[Here a part of the manuscript is missing.]
which, having all the operation of money, and of a more advantageous
kind than that which the lenders have parted with, will have all the
efficacy of a payment. It is for this reason they are made to bear
interest: and there can be no doubt, that every man will prefer a
species of money which answers all the purposes of a currency, and
even, when lying idle, brings in a profit to the possessor. The same
consideration will prevent the lenders recalling the old paper, at the
quarterly payments; because they hold a more valuable property instead
of it. The interest is to be paid in specie, as a further temptation,
for which a small sum will suffice. The denomination of the money is
altered; because it will produce a useful illusion. Mankind are much
led by sounds and appearances; and the currency having changed its
name, will seem to have changed its nature.
The Bank will advance bills to the amount of two millions of pounds
sterling to Congress; and, in addition to its stock, will now have a
debt due it of this sum, which is to be considered as so much gained.
[Here a part of the manuscript is missing.]
Brought over, 7,075,000
To be deducted,
Drawn out of circulation, by the sale
of goods imported, 4,000,000
By governmental taxes, supposed to be, 1,000,000--5,000,000
---------
Remaining in circulation the fourth year, £2,075,000
This will be less than the preceding, which is occasioned by the
million supposed to be drawn in by taxes.
The national debt, on this plan, will stand thus, at the end of three
years:
Foreign loan, 2,000,000
Domestic loan, at two millions per annum, 6,000,000
Interest, at four per cent., 320,000
---------
8,320,000
Half the value of the Bank, 7,900,000
---------
Balance against the United States, £420,000
We may, therefore, by means of this establishment, carry on the war
three years, and only incur a debt of four hundred and twenty thousand
pounds over and above the guarantee of the subscription money; which,
however, is not to be paid till the end of ten years.
I have said, in one place, that abstract calculations, in questions
of finance, are not to be relied on: and as the complex operations of
trade are involved in the present plan, I am, myself, diffident of
those flattering results which it presents at every step. I am aware
how apt the imagination is to be heated in projects of this nature,
and to overlook the fallacies which often lurk in first principles.
But when I consider, on the other hand, that the scheme stands on the
firm footing of public and private faith; that it links the interest of
the State in an intimate connection with those of the rich individuals
belonging to it; that it turns the wealth and influence of both into a
commercial channel, for mutual benefit, which must afford advantages
not to be estimated; that there is a defect of circulating medium,
which this plan supplies, by a sort of creative power; converting what
is so produced into a real and efficacious instrument of trade; I
say, when I consider these things, and many more that might be added,
I cannot forbear feeling a degree of confidence in the plan; and, at
least, hoping that it is capable of being improved into something that
will give relief to our finances.
I do not believe, that the advantages will be so great in fact, as
they seem to be in speculation. They will be limited by the means of
commerce which the States produce; and these may not be so extensive
in the beginning as the plan supposes. Beside this, the profits of
the commerce will not be so large, in proportion, after the first or
second year, as during those years: neither will it be possible to
increase the paper credit in the same degree. But the Bank of England
is a striking example, how far this may be carried, when supported by
public authority and private influence. On the other hand, a variety of
secondary expedients may be invented, to enlarge the advantages of the
bank. The whole system of annuities, as practised in England, may be
ingrafted upon it, with such differences as are proper to accommodate
it to our circumstances. The European loan may also be converted into
a European Bank, the interests of which, being interwoven with the
American Bank, may engage rich individuals there in promoting and
extending the plan.
Very beneficial contracts may be made between Government and the
Company, for supplying the army, by which money may be saved to the
public, the army better furnished, and the profits of the bank extended.
I have confined the Bank to the space of ten years; because this will
be long enough to judge of its advantages and disadvantages: and the
latter may be rectified by giving it a new form. I do not suppose it
will ever be discontinued; because it seems to be founded on principles
that must always operate well, and make it the interest, both of
Government and the Company, to uphold it. But I suppose the plan
capable of improvement, which experience will suggest.
I give one half of the whole property of the Bank to the United States;
because it is not only just, but desirable to both parties. The United
States contribute a great part of the stock; their authority is
essential to the existence of the Bank; their credit is pledged for
its support. The plan would ultimately fail, if the terms were too
favorable to the Company, and too hard upon Government. It might be
encumbered with a debt which it could never pay, and be obliged to take
refuge in a bankruptcy. The share which the State has in the profits,
will induce it to grant more ample privileges, without which the trade
of the Company might often be under restrictions injurious to its
success.
It is not, perhaps, absolutely necessary that the sum subscribed
should be so considerable as I have stated it, though the larger the
better. It is only necessary it should be considerable enough to engage
a sufficient number of the principal moneyed men in the scheme. But
Congress must take care to proportion the advantages they give and
receive.
It may be objected, that this plan will be prejudicial to trade, by
making the Government a party with a trading Company; which may be
a temptation to arrogate exclusive privileges, and thereby fetter
that spirit of enterprise and competition, on which the prosperity
of commerce depends. But Congress may satisfy the jealousies on this
head, by a solemn resolution not to grant exclusive privileges, which
alone can make the objection valid. Large trading Companies must be
beneficial to the commerce of a nation, when they are not invested with
these, because they furnish a capital with which the most extensive
enterprises may be undertaken. There is no doubt the establishment
proposed would be very serviceable at this juncture, merely in a
commercial view; for private adventurers are not a match for the
numerous obstacles resulting from the present posture of affairs.
The present plan is the product of some reading on the subjects of
commerce and finance, and of occasional reflections on our particular
situation: but a want of leisure has prevented its being examined in so
many lights, and digested so materially, as its importance requires.
If the outlines are thought worthy of attention, and any difficulties
occur which demand explanation: or if the plan be approved, and the
further thoughts of the writer are desired; a letter directed to James
Montague, Esquire, lodged in the post-office at Morristown, will be a
safe channel of any communications you may think proper to make; and
an immediate answer will be given. Though the writer has reasons which
make him unwilling to be known; if a personal conference with him
should be thought material, he will endeavor to comply.
You will consider this as a hasty production, and excuse the
incorrectnesses with which it abounds.
I am, Sir, very respectfully,
Your most obedient and humble servant.
[3] France owes a debt of near two hundred millions of pounds sterling;
of which about twenty-eight millions is due to Governments and
individuals in the United Provinces.
England owes a debt not much short: of which about thirty millions is
likewise due in the United Provinces.
The United Provinces, themselves, owe a debt of the generality,
of fifty millions sterling besides the particular debts of each
province. Russia, Prussia, Denmark, Sweden, all owe money to the
United Provinces, notwithstanding the assistance of their mines. These
Governments, too, are patterns of economy. Sweden receives a constant
supply from France. The House of Austria is also to be included in the
catalogue. Spain is almost the only considerable European power to be
excepted; but this is to be attributed to that inexhaustible fund of
treasure which she possesses in the mines of South America.
The King of Prussia is one of those potentates the least in debt;
notwithstanding he has a long time made a figure in Europe, much
above what the comparative strength and resources of his kingdom
entitled him to expect. This his superior genius has effected. By a
wise administration, he maintains an army of one hundred and fifty
thousand men, nearly equal to that of France, with one-third of its
people, and less than a third of its riches. This he does by judicious
arrangements; by a rigid economy; and by a species of commerce, which
is carried on, on account of the State. There are several public
manufactories, from which the army is supplied; and by the help of
which, the money paid out with one hand is taken in by the other.
[4] This will appear, by recurring to our expenses in the commencement
of the war, before the money was depreciated. In ’75, which was only
three-fourths of a year, the emissions amounted to seven millions
of dollars: in ’76, to fourteen millions. The war did not begin, in
earnest, till ’76.
[5] This is meant, without employing the assistance of a foreign loan,
and of other expedients beside borrowing and taxing.
[6] This will appear from the plan which will be proposed.
[7] To form an idea of the effect of this plan, let it be supposed that
the goods imported amount to two millions of pounds sterling, and that
these sell at one hundred and fifty pounds in paper, for each pound
sterling. The whole proceeds will be eight hundred millions of dollars:
to these add two hundred millions, raised in taxes. There will then be
in the hands of the public, one thousand millions of dollars; which, at
sixty to one, gives sixteen millions six hundred and sixty-six thousand
six hundred and sixty-six and two-thirds of real dollars. Take the year
’76 for a standard, and suppose fourteen millions of dollars to be
the proper annual expense of the war, which is only two millions six
hundred and sixty-six thousand six hundred and sixty-six and two-thirds
less than the whole amount of the goods and taxes. At this rate, the
plan would do little more than defray the expenses of the war for one
year. But this calculation is not exactly true; because the money would
certainly appreciate, in some degree, by the reduction of its quantity:
yet, as this reduction would not last, at least in the same extent, to
preserve the appreciation; and as, in proportion to the appreciation,
the price of goods must fall, and bring less money in, it is difficult
to say whether it would not ultimately come to the same thing.
[8] The taxes are made to increase every year, for the three years;
because the money in circulation increases, and, consequently, the
people can afford to pay more.
[9] This is sixty paper dollars to one dollar of four shillings and
sixpence sterling; which is the real value of the money. But if it is
apprehended that this may meet with opposition, let the valuation of
the bank notes be the same as the price of European Bills of Exchange.
Other operations must be regulated accordingly.
[10] The reason of this is, to preserve the idea of a Stock, and make
it seem that the old paper is still in existence. But there is danger,
notwithstanding the reasons to the contrary, that there may be a run
upon the bank, from particular causes, which may embarrass it. It is
not probable the old paper will be entirely, though nearly, called out
of circulation: what remains, will appreciate: this may tempt those
who have bank notes, to demand payment on the terms of the original
deposit; without considering that, by bringing too great a quantity
again into circulation, it will again depreciate. The Bank may be
pushed to a very disagreeable extremity by this means. I do not know
whether it may not be advisable to confine the privilege of repayment
to the lenders to the Bank, and make the bills bear interest, payable
every three months, without making the principal demandable. Much may
be said for and against. It is well worth consideration.
[11] This board ought immediately to be established, at all events.
The Royal Council of Commerce, in France, and the subordinate Chambers
in each province, form an excellent institution, and may, in many
respects, serve as a model. Congress have too long neglected to
organize a good scheme of administration, and throw public business
into proper executive departments. For Commerce, I prefer a Board;
but for most other things, single men. We want a Minister of War, a
Minister of Foreign Affairs, a Minister of Finance, and a Minister of
Marine. There is always more decision, more dispatch, more secrecy,
more responsibility, where single men, than where bodies are concerned.
By a plan of this kind, we should blend the advantages of a Monarchy
and of a Republic, in a happy and beneficial union. Men will only
devote their lives and attentions to the mastering a profession, on
which they can build reputation and consequence which they do not share
with others.
If this plan should be approved, Congress ought immediately to appoint
a Minister of Finance, under whatsoever title they think proper,
and charge him with its execution. He ought to be a man of ability,
to comprehend it in all its consequences; and of eloquence, to make
others comprehend and relish it. He ought, beside, to have some general
knowledge of the science. This man ought immediately to address himself
to some of the most sensible moneyed men; and endeavor to convince them
of the utility of the project. These must engage others, and so on,
till a sufficient number is engaged.
Then Congress must establish the Bank, and set it agoing. I know of
no man that has better pretensions than yourself; and I shall be very
happy to hear that Congress have said, “Thou art the man.”
I had like to have omitted one remark, which is, that the subscription
money may be guaranteed, if necessary, at 10 to 1, as a greater
inducement. This will only be twenty millions of dollars, or five
millions of pounds sterling; a cheap bargain to get rid of the
perplexities we labor under, and convert the torrent of ideal money
into a moderate, but sufficient, stream, to supply the real wants of
the State. Congress, no doubt, would be able to borrow enough abroad to
pay this debt, if it should not find better means within itself. But I
shall be much mistaken, if the proprietors will desire to be repaid,
and not prefer continuing the loan to Government on reasonable terms.