sometimes, when it was only twenty at Boston. The agent of a foreign merchant had only to sell his goods, or send silver to Philadelphia, and exchange it for paper, which he could lay out at Boston for twice what it cost him, and in this way again double his property.

This depreciating paper currency being, therefore, such a fruitful source for men of penetration to make large profits, it is not to be wondered that some have written alarming letters to their correspondents.

No man is more ready than I am to acknowledge the obligations we are under to France; but the flouris.h.i.+ng state of her marine and commerce, and the decisive influence of her councils and negotiations in Europe, which all the world will allow to be owing in a great measure to the separation of America from her inveterate enemy, and to her new connexions with the United States, show that the obligations are mutual. And no foreign merchant ought to expect to be treated in America better than her native merchants, who have hazarded their property through the same perils of the seas and of enemies.

In the late Province of the Ma.s.sachusetts Bay, from the years 1745 to 1750, we had full experience of the operation of paper money. The Province engaged in expensive expeditions against Louisburg and Canada, which occasioned a too plentiful emission of paper money, in consequence of which, it depreciated to seven and a half for one. In 1750, the British Parliament granted a sum of money to the Province to reimburse it, for what it had expended more than its proportion in the general expense of the empire. This sum was brought over to Boston in silver and gold, and the Legislature determined to redeem all their paper with it at the depreciated value. There was a similar alarm at first, and before the matter was understood, but after the people had time to think upon it, all were satisfied to receive silver at fifty s.h.i.+llings an ounce, although the face of the bills promised an ounce of silver for every six s.h.i.+llings and eight pence. At that time, the British merchants were more interested in our paper money, in proportion, than any Europeans now are; yet they did not charge the Province with a breach of faith, or stigmatise this as an act of bankruptcy. On the contrary, they were satisfied with it.

I beg leave to remind your Excellency, that at that time, the laws of Ma.s.sachusetts were subject not only to the negative of the King's Governor, but to a revision by the King in Council, and were there liable to be affirmed or annulled. And from the partial preference, which your Excellency well knows, was uniformly given to the subjects of the King, within the realm, when they came in compet.i.tion with those of the subjects of the Colonies, there is no reason to doubt, that if that measure, when thoroughly considered, had been unjust in itself, but the merchants in England would have taken an alarm, and procured the act to be disallowed by the King in Council. Yet the merchants in England, who well understood their own interests, were quite silent upon this occasion, and the law was confirmed in the Council; nor can it be supposed to have been confirmed there in a manner unnoticed. It had met with too much opposition among a certain set of interested speculators in the then Province, for that supposition to be made. And the case of the British merchants, at that time, differed in no respect from the present case of the French, or other foreign merchants, except that the credits of the former were vastly greater, and they must have, consequently, been more deeply interested in that measure of government, than the latter are in the present one. Their acquiescence in the measure, and the confirmation of that act, must have rested upon the full conviction of the British administration and of the merchants, of the justice of it. Your Excellency will agree, in the difficulty of making any distinction between the French merchant and the Spanish or Dutch merchant, by any general rule; for all these are interested in this business.

Your Excellency is pleased to ask, whether I think these proceedings of Congress proper to give credit to the United States; to inspire confidence in their promises, and to invite the European nations to partake of the same risks, to which the subjects of his Majesty have exposed themselves?

I have the honor to answer your Excellency, directly and candidly, that I do think them proper for these ends, and I do further think them to be the only measures that ever could acquire credit and confidence to the United States. I know of no other just foundation of confidence in men, or bodies of men, than their understanding and integrity; and Congress have manifested to all the world by this plan, that they understand the nature of their paper currency, that its fluctuation has been the grand obstacle to their credit; and that it was necessary to draw it to a conclusion, in order to introduce a more steady standard of commerce; that, to this end, the repeal of their laws, which made the paper a tender, and giving a free circulation to silver and gold, were necessary. They have further manifested by these resolutions, that they are fully possessed of the only principle there is in the nature of things for doing justice in this business, to the public and to individuals, to natives and foreigners, and that they are sufficiently possessed of the confidence of the people; and there is sufficient vigor in their government to carry it into execution.

Notwithstanding all, if any European merchant can show any good reason for excepting his particular case from the general rule, upon a representation of it to Congress, I have no doubt they will do him justice.

Moreover, if his Excellency the Chevalier de la Luzerne can show, that the sum of five millions of dollars is not the real worth of all the paper money that is abroad, and that ten millions of dollars is the true sum, I doubt not Congress would alter their rule, and redeem it at twenty for one. But I doubt very much whether this can be shown.

But I cannot see that any distinction could be made between French merchants and those of other nations, but what would be very invidious and founded upon no principle. I cannot see that any distinction can be made between natives and foreigners, but what would have a most unhappy effect upon the minds of the people in America, and be a partiality quite unwarrantable; and, therefore, your Excellency will see, that it is impossible for me to take any steps to persuade Congress to retract, because it would be acting in direct repugnance to the clearest dictates of my understanding and judgment, of what is right and fit.

I cannot excuse myself from adding, that most of the arms, ammunition, and clothing for the army, have been contracted for here, by the Ministers of Congress, and paid for, or agreed to be paid for here, in silver and gold. Very little of these articles have been s.h.i.+pped by private adventurers. They have much more commonly s.h.i.+pped articles of luxury, of which the country did not stand in need, and upon which they must have made vast profits.

Thus have I communicated to your Excellency my sentiments, with that freedom, which becomes a citizen of the United States, intrusted by the public with some of its interests. I intreat your Excellency to consider them as springing from no other motive, than a strong attachment to the union of the States, and a desire to prevent all unnecessary causes of parties and disputes; and from a desire not only to preserve the alliance in all its vigor, but to prevent everything, which may unnecessarily oppose itself to the affection and confidence between the two nations, which I wish to see increased every day; as every day convinces me more and more of the necessity, that France and America will be under, of cheris.h.i.+ng their mutual connexions.

I have the honor to be, &c.

JOHN ADAMS.

TO B. FRANKLIN.

Paris, June 22d, 1780.

Sir,

I have this day the honor of a letter from his Excellency the Count de Vergennes, on the subject of the resolutions of Congress, of the 18th of March, concerning the paper bills, in which his Excellency informs me, that the Chevalier de la Luzerne has orders to make the strongest representations upon the subject. I am not certain whether his Excellency means, that such orders were sent so long ago as to have reached the hand of the Minister at Congress, or whether they have been lately expected. If the latter, I submit to your Excellency, whether it would not be expedient to request, that those orders may be stopped until proper representations can be made at Court, to the end, that if it can be made to appear, as I firmly believe that it may, that those orders were given upon misinformation, they may be revoked, otherwise sent on.

Your Excellency will excuse this, because it appears to me a matter of very great importance. The affair of our paper is sufficiently dangerous and critical, and if a representation from his Majesty should be made, advantages will not fail to be taken of it by the tories, and by interested and disappointed speculators, who may spread an alarm among many uninformed people, so as to endanger the public peace.

I have the honor to be, &c.

JOHN ADAMS.

TO THE PRESIDENT OF CONGRESS.

Paris, June 26th, 1780.

Sir,

The resolutions of Congress, of the 18th of March, respecting the paper bills, appeared first in Europe, as recited in the act of the a.s.sembly of Pennsylvania; they were next published in the English newspapers, as taken from a Boston paper published by the Council; at last the resolutions appeared in the Journals of Congress.

A great clamor was raised, and spread, that the United States had violated their faith, and had declared themselves bankrupts, unable to pay more than two and a half per cent. A gentleman soon after called on me, and told me, that the Court was alarmed, and that the Count de Vergennes would be glad to consult me upon the subject. I then received a letter from Boston, acquainting me, that the Legislature of Ma.s.sachusetts had adopted the plan. Of this letter I sent an extract immediately to the Count, and waited on him at Versailles, where I had the honor of a long conversation with his Excellency on the subject.

He desired me to converse with his first Secretary, which I did particularly.

His Excellency told me he had written to me on the subject, and that I should receive the letter the next day. On my return from Versailles, I received a letter from Mr Gerry, informing me of the resolutions to pay the Loan Office certificates, at the value of money at the time when they were issued. I had before told the Count, that I was persuaded this was a part of the plan. I sent an extract of this letter also to the Count, without loss of time. The next day I received the letter from his Excellency, the copy of which, and of my answer, are enclosed. Yesterday, Mr Trumbull of Connecticut, favored me with a law of the State, respecting this matter, and an estimate of the gradual progress of depreciation. These papers I forthwith transmitted to his Excellency. I am determined to give my sentiments to his Majesty's Ministers whenever they shall see cause to ask them, although it is not within my department, until I shall be forbidden by Congress; and to this end I shall go to Court often enough to give them an opportunity to ask them, if they wish to know them.

The clamor that has been raised, has been so industriously spread, that I cannot but suspect, that the motive at bottom has either been a wish to have an opportunity of continuing the profitable speculations, which artful men are able to make in a depreciating currency, or else by spreading a diffidence in American credit, to discourage many from engaging in American trade, that the profits of it may still continue to be confined to a few.

I have the honor to be, &c.

JOHN ADAMS.

TO THE PRESIDENT OF CONGRESS.

Paris, June 29th, 1780.

Sir,