University of Virginia Library

2040. DEBT (Revolutionary), Settlement of Foreign.—

The first act of the new

government [under the Constitution] should be
some operation whereby they may assume to
themselves the [first] station [in point of
credit]. Their European debts form a proper
subject for this. Digest the whole, public and
private, Dutch, French and Spanish, into a
table, showing the sum of interest due every
year, and the portions of principal payable the
same year. Take the most certain branch of
revenue, and one which shall suffice to pay the
interest, and leave such a surplus as may accomplish
all the payments of the capital, at
terms somewhat short of those at which they
will become due. Let the surpluses of those
years, in which no reimbursement of principal
falls, be applied to buy up our paper on the exchange
of Amsterdam, and thus anticipate the
demands of principal. In this way, our paper
will be kept up at par; and this alone will enable
us to command in four and twenty hours,
at any time, on the exchange of Amsterdam,
as many millions as that capital can produce.
The same act, which makes this provision for
the existing debts, should go on to open a loan
to their whole amount; the produce of that loan
to be applied, as fast as received, to the payment
of such parts of the existing debts as admit
of payment. The rate of interest to be as
the government should privately instruct their
agent, because it must depend on the effect
these measures would have on the exchange.
Probably it could be lowered from time to time.—
To James Madison. Washington ed. ii, 377.
(P. 1788)