April 30, 1781.
Sir:
I was among the first who were convinced that an administration, by
single men, was essential to the proper management of the affairs of
this country. I am persuaded, now, it is the only resource we have, to
extricate ourselves from the distresses which threaten the subversion
of our cause. It is palpable, that the people have lost all confidence
in our public councils; and it is a fact, of which I dare say you are
as well apprised as myself, that our friends in Europe are in the same
disposition. I have been in a situation that has enabled me to obtain a
better idea of this than most others; and I venture to assert, that the
Court of France will never give half the succors to this country, while
Congress hold the reins of administration in their own hands, which
they would grant, if these were intrusted to individuals of established
reputation, and conspicuous for probity, abilities, and fortune.
With respect to ourselves, there is so universal and rooted a
diffidence of the government, that, if we could be assured the future
measures of Congress would be dictated by the most perfect wisdom and
public spirit, there would be still a necessity for a change in the
forms of our administration, to give a new spring and current to the
passions and hopes of the people. To me it appears evident, that an
executive ministry, composed of men with the qualifications I have
described, would speedily restore the credit of government abroad
and at home--would induce our allies to greater exertions in our
behalf--would inspire confidence in moneyed men in Europe, as well as
in America, to lend us those sums of which it may be demonstrated we
stand in need, from the disproportion of our national wealth to the
expenses of the war.
I hope, sir, you will not consider it as a compliment, when I assure
you that I heard, with the greatest satisfaction, of your nomination
to the department of finance. In a letter of mine, last summer, to Mr.
Duane, urging, among other things, the plan of an executive ministry, I
mentioned you as the person who ought to fill that department. I know
of no other in America, who unites so many advantages; and of course
every impediment to your acceptance, is to me a subject of chagrin. I
flatter myself Congress will not preclude the public from your services
by an obstinate refusal of reasonable conditions; and, as one deeply
interested in the event, I am happy in believing you will not easily
be discouraged from undertaking an office, by which you may render
America, and the world, no less a service than the establishment of
American independence! ’Tis by introducing order into our finances--by
restoring public credit--not by gaining battles, that we are finally to
gain our object. ’Tis by putting ourselves in a condition to continue
the war--not by temporary, violent, and unnatural efforts to bring it
to a decisive issue, that we shall, in reality, bring it to a speedy
and successful one. In the frankness of truth I believe, sir, you are
the man best capable of performing this great work.
In expectation that all difficulties will be removed, and that you
will ultimately act on terms you approve, I take the liberty to submit
to you some ideas, relative to the objects of your department. I
pretend not to be an able financier: it is a part of administration
which has been least in my way, and, of course, has least occupied my
inquiries and reflections. Neither have I had leisure or materials to
make accurate calculations. I have been obliged to depend on memory
for important facts, for want of the authorities from which they are
drawn. With all these disadvantages, my plan must necessarily be crude
and defective; but if it may be a basis for something more perfect, or
if it contains any hints that may be of use to you, the trouble I have
taken myself, or may give you, will not be misapplied. At any rate, the
confidence I have in your judgment, assures me that you will receive,
with pleasure, communications of this sort: if they contain any thing
useful, they will promote your views and the public benefit; if not,
the only evil is the trouble of reading them; and the best informed
will frequently derive lights, even from reveries of projectors and
quacks. There is scarcely any plan so bad as not to have something good
in it. I trust mine to your candor without further apology; you will at
least do justice to my intention.
The first step towards determining what ought to be done in the
finances of this country, is to estimate, in the best manner we can,
its capacity for revenue; and the proportion between what it is able to
afford, and what it stands in need of, for the expenses of its civil
and military establishments. There occur to me two ways of doing this:
1st. By examining what proportion the revenues of other countries have
borne to their stock of wealth, and applying the rule to ourselves,
with proper allowance for the difference of circumstances. 2d. By
comparing the result of this rule with the product of taxes in those
States which have been the most in earnest in taxation. The reason for
having recourse to the first method is, that our own experience of our
faculties in this respect, has not been sufficiently clear, or uniform,
to admit of a certain conclusion: so that it will be more satisfactory
to judge of them by a general principle, drawn by the example of other
nations, compared with what we have effected ourselves, than to rely
entirely upon the latter.
The nations with whose wealth and revenues we are best acquainted, are
France, Great Britain, and the United Provinces. The real wealth of a
nation, consisting in its labor and commodities, is to be estimated
by the sign of that wealth--its circulating cash. There may be times
when, from particular accidents, the quantity of this may exceed or
fall short of a just representative; but it will turn again to a proper
level, and, in the general course of things, maintain itself in that
state.
The circulation of France is almost wholly carried on in the precious
metals; and its current cash is estimated at from fifteen to sixteen
hundred millions of livres. The net revenue of the kingdom, the sum
which actually passes into the public coffers, is somewhere between
three hundred and sixty and four hundred millions, about one fourth of
the whole of its currency. An estimate of the wealth of this nation
is liable to less fallacy than of that of the other two, as it makes
little use of paper credit, which may be artificially increased, and
even supported, a long time beyond its natural bounds.
It is supposed that the gross sum extracted from the people by the
collectors of the revenue, may be one-third more than that which goes
into the treasury: but as their exactions are excessive, and fall too
heavy on particular orders, who are by that means reduced to indigence
and misery, it is to be inferred, that, with moderate and reasonable
expenses of collection, the present revenue is as great as the kingdom
can well afford, from its present quantity of wealth.
The circulating cash of Great Britain, in paper and specie, may be
stated at about forty millions of pounds sterling. Mr. Hume supposes
it to have been, at the time he wrote his Essay on the Balance of
Trade, about thirty millions. Other writers have carried it to fifty,
and it is probably in a medium that we shall find the truth. I do not
include in this, the whole amount of Bank notes, Exchequer bills,
India bonds, etc. etc.; but only such part as is really employed in
common circulation, and performs the offices of current cash. In ’75,
by Dr. Price’s statement, the net revenue of Great Britain was ten
millions--that is, about one-fourth of its current cash, as in France.
I have never met with any calculation that might be depended upon, of
the current cash of the Seven Provinces. Almost the whole of their
coin, as well as large quantities of plate and bullion, are shut up
in the Bank of Amsterdam. The real wealth of the Bank is believed to
be about fifteen millions sterling; though, upon the strength of
this fund, it has a credit almost unlimited, that answers all the
purposes of cash in trade. As the Dutch, by their prudent maxims, have
commonly the rate of exchange throughout Europe in their favor, and
a considerable balance of trade, the use of paper credit (which, in
part, also depends upon the particular nature of their Banks) has not
the same tendency with them, as in England, to banish the precious
metals. We may therefore suppose these to be here, as in France, the
true sign of the wealth of the nation. If to the fifteen millions in
Bank, we add two millions of specie for the retail circulation and
various transactions of business, we shall, I imagine, have nearly the
true stock of wealth of the United Provinces. Their revenues amount
to something more than four millions, and bear the same proportion to
the stock from which they are drawn, as those of France and England.
I confess, however, the data, in their case, are not sufficiently
ascertained to permit us to rely equally on the result. From these
three examples we may venture to deduce this general rule,--that the
proportion of revenue which a nation is capable of affording, is
about one-fourth of its circulating cash, so far as this is a just
representative of its labor and commodities.
This is only applicable to commercial countries, because, in those
which are not so, the circulating cash is not an adequate sign. A great
part of domestic commerce is carried on by barter; and the State must
receive a part of its dues in the labor and commodities themselves. The
proportion, however, of the revenues of such a State to the aggregate
of its labor and commodities, ought to be the same as in the case
of trading nations to their circulating cash; with this difference,
that the difficulty of collection and transportation, the waste and
embezzlement inseparable from this mode of revenue, would make the real
advantage and ultimate gain to the State, infinitely less than when the
public dues are paid in cash.
When I say that one-fourth part of its stock of wealth is the revenue
which a nation is capable of affording to the government, I must be
understood in a qualified, not in an absolute sense. It would be
presumptuous to fix a precise boundary to the ingenuity of financiers,
or to the patience of the people: but this we may safely say, that
taxation is already carried, in the nations we have been speaking of;
to an extent which does not admit of a very considerable increase
without a proportionable increase of industry. This suffices for a
standard to us; and we may proceed to the application.
From a comparison of the several estimates I have seen, of the quantity
of current cash in this country previous to the war (specie and paper),
I have settled my opinion of the amount at thirty millions of dollars,
of which about eight might have been in specie: one-fourth of this, by
analogy, was at that time the proper revenue of these States; that is,
seven and a half millions of dollars.
As taxation, however, has, by slow gradations, been carried to an
extreme in those countries which I have chosen as examples, that would
not be, but in a course of time, practicable in this, where the people
have been so little accustomed to taxes, it may be doubted whether
it would be possible to raise the same proportion of revenue here.
The object of the war, I imagine, would supply the want of habit,
and reconcile the minds of the people to paying to the utmost of
their abilities, provided the taxes were judiciously imposed, and the
revenues wisely administered. Besides this, there is a circumstance
in our favor, which puts it in the power of government to raise an
equal proportion of revenue without burthening the lower classes of
the people in the same degree as in Europe. This circumstance is the
much greater equality of fortunes, by which means men, in this country,
may be made to contribute to the public exigencies in a much juster
proportion to their property; and this is in fact the case. In France
the rich have gained so entire an ascendant, that there is a constant
sacrifice of the ease and happiness of the people to their avarice and
luxury: their burthens are in no proportion to those of the middle
order, and still less to those of the poor. In England and Holland the
case, though not altogether, is in a great measure the same. There are
also men of very large moneyed capitals, which were either formerly
exempt from taxes by being in the public funds, or, having no visible
representative for taxation to operate upon, enjoy virtually the same
advantages. But if, at the commencement of the war, the ability of
these States for revenue may be rated at seven and a half millions of
dollars, when the amount of its circulating cash was thirty millions,
now that it is reduced more than one-half in real value, to what
revenue are they to be supposed equal at this time? I should judge
about one-fifth less, and not more.
The diminution of our circulating cash is principally artificial. It is
true, our foreign commerce has declined by the war, but our domestic
commerce has increased. I know of no good reason to believe, that the
quantity of labor and commodities have been materially diminished. Our
exports have lessened, but our internal consumption has augmented. The
men employed in the army, and in the departments connected with it,
consume and waste three times as much as the same number of men in
civil life. A number of husbandmen have been taken from their ploughs
into military service; but the progress of our natural population
has, in part, supplied their place; and the demands of the war have
increased individual industry. The great influx of money, at first
operated upon the avarice of the people, and, for a long time, served
also as a stimulus to industry, which taxation has since kept up on the
principle of necessity. Notwithstanding the demands and competitions of
two armies for supplies, we see that corn, which is the staple of these
middle States, is cheaper than for some years before the war; a strong
argument of plenty.
We may infer from all this, that we stand in need now of nearly the
same quantity of medium for our circulation as before the war. The
depreciation of the money below the standard, is to be attributed to
a want of confidence rather than to a decay of resources. We find the
people, in some of the States, distressed to pay their taxes, for
want of money, with ample means otherwise; which is a proof, that
our current cash is not a competent representative of the labor and
commodities of the country. Another proof of the same nature is, that
particular States who have found no small difficulty in collecting
their pecuniary taxes, have been successful in raising contributions
to a large amount in kind. This country never having been a country of
manufactures, the productions of the soil ever were, as they still are,
the principal source of revenue. The inhabitants have abridged their
wants of foreign articles, from the scarcity of them, and have, in
part, supplied their place by home manufactures; which, being chiefly
conducted by the women, take nothing from the labor appropriated to
agriculture, while it enables the farmer to spare a larger portion of
his income to the public.
Whatever diminution our means of revenue may have suffered, must
be accounted for on the decay of foreign trade, and on the loss of
territory. The imposts on trade in Great Britain amounted to about a
fourth of its total revenue. The proportion must be less in America.
But suppose it to be the same; suppose our external commerce to
be reduced one-half, which I believe is an ample allowance, then,
one-eighth should be deducted from our revenue on this account; which
would bring it down to six millions, five hundred and sixty-two
thousand, five hundred dollars. Allow for the loss of Georgia and
South Carolina one-eighth of this sum: this would reduce the income
of the remaining States to five millions, seven hundred and forty-two
thousand, one hundred and eighty-eight, and four-eighths, dollars.
But as the allowance, in both cases, is large, the diminution I have
already supposed, of one-fifth of the whole, appears to be nearest the
truth; which leaves these States with a net revenue of six millions of
dollars.
We will now examine how far this rule agrees with experience, and with
what has already been effected in these States. Massachusetts may serve
as a criterion. This is one of the States where taxation has been
carried furthest. Taxes were so heavy last year, that I am informed
there were real marks of distress among some classes of the people. The
Legislature, in their late Address, tell us that they amounted to six
hundred thousand pounds lawful: and they appear to have thought the
pressure of them too great, by reducing them at a time when they are
obliged to have recourse to a large loan, to answer the exigencies of
the current year.
The taxes they specify which seem to belong to those of the present
year, with the addition of the bounties for raising men, and the beef
supply, may be estimated at near five hundred thousand pounds.
This State is in a different situation from any other. Its position
has made it impossible for the enemy to intercept its trade; while
that of all the others has been greatly injured or totally obstructed.
It has become, in consequence, the mart of the States northward of
Pennsylvania; and its commerce has enlarged itself much beyond its
former limits. A great part of the money expended for the support of
the war, has been disbursed there. Congress, in their requisitions for
money, have rated the quota of Massachusetts at of the whole;
but I believe its ability, at this time, is in the proportion of
one-fifth. I found this estimation on an impartial comparison of the
circumstances of the several States.
Admitting the proportion to be just, and taking the taxes of the
present year as a standard, the gross amount of our collective revenues
would be two millions, five hundred thousand pounds lawful; or eight
millions, three hundred and thirty-three thousand, three hundred and
thirty-three, and one-third, dollars. The expense of collection, in
England, is about the ninth of the gross amount; and considering
that our revenue is to be raised in eleven different governments,
each having a complete set of collectors of its own, the expense of
collection, with us, will in all probability be not much less than it
is in England. Supposing it to be the same, and that the taxes were to
prove as productive as their nominal amount, our net revenue would then
be seven millions, four hundred and seven thousand, four hundred and
eight, and one-half, dollars; which considerably exceeds what it ought
to be by my first calculation.
But there are considerations which may induce us to make large
deductions from this sum. When the Legislature tells us, that the
taxes of last year amounted to six hundred thousand pounds, it also
tells us that there was _a part_ of them still to be levied; which,
among other things, had occasioned them to postpone the next tax to a
future session. Whatever is due on the last year, may be considered,
in effect, as an anticipation on the taxes of the present; for it takes
off so much from the ability of the people to pay them. The chances
are, that the additional impositions projected for the current year
will not be raised in their full extent. Taxes are seldom or never so
productive as their estimated value; and in a case like this, must be
expected to be more than commonly deficient.
It is to be observed, also, that the last year was a year of peculiar
exertion. There was a general expectation of some attempt, in
conjunction with our allies, decisive of the war. This made the people
strain their efforts beyond their natural abilities: and yet they did
not comply with the demands of the Legislature.
The money for the bounties this year, which I have calculated at
sixty thousand pounds,[12] may, in like manner, be regarded as an
extraordinary and special contribution, which the people may be willing
to submit to, over and above what they could probably afford to pay, to
get rid of the insupportable inconvenience of temporary enlistments.
Reasonable deductions on these accounts being made, will bring the two
calculations to a pretty exact agreement, and make them confirm each
other. But were not this the case, I should be inclined, in preference,
to trust the first, as being founded on a basis better known and better
ascertained by experience. I believe, however, we may safely conclude,
from both, that between six and seven millions of dollars is the proper
revenue of these States, after the dismemberment of South Carolina and
Georgia.
Having formed an estimate of our ability for revenue, the next thing
to be ascertained is, the annual expense of our civil and military
establishments. With tolerable economy, I should suppose two millions
and a half of dollars would amply suffice for the first, including the
particular administration of each State. For the second, judiciously
managed, eight millions of dollars would be adequate, calculating for
an army of twenty thousand men, which are as many as we shall stand in
need of, or be able[13] to raise. Eleven millions of dollars will be
then the amount of the annual expenses of these States. I speak on a
supposition that a system were embraced, well adapted to rescuing our
affairs from the chaos in which they are now involved; and which, while
it continues, must baffle all calculation.
The difference between our revenues and expenses, on the preceding
scale, will be from four to four and a half millions of dollars; which
deficiency must of course be supplied by credit, foreign or domestic,
or both.
With regard to credit abroad, I think we have little chance of
obtaining a sufficiency, nearly to answer our purpose. France, by all
the reforms she can make in her interior economy, by all the means
she can procure in loans and lotteries, in addition to her revenue,
can do little more than satisfy her own wants. The death of the
Empress Queen, and the notorious hostility of the Emperor, will add
to the number of these. She will, in all probability, be obliged to
pay greater attention to her army, which has been neglected, for
several years past, to apply all the resources of the kingdom to
the improvement of the navy. Though Russia and Prussia, by the last
advices, seemed disposed to control the ill-humor of the Emperor,
France will hardly think it prudent to leave herself in a defenceless
condition, relying on the precarious friendship and momentary interests
of other powers. The increase of her army will necessarily increase her
expenses, as she cannot, in the present state of things, retrench any
thing from the navy; and of course she will have less money to spare
to allies. It has been observed, that France has hitherto imposed none
of the additional taxes usual in time of war; by doing which, it is
imagined she would have it in her power, not only to supply her own
wants better, but to contribute largely to ours. To this it has been
answered, with great appearance of reason, that the credit of the
financier very much depends on his having such a resource in reserve,
which, being considered as a mean he may command, when necessary, to
fulfil his engagements, disposes moneyed men to lend to him with the
greater freedom and confidence. The breaking in upon that resource,
therefore (it is said), would injure credit, and obstruct loans in a
degree that could not be compensated by the direct value of the revenue
it would furnish.
Upon the whole, however, from a variety of siftings and inquiries, I
should be mistaken if France did not lend this country eight or ten
millions of livres annually, during the war; provided its finances were
once put upon a reasonable footing: but this is not above a third of
our wants.
I find no reason to flatter ourselves that we have much to expect
either from the ability or inclination of Spain. Her government is far
from being so rich as is vulgarly imagined. The mines of South America,
of late years, have been less liberal of their profits; and, for fear
of accidents, but a small part of their product, since the war, has
been imported into Europe. The extreme indolence of the Spaniards,
and their neglect of agriculture, manufactures, and trade, make them
tributary to their more industrious neighbors, who drain them of their
precious metals as fast as they arrive.
But if they were heartily disposed to do it, they might still afford
us some assistance. Their conduct, hitherto, has manifested no such
disposition: it has been as cold and reserved as it could well be.
The bills drawn upon them have not been rejected, but they have not
been paid. Their permitting the residence of a British emissary among
them, and the countenance they give him, unprecedented in a state of
war, afford just room for a distrust of their intentions, though it
may be nothing more than a stroke of policy, to play him off against
our negotiations, and make us bid higher for their friendship. Their
method of prosecuting the war is passive, to a degree that can scarcely
be resolved even into Spanish supineness; but seems to have a more
corrupt original. A bigoted prince, governed by a greedy confessor, is
a character on which little dependence can be placed.
’Tis not on Spain, then, that we are to build our hopes of any
considerable succors in money.
The Dutch government has of long standing mortgaged all its revenues.
Taxation has been carried to a length that admits of little extension.
’Tis from its credit with its own citizens, that it must derive the
means of making war. It has every thing to do. Its fleet is to be in a
manner created anew; and its land forces to be recruited, having been,
for some time past, suffered to decline very much. It will, therefore,
stand in need of all its credit for its own uses. Of course we have
nothing to expect from the government of that country.
The individuals will not have confidence enough in our public councils,
to embark any considerable part of their fortunes with us, on the
ordinary principles of a loan. Stronger inducements, the prospect of
commercial advantages, securities different from the mere faith of the
United States, must be held out, to tempt them to engage far with us.
The plan I am going to propose, endeavors to conciliate these objects.
As to internal loans, on which, after all, we must chiefly depend,
there are two things that operate against them, to any large amount;
the want of a sufficient number of men, with sufficient moneyed
capitals to lend the sums required, and the want of confidence in those
who are able to lend, to make them willing to part with their money. It
may be added, that they can employ it to greater advantage in traffic,
than by merely lending it on interest.
To surmount these obstacles, and give individuals ability and
inclination to lend, in any proportion to the wants of government, a
plan must be devised, which, by incorporating their means together,
and uniting them with those of the public, will, on the foundation of
that incorporation and union, erect a mass of credit that will supply
the defect of moneyed capital, and answer all the purposes of cash; a
plan which will offer adventurers immediate advantages, analogous to
those they receive by employing their money in trade, and, eventually,
greater advantages; a plan which will give them the greatest security
the nature of the case will admit for what they lend; and which will
not only advance their own interest, and secure the independence of
their country, but, in its progress, have the most beneficial influence
upon its future commerce, and be a source of national strength and
wealth.
I mean the institution of a NATIONAL BANK. This I regard, in some shape
or other, as an expedient essential to our safety and success; unless,
by a happy turn of European affairs, the war should speedily terminate
in a manner upon which it would be unwise to reckon. There is no other
that can give to government that extensive and systematic credit,
which the defect of our revenues makes indispensably necessary to its
operations.
The longer it is delayed, the more difficult it becomes. Our affairs
grow every day more relaxed and more involved; public credit hastens
to a more irretrievable catastrophe; the means for executing the plan
are exhausted in partial and temporary efforts. The loan now making in
Massachusetts would have gone a great way in establishing the funds on
which the Bank must stand.
I am aware of all the objections that have been made to public Banks;
and that they are not without enlightened and respectable opponents.
But all that has been said against them, only tends to prove that,
like all other good things, they are subject to abuse, and, when
abused, become pernicious. The precious metals, by similar arguments,
may be proven to be injurious. It is certain that the mines of South
America have had great influence in banishing industry from Spain, and
sinking it in real wealth and importance. Great power, commerce, and
riches, or, in other words, great national prosperity, may, in like
manner, be denominated evils; for they lead to insolence, an inordinate
ambition, a vicious luxury, licentiousness of morals, and all those
vices which corrupt government, enslave the people, and precipitate
the ruin of a nation. But no wise statesman will reject the good, from
an apprehension of the ill. The truth is, in human affairs there is
no good, pure and unmixed: every advantage has two sides: and wisdom
consists in availing ourselves of the good, and guarding as much as
possible against the bad.
The tendency of a National Bank is to increase public and private
credit. The former gives power to the State, for the protection of
its rights and interests: and the latter facilitates and extends the
operations of commerce among individuals. Industry is increased,
commodities are multiplied, agriculture and manufactures flourish: and
herein consists the true wealth and prosperity of a State.
Most commercial nations have found it necessary to institute Banks: and
they have proved to be the happiest engines that ever were invented for
advancing trade. Venice, Genoa, Hamburgh, Holland, and England, are
examples of their utility. They owe their riches, commerce, and the
figure they have made at different periods, in a great degree to this
source. Great Britain is indebted for the immense efforts she has been
able to make, in so many illustrious and successful wars, essentially
to that vast fabric of credit raised on this foundation. ’Tis by this
alone she now menaces our independence.
She has, indeed, abused the advantage, and now stands on a precipice.
Her example should both persuade and warn us. ’Tis in republics where
Banks are most easily established and supported, and where they are
least liable to abuse. Our situation will not expose us to frequent
wars; and the public will have no temptation to overstrain its credit.
In my opinion, we ought not to hesitate, because we have no other
resource. The long and expensive wars of King William, had drained
England of its specie: its commerce began to droop for want of a proper
medium: its taxes were unproductive, and its revenues declined. The
administration wisely had recourse to the institution of a Bank; and
it relieved the national difficulties. We are in the same, and still
greater, want of a sufficient medium. We have little specie: the paper
we have is of small value, and rapidly descending to less: we are
immersed in a war for our existence as a nation, for our liberty and
happiness as a people: we have no revenues nor no credit. A Bank, if
practicable, is the only thing that can give us either the one or the
other.
Besides these great and cardinal motives to such an institution, and
the advantages we should enjoy from it, in common with other nations,
our situation, relatively to Europe and to the West Indies, would give
us some peculiar advantages.
Nothing is more common than for men to pass from the abuse of a good
thing, to the disuse of it. Some persons, disgusted by the depreciation
of the money, are chimerical enough to imagine it would be beneficial
to abolish all paper credit, annihilate the whole of what is now in
circulation, and depend altogether upon our specie, both for commerce
and finance. The scheme is altogether visionary, and in the attempt
would be fatal. We have not a competent stock of specie in this
country, either to answer the purposes of circulation in trade, or to
serve as a basis for revenue. The whole amount of what we have, I am
persuaded, does not exceed six millions of dollars, one-fifth of the
circulating medium before the war. To suppose this would be sufficient
for the operations of commerce, would be to suppose that our domestic
and foreign commerce were both reduced four-fifths: a supposition that
carries absurdity in the face of it. It follows that if our paper
money were destroyed, a great part of the transactions of traffic
must be carried on by barter; a mode inconvenient, partial, confined,
destructive both of commerce and industry. With the addition of the
paper we now have, this evil exists in too great a degree. With respect
to revenue, could the whole of our specie be drawn into the public
treasury annually, we have seen that it would be little more than one
half of our annual expense. But this would be impracticable; it has
never been effected in any country. Where the numerary of a country
is a sufficient representative, there is only a certain proportion of
it that can be drawn out of daily circulation; because, without the
necessary quantity of cash, a stagnation of business would ensue. How
small, then, would be the proportion of the six millions (in itself so
unequal a representative) which the public would be able to extract in
revenue. It must either have little or no revenue, or it must receive
its dues in kind; on the inefficacy and inconveniences of which mode, I
have already remarked. The necessity for it, in part, unhappily now has
place, for the cause assigned, a deficiency of current cash: but were
we to establish it as our principal dependence, it would be impossible
to contrive a mode less productive to the public, more contrary to the
habits and inclinations of the people, or more baneful to industry.
But waiving the objections on this head, there would still remain
a balance of four millions of dollars more than these States can
furnish in revenue, which must be provided for the yearly expense of
the war. How is this to be procured without a paper credit, to supply
the deficiency of specie, and enable the moneyed men to lend? This
question, I apprehend, will be of no easy solution.
In the present system of things, the health of a State, particularly
a commercial one, depends on a due quantity and regular circulation
of cash, as much as the health of an animal body depends upon the due
quantity and regular circulation of the blood. There are indisputable
indications that we have not a sufficient medium; and what we have is
in continual fluctuation. The only cure to our public disorders, is to
fix the value of the currency we now have, and increase it to a proper
standard, in a species that will have the requisite stability.
The error of those who would explode paper money altogether, originates
in not making proper distinctions. Our paper was, in its nature, liable
to depreciation, because it had no funds for its support, and was not
upheld by private credit. The emissions under the resolution of March,
’80, have partly the former advantage, but are destitute of the latter,
which is equally essential. No paper credit can be substantial, or
durable, which has not funds, and which does not unite, immediately,
the interest and influence of the moneyed men, in its establishment and
preservation. A credit begun on this basis, will, in process of time,
greatly exceed its funds: but this requires time, and a well settled
opinion in its favor. ’Tis in a National Bank, alone, that we can find
the ingredients to constitute a wholesome, solid, and beneficial paper
credit.
I am aware that, in the present temper of men’s minds, it will be no
easy task to inspire a relish for a project of this kind: but much will
depend on the address and personal credit of the proposer. In your
hands I should not despair: and I should have the greater hopes for
what I am informed appeared to be the disposition, at the promulgation
of the plan for a loan in Massachusetts. The men of property in
America, are enlightened about their own interest, and would easily
be brought to see the advantages of a good plan. They ought not to
be discouraged at what has happened heretofore, when they behold
the administration of our finances put into a better channel. The
violations of public engagements, hitherto, have proceeded more from a
necessity produced by ignorance and mismanagement, than from levity or
a disregard to the obligations of good faith.
Should the success, in the first instance, not be as complete as
the extent of the plan requires, this should not hinder its being
undertaken. It is of the nature of a Bank, wisely instituted, and
wisely administered, to extend itself, and, from small beginnings, grow
to a magnitude that could not have been foreseen.
The plan I propose, requires a stock of three millions of pounds,
lawful money; but if one-half the sum could be obtained, I should
entertain no doubt of its full success. It now remains to submit my
plan, which I rather offer as an outline, than as a finished plan.
It contains, however, the general principles. To each article, in an
opposite column, I shall affix an explanatory remark.
Art I. A Bank to be Remark 1. By the second Article,
erected with a stock of three a part of the stock is to be in landed
millions of pounds, lawful security: by this, the whole is to be
money, at the rate of six exempted from taxes. Here will be a
shillings to a dollar, divided considerable saving to the proprietor,
into thirty thousand shares. which is to be estimated among the clear
This stock to be exempted profits of the Bank. This will indeed
from all public taxes and be a small reduction of the public
impositions whatsoever. revenue; but the loss will be of little
consequence, compared with the advantages
to be derived from the Bank.
Art II. A subscription Remark 2. By admitting landed
to be opened for the amount security as a part of the Bank stock,
of the stock. A subscriber of while we establish solid funds for the
from one share to five, to money emitted, we at the same time
advance the whole in specie. supply the defect of specie, and we give
A subscriber of six shares to a strong inducement to moneyed men to
fifteen to advance one-half in advance their money; because, not only
specie, the other half in good the money actually deposited is to be
landed security. A subscriber employed for their benefit, but, on the
of sixteen shares, and upwards, credit of their landed security, by the
to advance two-sixths in seventh Article, may be raised an equal
specie, one-sixth in bills or amount in cash, to be also employed for
securities on good European their benefit: by which artifice they
funds, and three-sixths in good have the use of their land (exempted,
landed security. In either case too, from taxes), and the use of the
of specie, plate or bullion, value of it in a representative cash. In
at a given value, proportioned this consists a capital advantage of the
to its quality, may be Bank to the proprietors. A, for instance,
substituted; and in either case advances six hundred pounds in specie,
of landed security, specie, and as much more in landed security. By
good bills, or securities the establishment he may draw bank notes
on European funds, to be for the whole of his stock, that is,
admissible in their stead.[14] for twelve hundred pounds, when he only
advances half the sum in money. These
bank notes operating as cash, his land
(continuing, as we observed above, in
his own use, with the privilege besides
of an exemption from taxes) is converted
into cash; which he may employ in loans,
in profitable contracts, in beneficial
purchases, in discounting bills of
exchange, and in the other methods
permitted in the subsequent Articles.
Besides all this, when the bank notes
have once acquired a fixed credit, he
is not obliged to keep his six hundred
pounds, deposited in specie, idle: he
may lend, or otherwise improve, a part
of that also. These advantages will not
exist in their full extent at first, but
they will soon succeed each other.
Art. III. The Bank Remark 3. This Article needs no
to be erected into a legal illustration.
corporation; to have all the
powers and immunities requisite
to its security, to the
recovery of its debts, and to
the disposal of its property.
Art. IV. The stock Remark 4. The first part of
of the Bank not to be liable this regulation is necessary to engage
to any attachment or seizure foreigners to trust their property in the
whatsoever; but, on refusal of Bank; the latter part to give an idea of
payment, the holders of bank security to the holders of bank notes.
notes, or bonds, may enter suit
against any member, or members,
of the corporation; and, as far
as their respective shares in
the Bank extend, recover the
debt, with cost and damages,
out of their private property.
Art. V. The United Remark 5. This will link the
States, or any particular interests of the public more intimately
States, or foreigners, may with the Bank, and be an easy method
become subscribers to the Bank, of acquiring revenue. It will also
and participate its profits, facilitate the making up its stock by the
for any sums not exceeding the loans which Congress may obtain abroad;
whole half the stock. without which it would be more difficult
to raise so large a sum. It is essential
the stock should be large, because, in
proportion to it, will be the credit of
the Bank, and of course its ability to
lend and enlarge its paper emissions.
The admission of foreigners will also
assist the completing the stock; and it
is probable many may be induced to enter
into the plan, especially after it has
made some progress among ourselves, and
obtained a degree of consistency.
The sum is limited to one half the stock,
because it is of primary importance the
moneyed men among ourselves should be
deeply interested in the plan.
Art. VI. The United Remark 6. This mode of pledging
States, collectively and the public faith, makes it as difficult
particularly, to become to be infringed as could possibly
responsible for all the be devised. In our situation it is
transactions of the Bank, expedient to offer every appearance of
conjointly with the private security. Foreigners are more firmly
proprietors. persuaded of the establishment of our
independence than of the continuance of
our union; and will therefore have more
confidence in the States bound separately
than collectively. Individuals among
ourselves will be influenced by similar
considerations.
Art VII. The Bank to Remark 7. The reason of having
issue notes payable at sight, them payable at sight, is to inspire
in pounds, shillings, and the greater confidence and give them a
pence, lawful: all of twenty readier currency: nor do I apprehend
shillings, and under, to bear there would be any danger from it. In
no interest: all above, to the beginning some may be carried to the
bear an interest not exceeding Bank for payment, but finding they are
four per cent. The notes to be punctually discharged, the applications
of so many denominations as will cease. The notes are payable in
may be judged convenient for pounds, shillings, and pence, rather
circulation, and of two kinds; than in dollars, to produce an illusion
one payable only in America, in the minds of the people favorable
the other payable either in to the new paper; or rather to prevent
American or in an part of their transferring to that their
Europe where the Bank may have prejudices against the old. Paper credit
funds. The aggregate of these depends much on opinion, and opinion is
notes never to exceed the Bank often guided by outside appearances. A
stock. circumstance trivial as this may seem,
might have no small influence on the
popular imagination. And if 20s., and
under, are without interest, because such
small sums will be diffused in the lesser
transactions of daily circulation, there
will be less probability of their being
carried to the Bank for payment.
The interest on the larger notes is
calculated to give them a preference to
specie, and prevent a run upon the Bank.
The notes, however, must be introduced by
degrees, so as not to inundate the public
at once. Those bearing no interest ought
not to be multiplied too much at first;
but as the interest is an abridgment of
the profits of the Bank, after the notes
have gained an unequivocal credit, it
will be advantageous to issue a large
proportion of the smaller ones. At first,
the interest had best be at four per
cent., to operate the more effectually as
a motive: afterwards, on the new notes,
it may be gradually diminished: but it
will always be expedient to let them bear
an interest not less than two per cent.
The making some of the notes payable
in Europe as well as in America, is
necessary to enable the Bank to avail
itself of its funds there: it will also
serve to raise the demand for Bank notes,
by rendering them useful in foreign
commerce, the promoting which is a
further inducement.
The limiting the aggregate of the notes
to the amount of the stock, is necessary
to obviate a suspicion of their being
multiplied beyond the means of redemption.
Art. VIII. The Bank to Remark 8. In the beginning it
lend money to the public, or to will be for the advantage of the Bank to
individuals, at an interest not require high interest, because money is
exceeding eight per cent. in great demand, and the Bank itself will
want the principal part of its cash for
the loans stipulated in Article XIII, and
for performing the contracts authorized
by Article XII: so that the profits will
not, for some time, turn materially on
the principle of loans, except that
to the public. But when the contracts
cease, the Bank will find its advantage
in lending, at a moderate interest, to
secure a preference from borrowers, which
will, at the same time, promote commerce;
and by a kind of mutual reaction, the
Bank will assist commerce, and commerce
will assist the Bank.
Art. IX. The Bank to Remark 9. This is a precaution
have liberty of borrowing, on against a sudden run. It may borrow
the best terms it can, to the in proportion to what it pays. It
amount of one half of its stock. has another advantage: at particular
conjunctures the Bank may borrow at a
low interest, and lend, at others, at a
higher.
Art. X. The Bank to Remark 10. This privilege
have liberty of purchasing of purchasing estates will be a very
estates by principal, or by valuable one. By watching favorable
annuities; the power of coining opportunities, with so large a capital,
to the amount of half its vast property may be acquired in this
stock, the quantity of alloy, way. There will be a fine opening at
etc., being determined by the conclusion of the war. Many persons
Congress; also the power of disaffected to our independence, who
discounting bills of exchange. have rendered themselves odious without
becoming obnoxious to the laws, will
be disposed to sell their estates
here, either for their whole value, or
for annuities in Europe. The power of
coining[15] is necessary, as plate, or
bullion, is admitted instead of specie;
and it may be, on particular occasions,
expedient to coin them; this will be a
small resource to the Bank. The power
of discounting bills of exchange will
be a considerable one. Its advantages
will consist in purchasing, or taking up
for the honor of the drawer, when the
security is good, bills of exchange at so
much per cent. discount. A large profit
might be now made in this way on the
bills drawn on France; and hereafter, in
times of peace, when commerce comes to
flourish, this practice will promote the
transactions of the several States with
each other, and with Europe, and will be
very profitable to the Bank.
Art. XI. The Bank Remark 11. This is in imitation
to receive from individuals, of the Bank of Amsterdam. If individuals
deposits of any sums of money, once get into the practice of depositing
to be repaid when called for, their money in Bank, it will give credit
or passed, by order, to the to the Bank, and assist trade. In time,
credit of others; or deposits a premium may be required at repayment
of plate, paying a certain as in Holland. A small profit may be
annual rate for safe keeping. immediately gained on plate, as the
Whatever is deposited in the States begin to tax this article; and
Bank, to be exempt from taxes. many persons will dispense at this time
with the use of their plate, if they can
deposit it in a place of safety, and
pay less for keeping it than the tax.
Whatever serves to increase the apparent
wealth of the Bank, will enhance its
credit! It may even be useful to let the
owners of the plate have credit in Bank
for the value of the plate, estimated
on a scale that would make it for the
advantage of the Bank to purchase.
Art. XII. The Bank to Remark 12. It will be of
have a right to contract with great importance to the success of the
the French government for the subscriptions, that a previous assurance
supply of its fleets and armies of these contracts should take place:
in _America_, and to contract the profits of them would be no trifling
with Congress for the supply of inducement to adventurers; it would have
their armies. the air of employing the money subscribed
in trade. As soon, therefore, as the plan
should be resolved upon, negotiations
should be begun for the purpose. It is
so clearly the interest of the French
government to enter into these contracts,
that they must be blind not to do it,
especially when it is proposed under the
aspect of a method of re-establishing
our finances. The present loss on their
bills is enormous. The Bank may engage
to receive them at a moderate discount,
and to supply on better terms than they
now make. Their business is at this time
trusted to a variety of hands, some
of which are neither very skilful nor
very honest: competitions, frauds, and
additional expense, are the consequences.
Congress could not hesitate on their
parts, as the amount of the contracts
would be a part of the loan required in
Article XIII.
Art. XIII. The Bank Remark 13. This loan will
to lend Congress one million, enable Congress to get through the
two hundred thousand pounds, expenses of the year. There may be a
lawful, at eight per cent. small deficiency, but this will be easily
interest; for the payment of supplied. The credit of the Bank once
which, with its interest, a established, it may increase its stock,
certain unalienable fund of one and lend an equal sum every year during
hundred and ten thousand, four the war. This loan may be advanced,
hundred pounds per annum, to be partly in a contract for provisions,
established for twenty years. clothing, etc., and partly in cash, at
The States, generally and periodical payments, to avoid a too quick
severally, to pledge themselves multiplication of Bank notes.
for this sum, and for the due
appropriation of the fund.
Congress to have a right, at
any intermediate period, to pay
off the debt, with the interest
to the time of payment. The
same rule to govern in all
future loans.
Art. XIV. The Bank Remark 14. It is of the greatest
to become responsible for the importance that the old currency should
redemption of all the paper be fixed at a certain value, or there
now emitted; the old, at forty will be danger of its infecting the
for one in thirty years, the future paper: besides, we want to raise
new at par, with gold and it to a point that will make it approach
silver, according to the terms nearer to an adequate medium. I have
promised by Congress in their chosen the resolution of March, ’80, as a
resolution of March, ’80. standard. We ought not, on any account,
One-third of the first to be to raise the value of the old paper
redeemed at the end of every higher than forty to one, for this will
ten years; and the whole of give it about the degree of value that
the last to be redeemed at the is most salutary; at the same time that
expiration of the six years it will avoid a second breach of faith,
specified by Congress, with the which would cause a violent death to
interest of five per cent. The all future credit. A stable currency is
United States, in compensation an idea fundamental to all practicable
for this responsibility, to schemes of finance. It is the duty and
establish certain funds for an interest of the public to give stability
annuity, payable to the Bank, to that which now exists; and it will be
equal to the discharge of the the interest of the Bank, which alone
whole amount of the paper can effect it, to co-operate. I have
currency in thirty years, with not mentioned the amount of the annuity
an interest of two per cent. to be paid by Congress, because I have
per annum. not materials to judge what quantity
of paper money now exists; since it
will be necessary to take all the State
emissions into the calculation. I suppose
(including State emissions) there may be
about four hundred millions of dollars of
the old standard, and about four millions
of the new.[16] This will give us, in
specie-value, about fourteen millions
of dollars. This is what the Bank is
to become answerable for, and what the
public is to pay, by an annuity of thirty
years, with two per cent. interest. This
annuity would amount to six hundred
and eleven thousand, three hundred and
thirty-three, and one-third, dollars,
for which funds are to be provided. By
a rough calculation, I find that the
Bank would gain, in the thirty years,
about three millions of dollars, on the
simple footing of interest; and that it
will, at different periods, have more
public money in its possession, than it
will be in advance at others: so that,
upon the whole, the sum it will gain in
interest, will be for the loan of its
credit to the public, not of any specific
sum of cash. Besides, the interest of
the Bank may gain a very considerable
sum by the purchases it may make of the
old paper at its current value, before
the influence of this plan has time to
bring it back to the point at which it
is intended to be fixed.[17] It is the
obvious interest of the United States to
concur in this plan, because, by paying
three millions of dollars in interest
to the Bank, more than it would have
to pay to the money-holders, agreeably
to its present engagements, it would
avoid a new breach of faith, fix its
circulating medium increased in value
more than one-half, render the taxes more
productive, and introduce order into its
finances, without which our independence
is lost. It will also have only about
two-thirds of the funds to establish for
this plan that are required by the Act of
March, ’80, to discharge the new bills:
it will, of course, reserve a large
balance towards the current expenses,
which is no insignificant consideration.
Perhaps it may be imagined, that the same
funds established for the redemption
of the money in the same time, without
passing through the Bank, would have an
equal effect upon its credit, and then
we should save the interest of two per
cent. Experience proves the contrary. We
find the new notes depreciating in the
States which have provided good funds.
The truth is, there is not confidence
enough in any funds merely public. The
responsibility of the Bank would beget
a much stronger persuasion of the paper
being redeemed, and have incomparably
more efficacy in raising and confirming
its credit. Besides, the Bank might
immediately reduce the quantity by
purchase, which the public could not do.
It will be observed, that of the six
millions of dollars which constitute our
annual revenue, I require nine hundred
and seventy-nine thousand, three hundred
and thirty-three, and one-third, dollars,
in funds, to reimburse the loan for the
first year, and pay off the annuity for
the redemption of the old paper. It may
be asked, where these funds are to be
procured in the present impotence of
our federal government. I answer, there
are ample means for them, and they must
be had. Congress must deal plainly with
their constituents. They must tell them,
that power without revenue is a bubble;
that unless they give them substantial
resources of the latter, they will not
have enough of the former, either to
prosecute the war, or to maintain the
Union in peace; that, in short, they
must, in justice to the public and to
their own honor, renounce the vain
attempt of carrying on the war without
either; a perseverance in which, can only
deceive the people, and betray their
safety. They must demand an instant,
positive, and perpetual investiture of
an impost on trade; a land tax, and a
poll tax, to be collected by their own
agents. This Act to become a part of the
Confederation.
It has ever been my opinion that Congress
ought to have complete sovereignty in
all but the mere municipal law of each
State; and I wish to see a convention
of all the States, with full power to
alter and amend, finally and irrevocably,
the present futile and senseless
Confederation.
The taxes specified, may be made to
amount to three millions of dollars; the
other three millions to be raised by
requisition, as heretofore.
Art. XV. The Bank Remark 15. It is essential that
notes to be received in payment all taxes should be raised, throughout
of all public customs and the United States, in specie, or
taxes, at an equivalent with Bank notes at par, or the old paper
gold and silver. at its current value at the time of
payment. This will serve to increase
the circulation and credit of the Bank
notes; but no person should be obliged to
receive them in private dealings. Their
credit must depend on opinion; and this
opinion would be injured by legislative
interposition.
Art. XVI. The Bank to Remark 16. This permission
dissolve itself whenever it to dissolve or sell at pleasure, will
thinks proper, making effectual encourage men to adventure; and, when
provision for the payment of once engaged, the profits will make them
its debts; and a proprietor willing to continue.
of Bank stock to have the
privilege of selling out
whenever he pleases.
Art. XVII. The Bank to Remark 17. This is chiefly
be established for thirty years to prevent some speculative men being
by way of experiment. alarmed, who, upon the whole, may think a
paper credit detrimental and dangerous,
though they would be willing, from
necessity, to encourage it for a limited
time. Experience, too, may show the
defects of this plan, and give rise to
alterations for the better.
Art. XVIII. No other Remark 18. Other Banks might
Bank, public or private, to be excite a competition prejudicial to the
permitted during that period. interests of this, and multiply and
diversify paper credit too much.
Art. XIX. Three Banks Remark 19. These Banks ought
to be erected in Massachusetts, to be in the interior of the country,
Pennsylvania, and Virginia, to remote from danger, with every precaution
facilitate the circulation and for their security in every way. Their
payment of the Bank notes. distance from the capital trading points,
will be an advantage, as it will make
applications for the payment of Bank
notes less convenient.
Art. XX. The affairs Remark 20. It is necessary, for
of the Bank to be managed by reciprocal security of the public, the
twelve general Directors, men proprietors, and the people, that the
of reputation and fortune; affairs of the Bank should be conducted
eight of them to be chosen under a joint direction.
by the private proprietors,
and four by Congress. The
Minister of Finance to have the
privilege of inspecting all
their proceedings.
These, as has been already observed, are only intended as outlines;
the form of administration for the Bank, and all other matters, may
be easily determined, if the leading principles are once approved. We
shall find good models in the different European Banks, which we can
accommodate to our circumstances. Great care, in particular, should
be employed to guard against counterfeits; and I think methods may be
devised that would be effectual.
I see nothing to prevent the practicability of a plan of this kind, but
a distrust of the final success of the war, which may make men afraid
to risk any considerable part of their fortunes in the public funds;
but, without being an enthusiast, I will venture to assert, that, with
such a resource as is here proposed, the loss of our independence is
impossible. All we have to fear is, that the want of money may disband
the army, or so perplex and enfeeble our operations, as to create in
the people a general disgust and alarm, which may make them clamor for
peace on any terms. But if a judicious administration of our finances,
assisted by a Bank, takes place, and the ancient security of property
is restored, no convulsion is to be apprehended. Our opposition will
soon assume an aspect of system and vigor, that will relieve and
encourage the people, and put an end to the hopes of the enemy. ’Tis
evident they have it not in their power to subdue us by force of arms.
In all these States they have not more than fifteen thousand effective
troops, nor is it possible for them much to augment this number. The
East and West Indies demand reinforcements. In all the Islands, they
have not, at this time, above five thousand men; a force not more
than equal to the proper garrisoning of Jamaica alone; and which, the
moment they lose a maritime superiority in those seas, will leave them
much cause to fear for their possessions. They will probably send out
fifteen hundred or two thousand men, to recruit their regiments already
here; but this is the utmost they can do.
Our allies have five thousand men at Rhode Island, which, in the worst
event that can happen, will be recruited to eight, to co-operate with
us on a defensive plan. Should our army amount to no more than fifteen
thousand men, the combined forces, though not equal to the expulsion of
the enemy, will be equal to the purpose of compelling them to renounce
their offensive, and content themselves with maintaining one or two
capital points. This is on the supposition that the public have the
means of putting their troops in activity. By stopping the progress
of their conquests, and reducing them to an unmeaning and disgraceful
defensive, we destroy the national expectation of success, from which
the ministry draw their resources. It is not a vague conjecture, but
a fact founded on the best information, that, had it not been for the
capture of Charleston, and the victory of Camden, the ministry would
have been in the utmost embarrassment for the supplies of this year.
On the credit of those events, they procured a loan of five and twenty
millions. They are in a situation where a want of splendid successes
is ruin. They have carried taxation nearly to its extreme boundary;
they have mortgaged all their funds; they have a large unfunded debt,
besides the enormous mass which is funded. This must necessarily create
apprehensions in their most sanguine partisans: and if these are not
counteracted by flattering events, from time to time, they cannot much
longer continue the delusion. Indeed, in this case, I suppose they must
themselves despair.
The game we play is a sure game, if we play it with skill. I have
calculated, in the preceding observations, on the most disadvantageous
side. Many events may turn up, in the course of the summer, to make
even the present campaign decisive.
If we compare the real ability of France, for revenue, with that of
Great Britain; the economy and sagacity in the conduct of the finances
of the former; the extravagance and dissipation which are overwhelming
those of the latter; there will be found every reason to believe,
that the resources of France will outlast those of her adversary. Her
fleet is not much inferior, independent of that of Spain and Holland.
Combined with that of Spain, it is greatly superior. If the Dutch enter
into the war in earnest, and add their fleet, the superiority will be
irresistible. Notwithstanding the injury they may sustain in the first
instance, the Dutch will be still formidable: they are rich in credit,
and have extensive means for maritime power.
Except the Emperor, who is hostile, and the Dane, who is neutral,
all the rest of Europe are either friends to France or to our
independence. Never did a nation unite more circumstances in its favor
than we do: we have nothing against us but our own misconduct.
There are two classes of men among us, equally mistaken: one who, in
spite of daily experience, of accumulated distress, persist in a narrow
line of policy, and, amidst the most threatening dangers, fancy every
thing in perfect security. Another, who, judging too much from the
outside, alarmed by partial misfortunes, and the disordered state of
our finances, without estimating the real faculties of the parties,
give themselves up to an ignorant and ill-founded despondency. We want
to learn to appreciate our true situation and that of the enemy. This
would preserve us from a stupid insensibility to danger on the one
hand, and inspire us with a reasonable and enlightened confidence on
the other.
But let us suppose the worst, that we shall, after all, fail in our
independence; our return to Great Britain, whenever it should happen,
would be by compact. The war would terminate by a mediation. It cannot
be supposed that the mediator would be so devoted to Great Britain,
or would have so little consideration for France, as to oblige us to
revert to our former subjection by an unconditional surrender. While
they might confirm his dominion over us, they would endeavor to save
appearances for the honor of France, and stipulate terms as favorable
to us as would be compatible with a state of dependence. A general
amnesty, and the security of private property (of course the payment of
public debts), would be among the most simple and most indispensable.
This would comprehend the concerns of the Bank; and if, unfortunately
for our virtue, such a circumstance could operate as an inducement,
it might be added, that our enemies would be glad to find, and to
encourage such an institution among us for their own benefit.
A question may arise concerning the abilities of these States to pay
their debts after the establishment of their independence; and though
any doubt on this head must originate in gross ignorance, it may be
necessary to oppose it with more than general argument, as has been
done heretofore. A very summary and obvious calculation will show that
there is nothing to be dreaded on this head.
The funds of nine hundred and seventy-nine thousand, three hundred and
thirty-three, and one-third, dollars, proposed to be established for
paying off the loan of the first year, and for redeeming the present
paper, will, in thirty years, wipe off all the debts of the States,
except those contracted to foreigners, which, I imagine, do not amount
to four millions of dollars. Suppose we should be obliged, for two
years besides the present, to borrow an equal sum each year from the
Bank; the fund requisite to discharge these loans, on the same terms
with the first, will amount to seven hundred and thirty-six thousand
dollars, to be deducted from the five million, and twenty thousand,
six hundred and sixty-six, and two-thirds, dollars, remaining on the
annual revenue; which will reduce it to four millions, two hundred
and eighty-four thousand, six hundred and sixty-six, and two-thirds,
dollars: then the debt unfunded will be,