5622. NATIONAL CURRENCY, Borrowing fund.—
I am sorry to see our loans
begin at so exorbitant an interest. And yet,
even at that you will soon be at the bottom
of the loan-bag. We are an agricultural nation.
Such an one employs its sparings in
the purchase or improvement of land or
stocks. The lendable money among them is
chiefly that of orphans and wards in the
hands of executors and guardians, and that
which the former lays by till he has enough
for the purchase in view. In such a nation
there is one, and only one, resource for loans,
sufficient to carry them through the expense
of a war; and that will always be sufficient,
and in the power of an honest government,
punctual in the preservation of its faith.
The fund I mean, is the mass of circulating
coin. Every one knows, that although not
literally, it is nearly true, that every paper
dollar emitted banishes a silver one from
the circulation. A nation, therefore, making
its purchases and payments with bills fitted
for circulation, thrusts an equal sum of coin
out of circulation. This is equivalent to
borrowing that sum, and yet the vendor, receiving
in payment a medium as effectual
as coin for his purchases or payments, has
no claim to interest. And so the nation May
continue to issue its bills as far as its wants
require, and the limits of the circulation will
admit. Those limits are understood to extend
with us at present, to two hundred millions
of dollars, a greater sum than would be
necessary for any war. But this, the only resource
which the government could command
with certainty, the States have unfortunately
fooled away, nay corruptly alienated to
swindlers and shavers, under the cover of
private banks. Say, too, as an additional
evil, that the disposal funds of individuals,
to this great amount, have thus been withdrawn
from improvement and useful enterprise,
and employed in the useless, usu
rious and demoralizing practices of bank
directors and their accomplices. In the year
1775, our State [Virginia] availed itself of
this fund by issuing a paper money, bottomed
on a specific tax for its redemption, and, to
insure its credit, bearing an interest of five
per cent. Within a very short time, not a bill
of this emission was to be found in circulation.
It was locked up in the chests of executors,
guardians, widows, farmers, &c. We
then issued bills bottomed on a redeeming tax,
but bearing no interest. These were readily
received, and never depreciated a single
farthing. In the Revolutionary war, the old
Congress and the States issued bills without
interest, and without a tax. They occupied
the channels of circulation very freely, till
those channels were overflowed by an excess
beyond all the calls of circulation. But, although
we have so improvidently suffered the
field of circulating medium to be filched from
us by private individuals, yet I think we May
recover it in part, and even in the whole,
if the States will cooperate with us. If
Treasury bills are emitted on a tax appropriated
for their redemption in fifteen years, and
(to ensure preference in the first moments of
competition) bearing an interest of six per
cent. there is no one who would not take
them in preference to the bank paper now
afloat, on a principle of patriotism as well
as interest; and they would be withdrawn
from circulation into private hoards to a
considerable amount. Their credit once established,
others might be emitted, bottomed
also on a tax, but not bearing interest, and if
even their credit faltered, open public loans,
on which these bills alone should be received
as specie. These, operating as a sinking
fund, would reduce the quantity in circulation,
so as to maintain that in an equilibrium
with specie. It is not easy to estimate the
obstacles which, in the beginning, we should
encounter in ousting the banks from their
possession of the circulation; but a steady
and judicious alternation of emissions and
loans, would reduce them in time. But while
this is going on, another measure should be
pressed, to recover ultimately our right to the
circulation. The States should be applied to,
to transfer the right of issuing circulating
paper to Congress exclusively, in perpetuum,
if possible, but during the war at least, with
a saving of charter rights. I believe that
every State west and south of the Connecticut
River, except Delaware, would immediately
do it; and the others would follow in
time. Congress would, of course, begin by
obliging unchartered banks to wind up their
affairs within a short time, and the others as
their charters expired, forbidding the subsequent
circulation of their paper. This, they
would supply with their own, bottomed,
every emission, on an adequate tax, and bearing
or not bearing interest, as the state of the
public pulse should indicate. Even in the
non-complying States, these bills would make
their way, and supplant the unfunded paper
of their banks, by their solidity, by the universality
of their currency, and by their receivability
for customs and taxes. It would be in their power, too, to curtail those
banks to the amount of their actual specie,
by gathering up their paper, and running it
constantly on them. The national paper
might thus take place even in the non-complying
States. In this way, I am not without
a hope, that this great, this sole resource
for loans in an agricultural country, might
yet be recovered for the use of the nation
during war; and, if obtained
in perpetuum,
it would always be sufficient to carry us
through any war; provided, that in the interval
between war and war, all the outstanding
paper should be called in, coin be permitted
to flow in again, and to hold the field
of circulation until another war should require
its yielding place again to the national
medium.—
To John Wayles Eppes. Washington ed. vi, 139.
Ford ed., ix, 391.
(M.
June. 1813)
