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Before the depreciation commenced, the Congress, fearing it, stopped for a time the emission of new bills, and resolved to supply their occasions by borrowing. Those who lent them the paper money at that time and until March, 1778, fixed their property and prevented its depreciation; the interest being regularly paid by bills of exchange on France, which supports the value of the principal sums lent.
These loans not being sufficient, the Congress were forced to print more bills, and depreciation proceeded. The Congress would borrow no more on the former conditions of paying the interest in French money at Paris ; but great sums were offered and lent them on the terms of being paid the interest, and repaid the principal in the same bills in America.
These loans in some degree lessened, but did not quite take away, the necessity of new emissions; so that
, it at length arrived at the excessive difference between the value of paper and silver, that is above mentioned.
To put an end to this evil, which destroyed all certainty in commerce, the Congress first resolved to diminish the quantity gradually by taxes, which, though nominally vastly great, were really less heavy than they appeared to be, and were readily paid. By these taxes fifteen millions of Spanish dollars, of the two hundred millions extant, are to be brought in monthly and burnt. This operation will destroy the whole quantity, to wit, two hundred millions, in about fourteen months. Thirty millions have already been so destroyed.
To prevent in the mean time the farther progress of the depreciation, and give some kind of determinate value to the paper, it was ordained, that, for every sum of forty dollars payable by any person as tax, he might discharge himself by paying one dollar in silver. Whether this expedient will produce the effect intended or not, experience and time must discover.
The general effect of the depreciation among the inhabitants of the States has been this, that it has operated as a gradual tax upon them, their business has been done and paid for by the paper money, and every man has paid his share of the tax according to the time he retained any of the money in his hands, and to the depreciation within that time. Thus it has proved a tax on money, a kind of property very difficult to be taxed in any other mode; and it has fallen more equally than many other taxes, as those people paid most, who, being richest, had most money passing through their hands.
With regard to the paper money or bills borrowed by the Congress, it appears by the above account to be under two different descriptions.
First, the quantity of bills borrowed before the depreciation, the interest of which in silver was to be and is paid. The principal of this sum is considered as equal in value to so many dollars of silver as were borrowed in paper, and will be paid in silver accordingly.
Secondly, the quantities of bills borrowed in different stages of the depreciation down to the present time. These sums are, by a resolution of Congress, to be repaid in silver according to the value they were of in silver at the time they were lent; and the interest is to be paid at the same rate. Thus those lenders have their property secured from the loss by depreciation subsequent to the time of their loan.
All the inhabitants are satisfied and pleased with this arrangement, their public debt being by this means reduced to a small sum. And the new paper money, which bears interest, and for the payment of which solid funds are provided, is actually in credit equal to real silver.
If any persons living in distant countries have, through their absence from their property in America, suffered loss by not having it timely fixed in the several loans above mentioned, it is not doubted but that, upon an application to Congress stating the case, they will meet with redress.
The real money used in the United States is French, Spanish, Portuguese, and English coins, gold and silver. The most common is Spanish milled dollars, worth five livres five sols tournois.
The nominal money is generally paper, reckoned in pounds, shillings, and pence, of different value in the different States when compared with real money, and that value often changing, so that nothing certain can be said of it. Everywhere the accounts are kept in the nominal pounds, shillings, and pence, the pound containing twenty shillings, and the shilling twelve pence, whatever may be the real value.
Bills of exchange are frequently drawn on Europe ; the rate of exchange differing in different States, and fluctuating in the same State, occasioned by the greater or less plenty of bills or of demand for others; they are commonly drawn at thirty days' sight.
The usages in buying and selling merchandises, are much the same as in Europe, except that in Virginia the planter carries his tobacco to magazines, where it is inspected by officers, who ascertain its quality and give receipts expressing the quantity. The merchants receive these receipts in payment for goods, and afterwards draw the tobacco out of the magazines for exportation. Weights and measures are uniform in all the States, following the standard of Great Britain.
Money is lent either upon bond or on mortgage, påyable in a year with interest. The interest differs in the different States from five to seven per cent.
Goods are generally imported on eighteen months' credit from Europe, sold in the country at twelve months' credit.
Billets or promissory notes, payable to the creditor or order, are in use, and demandable when due, as well as accepted bills of exchange, without any days of grace, but by particular favor.
OF GREAT BRITAIN AND THE UNITED STATES
IN REGARD TO
THE BASIS OF CREDIT IN THE TWO COUNTRIES.
This paper was written in the year 1777, while Franklin was one of the Commissioners from the United States in France. The object was to produce in Europe a just impression of the resources and political condition and prospects of the United States, with the view of encouraging governments and private capitalists to loan money to the American Congress. It was translated into various languages and widely circulated. — EDITOR.
In borrowing money, a man's credit depends on some, or all, of the following particulars.
First. His known conduct respecting former loans, and his punctuality in discharging them.
Secondly. His industry.
Fourthly. The amount and the certainty of his income, and the freedom of his estate from the incumbrances of prior debts.
Fifthly. His well-founded prospects of greater future ability, by the improvement of his estate in value, and by aids from others.
Sixthly. His known prudence in managing his general affairs, and the advantage they will probably receive from the loan which he desires.
Seventhly. His known probity and honest character, manifested by his voluntary discharge of debts, which he could not have been legally compelled to pay. The circumstances, which give credit to an individual, ought to have, and will have, their weight upon the lenders of money to public bodies or nations. If then we consider and compare Britain and America in these several particulars, upon the question, “To which is it safest to lend money ?” we shall find,
1. Respecting former loans, that America, who borrowed ten millions during the last war, for the maintenance of her army of twenty-five thousand men and other charges, had faithfully discharged and paid that debt, and all her other debts, in 1772. Whereas Britain, during those ten years of peace and profitable commerce, had made little or no reduction of her debt; but on the contrary, from time to time, diminished the hopes of her creditors by a wanton diversion and misapplication of the sinking fund destined for discharging it.
2. Respecting industry; every man in America is employed; the greater part in cultivating their own lands, the rest in handicrafts, navigation, and commerce. An idle man there is a rarity ; idleness and inutility are disgraceful. In England the number of that character is immense; fashion has spread it far and wide.