5405. MONEY (Continental), Depreciation of.—
Previous to the Revolution, most
of the States were in the habit, whenever
they had occasion for more money than could
be raised immediately by taxes, to issue paper
notes or bills, in the name of the State,
wherein they promised to pay to the bearer
the sum named in the note or bill. In some
of the States no time of payment was fixed,
nor tax laid to enable payment. In these,
the bills depreciated. But others of the
States named in the bill the day when it
should be paid, laid taxes to bring in money
for that purpose, and paid the bills punctually,
on or before the day named. In these States,
paper money was in as high estimation as
gold and silver. On the commencement of
the late Revolution, Congress had no money.
The external commerce of the States being
suppressed, the farmer could not sell his produce,
and, of course, could not pay a tax.
Congress had no resource then but in paper
money. Not being able to lay a tax for its
redemption, they could only promise that
taxes should be laid for that purpose, so
as to redeem the bills by a certain day. They
did not foresee the long continuance of the
war, the almost total suppression of their
exports, and other events, which rendered the
performance of their engagement impossible.
The paper money continued for a twelvemonth
equal to gold and silver. But the
quantities which they were obliged to emit
for the purpose of the war, exceeded what
had been the usual quantity of the circulating
medium. It began, therefore, to become
cheaper, or, as we expressed it, it depreciated,
as gold and silver would have done, had they
been thrown into circulation in equal quantities.
But not having, like them, an intrinsic
value, its depreciation was more rapid and
greater than could ever have happened with
them. In two years, it had fallen to two
dollars of paper money for one of silver; in
three years, to four for one; in nine months
more, it fell to ten for one; and in the six
months following, that is to say, by September,
1779, it had fallen to twenty for one.
Congress, alarmed at the consequences which
were to be apprehended should they lose this
resource altogether, thought it necessary to
make a vigorous effort to stop its further
depreciation. They, therefore, determined, in
the first place, that their emissions should
not exceed two hundred millions of dollars,
to which term they were then nearly arrived;
and though they knew that twenty dollars of
what they were then issuing would buy no
more for their army than one silver dollar
would buy, yet they thought it would be
worth while to submit to the sacrifice of
nineteen out of twenty dollars, if they could
thereby stop further depreciation. They,
therefore published an address to their constituents,
in which they renewed their original
declarations, that this paper money should
be redeemed at dollar for dollar. They
proved the ability of the States to do this,
and that their liberty would be cheaply bought
at that price. The declaration was ineffectual.
No man received the money at a
better rate; on the contrary, in six months
more, that is, by March, 1780, it had fallen
to forty for one. Congress then tried an
experiment of a different kind. Considering
their former offers to redeem this money at
par, as relinquished by the general refusal to
take it but in progressive depreciation, they
required the whole to be brought in, declared
it should be redeemed at its present value,
of forty for one, and that they would give
to the holders new bills, reduced in their
denomination to the sum of gold or silver,
which was actually to be paid for them. This
would reduce the nominal sum of the mass
in circulation to the present worth of that
mass, which was five millions; a sum not
too great for the circulation of the States, and
which, they therefore hoped, would not depreciate
further, as they continued firm in
their purpose of emitting no more. This effort
was as unavailing as the former. Very little
of the money was brought in. It continued
to circulate and to depreciate till the end of
1780, when it had fallen to seventy-five for
one, and the money circulated from the
French army, being, by that time, sensible in
all the States north of the Potomac, the paper
ceased its circulation altogether in those
States. In Virginia and North Carolina it
continued a year longer, within which time
it fell to one thousand for one, and then
expired, as it had done in the other States,
without a single groan. Not a murmur was
heard on this occasion among the people. On
the contrary, universal congratulations took
place on their seeing this gigantic mass, whose
dissolution had threatened convulsions which
should shake their infant confederacy to its
centre, quietly interred in its grave. For
eigners, indeed, who do not, like the natives,
feel indulgence for its memory, as of a being
which vindicated their liberties, and fallen in
the moment of victory, have been loud, and
still are loud in their complaints. A few of
them have reason; but the most noisy are
not the best of them. They are persons who
have become bankrupt by unskilful attempts
at commerce with America. That they May
have some pretext to offer to their creditors,
they have bought up great masses of this
dead money in America, where it is to be had
at five thousand for one, and they show the
certificates of their paper possessions, as if
they had all died in their hands, and had been
the cause of their bankruptcy. Justice will
be done to all, by paying to all persons what
this money actually cost them, with an interest
of six per cent. from the time they received
it. If difficulties present themselves in
the ascertaining the epoch of the receipt, it
has been thought better that the State should
lose, by admitting easy proofs, than that individuals,
and especially foreigners, should,
by being held to such as would be difficult,
perhaps impossible.—
To M. de Meunier. Washington ed. ix, 248.
Ford ed., iv, 153.
(P.
1786)
