2013. DEBT, Public.—
At the time we
were funding our national debt, we heard
much about “a public debt being a public
blessing”; that the stock representing it was
a creation of active capital for the aliment
of commerce, manufactures and agriculture.
This paradox was well adapted to the minds
of believers in dreams, and the gulls of that
size entered bonâ fide into it. But the art
and mystery of banks is a wonderful improvement
on that. It is established on the principle
that “private debts are a public blessing
”; that the evidences of those private
debts, called bank notes, become active capital,
and aliment the whole commerce, manufactures,
and agriculture of the United States.
Here are a set of people, for instance, who
have bestowed on us the great blessing of
running in our debt about two hundred millions
of dollars, without our knowing who
they are, where they are, or want property
they have to pay this debt when called on;
nay, who have made us so sensible of the
blessings of letting them run in our debt, that
we have exempted them by law from the re
payment of these debts beyond a given proportion
(generally estimated at one-third).
And to fill up the measure of blessing, instead
of paying, they receive an interest on
what they owe from those to whom they owe;
for all the notes, or evidences of what they
owe, which we see in circulation, have been
lent to somebody on an interest which is
levied again on us through the medium of
commerce. And they are so ready still to
deal out their liberalities to us, that they are
now willing to let themselves run in our debt
ninety millions more, on our paying them the
same premium of six or eight per cent. interest,
and on the same legal exemption from
the repayment of more than thirty millions
of the debt when it shall be called for. But
let us look at this principle in its original
form, and its copy will then be equally understood.
“A public debt is a public blessing.”
That our debt was juggled from forty-three
to eighty millions, and funded at that amount,
according to this opinion a great public blessing,
because the evidences of it could be
vested in commerce, and thus converted into
active capital, and then the more the debt
was made to be, the more active capital was
created. That is to say, the creditors could
now employ in commerce the money due
them from the public, and make from it an
annual profit of five per cent., or four millions
of dollars. But observe, that the public were at
the same time paying on it an interest of exactly
the same amount of four millions of dollars.
Where, then, is the gain to either party,
which makes it a public blessing? There is no
change in the state of things, but of persons
only. A has a debt due to him from the public,
of which he holds their certificate as evidence,
and on which he is receiving an annual interest.
He wishes, however, to have the
money itself, and to go into business with
it. B has an equal sum of money in business,
but wishes now to retire, and live on the interest.
He therefore gives it to A in exchange
for A's certificates of public stock.
Now, then, A has the money to employ in
business, which B so employed before. B
has the money on interest to live on, which
A lived on before; and the public pays the
interest to B which they paid to A before.
Here is no new creation of capital, no additional
money employed, nor even a change
in the employment of a single dollar. The
only change is of place between A and B in
which we discover no creation of capital, nor
public blessing. Suppose, again, the public
to owe nothing. Then A not having lent his
money to the public, would be in possession
of it himself, and would go into business
without the previous operation of selling
stock. Here, again, the same quantity of
capital is employed as in the former case,
though no public debt exists. In neither case
is there any creation of active capital, nor
other difference than that there is a public
debt in the first case, and none in the last;
and we may safely ask which of the two
situations is most truly a public blessing? If,
then, a public debt be no public blessing, we
may pronounce,
à fortiori, that a private one
cannot be so. If the debt which the banking
companies owe be a blessing to anybody, it is
to themselves alone, who are realizing a solid
interest of eight or ten per cent. on it. As to
the public, these companies have banished
all our gold and silver medium, which, before
their institution, we had without interest,
which never could have perished in
our hands, and would have been our salvation
now in the hour of war; instead of which
they have given us two hundred million of
froth and bubble, on which we are to pay
them heavy interest, until it shall vanish into
air as the Morris notes did. We are warranted,
then, in affirming that this parody
on the principle of “a public debt being a
public blessing,” and its mutation into the
blessing of private instead of public debts, is
as ridiculous as the original principle itself.
In both cases, the truth is, that capital May
be produced by industry, and accumulated
by economy; but jugglers only will propose to
create it by legerdemain tricks with paper.—
To J. W. Eppes. Washington ed. vi, 239.
Ford ed., ix, 411.
(M.
Nov. 1813)
