being diminished by the war, the surplus quantity of cash was by that means also proportionally augmented.

It has been long and often observed, that when the current money of a country is augmented beyond the occasions for money, as a medium of commerce, its value as money diminishes. Its interest is reduced, and the principal sinks, if some means are not found to take off the surplus quantity. Silver may be carried out of the country that produces it, into other countries, and thereby prevent too great a fall of its value in that country. But, when by this means it grows more plentiful in all other countries, nothing prevents its sinking in value. Thus, within three hundred years since the discovery of America, and the vast quantities of gold and silver imported from thence, and spread over Europe and the rest of the world, those metals have sunk in value four fifths, that is, five ounces of silver will not purchase more labor now than an ounce would have done before that discovery.

Had Spain been able to confine all that treasure within its own territories, silver would probably have been there of no more value by this time than iron or lead. The exportation has kept its value on a level with its value in other parts of the world. Paper money not being easily received out of the country that makes it, if the quantity becomes excessive, the depreciation is quicker and greater.

Thus the excessive quantities which necessity obliged the Americans to issue for continuing the war, occasioned a depreciation of value, which, commencing towards the end of 1776, has gone on augmenting, till at the beginning of the present year, fifty, sixty, and as far as seventy dollars in paper were reckoned not more than equal to one dollar in silver, and the prices of all things rose in proportion.

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, payable in a year with interest. The interest differs in the different States from five to seven per cent.

VOL. II.

54

JJ #

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.

COMPARISON

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.

Thirdly. His frugality.