Congress to put themselves in a condition to defray the public
expenses. They found their currency to be so depreciated, and so
rapidly depreciating, that a further emission sufficient to discharge
the public expenses another year, would have, probably, depreciated it
to two hundred for one; perhaps, would have so totally discredited it,
that nobody would have taken it at any rate. It was absolutely
necessary, then, to stop emitting. Yet it was absolutely necessary to
have an army to save their cities from the fire, and their citizens
from the sword. That army must be fed, clothed, paid, and armed, and
other expenses must be defrayed. It had become necessary, therefore,
at this time, to call in their paper; for there is no nation that is
able to carry on war by the taxes, which can be raised within the
year. But I am far from thinking, that this necessity was the cause of
their calling it in at a depreciated value, because I am well
convinced that they would have called it in at a depreciated value, if
the British fleet and army had been withdrawn from the United States,
and a general peace had been concluded. My reason for this belief is,
the evident injustice of calling it in at its nominal value, a silver
dollar for a paper one. The public has its rights as well as
individuals; and every individual has a share in the rights of the
public. Justice is due to the body politic, as well as to the
possessor of the bills; and to have paid off the bills at their
nominal value, would have wronged the body politic of thirtynine
dollars in every forty, as really as if forty dollars had been paid
for one, at the first emission in 1775, when each paper dollar was
worth, and would fetch a silver one.
I beg leave to ask your Excellency, whether you judge that the
Congress ought to pay two hundred millions of silver dollars, for the
two hundred millions of paper dollars which are abroad? I presume your
Excellency will not think that they ought; because I have never met
with any man in America or in Europe, that was of that opinion. All
agree, that Congress ought to redeem it at a depreciated value. The
only question then, is, at what depreciation? Shall it be at
seventyfive, forty, thirty, twenty, ten, or five, for one? After it is
once admitted, that it ought to be redeemed at a less value than the
nominal, the question arises, at what value? What rule? I answer,
there is no other rule of justice than the current value, the value at
which it generally passes from man to man. The Congress have set it at
forty for one; and they are the best judges of this, as they represent
all parts of the continent where the paper circulates.
I think there can be little need of illustration; 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 mass 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 passed, 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 passed, the difference at which
they passed 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 entitled
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 shipped to Europe, sold to the King's ships,
and received bills of exchange, or shipped 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 shilling 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 flourishing 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 Massachusetts 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
shillings an ounce, although the face of the bills promised an ounce
of silver for every six shillings 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
Massachusetts 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 competition 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 shipped by
private adventurers. They have much more commonly shipped 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 cherishing 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
Assembly 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
Massachusetts 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.