INDEBTEDNESS OF THE UNITED STATES, OF THE STATES, ETC. 395 



day, but at this time it was found impossible 

 to get the members of Congress together on 

 that day. A Treasury Department was created, 

 and Alexander Hamilton appointed the secre- 

 tary. There was a debt of millions to be pro- 

 vided for, and not a dollar on hand even to 

 meet current expenses. The measures by 

 which to raise a revenue from an exhausted 

 country were to be devised and put in opera- 

 tion, and a financial system prepared which 

 should promise to conduct the Government to 

 independence and financial strength. 



SYSTEM ADOPTED. The first step taken was 

 to lay duties on imports, which was approved 

 on July 4, 1789, but no revenue was obtained 

 until September. The next step was to ob- 

 tain temporary loans from banks in New- 

 York. For the year 1789 the expenditures 

 were estimated at $8,285,603, the greater por- 

 tion of which was for principal and interest 

 due on the foreign and domestic debt. The 

 current expenses of the year were estimated at 

 $630,101. No payments on the debt were 

 made during the year, except interest on the 

 Holland loans. No way of relief was open but 

 to audit or adjust the details of the debt and 

 fund them on longer bonds. For this object 

 money was required. Congress, therefore, 

 passed an act appropriating any surplus rev- 

 enue to payment of the debt, and authorizing 

 a loan of $12,000,000 to apply on the foreign 

 debt, and a further loan of $2,000,000 to be 

 applied to purchase the debt. 



THE DEBT. The following is a statement 

 of the debt of the United States at the organ- 

 ization of the present form of government, 

 including arrearages of interest to January 1, 

 1790: 



French loan of 18,000,000 livres .......... 



French loan of 10,000,000 livres .............. 



French loan of 6,000,000 livres ............... 



Loan from Farmers-General of France, balance 

 due ...................................... 



Loan from Spain in 1781 ..................... 



Holland loan of 1782 ......................... 



Holland loan of 1784 ......................... 



Holland loan of 1787 ......................... 



Holland loan of 1788 ......................... 



$8,267,000 00 

 1,815,000 00 

 1,089,000 00 



153,688 89 

 174,017 13 

 2,000,000 00 

 800,000 00 

 400,000 00 

 400,000 00 



Total principal of foreign debts ......... $10,098,706 02 



Balance due France for military supplies ..... 24,832 86 



Arrearages of interest to January 1, 1790 ..... 1,760,277 08 



Debt due foreign officers who had served in 



the war of the Revolution ................. 186,988 78 



Arrearages of interest to January 1, 1790 ..... 11.219 32 



Principal of the domestic debt, estimated ____ 28,858,180 65 



Arrearages of interest to January 1, 1790, esti- 



mated .................................... 11,898,621 80 



Add to this arrears and claims against the late 

 government outstanding and subsequently 

 discharged 450,895 52 



Making the total debt of the United States, 



January 1,1790 $52,788,722 03 



To this should be added the individual debts 

 of the several States, the precise amount and 

 character of which was then unknown, esti- 

 mated by Hamilton at that time to aggregate 

 about $25,000,000. 



There were two kinds of debt in the adjust- 

 ment of which there seems to have been no 

 difficulty: One was the undisputed foreign 



debt, where the lenders had paid for their 

 bonds in gold, on the faith of the Continental 

 Congress ; the other was the paper money is- 

 sued by Congress and the several States. 



Authorities vary much as to the amount of 

 paper money issued during the struggle for 

 independence. Possibly Mr. Jefferson's state- 

 ment in his writings may be taken as approxi- 

 mate to the truth, and it affords, at the same 

 time, a striking exhibit of the effects of the 

 inflation of our paper currency : * 



On the commencement of the late Revolution Con- 

 gress had no money. The external commerce of the 

 States being suppressed, the farmer could not sell his 

 produce, and, of course^ could not pay a tax. Con- 

 gress had no resource then but in paper money. Not 

 being able to lay a tax for its redemption, they could 

 only promise that taxes should be laid for that pur- 

 pose, so as to redeem the bills by a certain day. They 

 did not foresee the long continuance of the war, the 

 almost total suppression of their exports, and other 

 events which rendered the performance of their en- 

 gagements impossible. The paper money continued 

 for a twelvemonth equal to gold and silver ; but the 

 quantities which they were obliged to emit, for the 

 purpose of the war, exceeded what had been the usual 

 quantity of the circulating medium. 



It began, therefore^ to become cheaper, or, as we 

 expressed it, it depreciated, as gold and silver would 

 have done had thev been thrown into circulation in 

 equal quantities. But not having, like them, an in- 

 trinsic value, its depreciation was more rapid and 

 greater than could ever have happened with them. 

 In two years it had fallen to two dollars of paper 

 money for one of silver ; in three years to four for 

 one ; in nine months more it fell to ten for one ; and 

 in the six months following, that is to say, by Septem- 

 ber, 1779, it had fallen to twenty for one. 



Congress, alarmed at the consequences which were 

 to be apprehended should they lose this resource alto- 

 gether, thought it necessary to make a vigorous effort 

 to stop its further depreciation. They therefore de- 

 termined, in the first place, that their emissions should 

 not exceed $200,000,000, to which sum they were then 

 nearly arrived, and though they knew that twenty 

 dollars of what they were then issuing would buy no 

 more for their army than one silver dollar would buy, 

 yet they thought it would be worth while to submit 

 to the sacrifice of nineteen out of twenty dollars if 

 they could thereby stop further depreciation. They, 

 therefore, published an address to their constituents, 

 in which they renewed their original declarations that 

 this paper money should be redeemed at dollar for 

 dollar. They proved the ability of the States to do 

 this, and that their liberty would be cheaply bought 

 at this price. The declaration was ineffectual. No 

 man received the money at a better rate. On the 

 contrary, in six months more, that is, by March, 1780, 

 it had fallen to forty for one. Congress then tried an 

 experiment of a different kind. Considering their 

 former offers to redeem this money at par as relin- 

 quished, by the general refusal to take it but in pro- 

 gressive depreciation, they required the whole to be 

 brought in, declared it should be redeemed at its 

 present value of forty for one, and that they would 

 give to the holders new bills, reduced in their denom- 

 ination to the sum of gold or silver which was actual- 

 ly to be paid for them. This would reduce the nomi- 

 nal sum of the mass in circulation to the present 

 worth of that mass, which was five millions, a sum 

 not too great for the circulation of the States, and 

 which they therefore hoped would not depreciate fur- 

 ther, as they continued firm in their purpose of emit- 

 ting no more. This effort was as unavailing as the 

 former. Very little of the money was brought in. 



It continued to circulate and to depreciate till the 



* Jefferson's "Works," vol. ix, p. 248., 



