Part 22

Art. XI. The Bank Remark 11. This is in imitation to receive from individuals, of the Bank of Amsterdam. If individuals deposits of any sums of money, once get into the practice of depositing to be repaid when called for, their money in Bank, it will give credit or passed, by order, to the to the Bank, and assist trade. In time, credit of others; or deposits a premium may be required at repayment of plate, paying a certain as in Holland. A small profit may be annual rate for safe keeping. immediately gained on plate, as the Whatever is deposited in the States begin to tax this article; and Bank, to be exempt from taxes. many persons will dispense at this time with the use of their plate, if they can deposit it in a place of safety, and pay less for keeping it than the tax. Whatever serves to increase the apparent wealth of the Bank, will enhance its credit! It may even be useful to let the owners of the plate have credit in Bank for the value of the plate, estimated on a scale that would make it for the advantage of the Bank to purchase.

Art. XII. The Bank to Remark 12. It will be of have a right to contract with great importance to the success of the the French government for the subscriptions, that a previous assurance supply of its fleets and armies of these contracts should take place: in _America_, and to contract the profits of them would be no trifling with Congress for the supply of inducement to adventurers; it would have their armies. the air of employing the money subscribed in trade. As soon, therefore, as the plan should be resolved upon, negotiations should be begun for the purpose. It is so clearly the interest of the French government to enter into these contracts, that they must be blind not to do it, especially when it is proposed under the aspect of a method of re-establishing our finances. The present loss on their bills is enormous. The Bank may engage to receive them at a moderate discount, and to supply on better terms than they now make. Their business is at this time trusted to a variety of hands, some of which are neither very skilful nor very honest: competitions, frauds, and additional expense, are the consequences.

Congress could not hesitate on their parts, as the amount of the contracts would be a part of the loan required in Article XIII.

Art. XIII. The Bank Remark 13. This loan will to lend Congress one million, enable Congress to get through the two hundred thousand pounds, expenses of the year. There may be a lawful, at eight per cent. small deficiency, but this will be easily interest; for the payment of supplied. The credit of the Bank once which, with its interest, a established, it may increase its stock, certain unalienable fund of one and lend an equal sum every year during hundred and ten thousand, four the war. This loan may be advanced, hundred pounds per annum, to be partly in a contract for provisions, established for twenty years. clothing, etc., and partly in cash, at The States, generally and periodical payments, to avoid a too quick severally, to pledge themselves multiplication of Bank notes. for this sum, and for the due appropriation of the fund. Congress to have a right, at any intermediate period, to pay off the debt, with the interest to the time of payment. The same rule to govern in all future loans.

Art. XIV. The Bank Remark 14. It is of the greatest to become responsible for the importance that the old currency should redemption of all the paper be fixed at a certain value, or there now emitted; the old, at forty will be danger of its infecting the for one in thirty years, the future paper: besides, we want to raise new at par, with gold and it to a point that will make it approach silver, according to the terms nearer to an adequate medium. I have promised by Congress in their chosen the resolution of March, ’80, as a resolution of March, ’80. standard. We ought not, on any account, One-third of the first to be to raise the value of the old paper redeemed at the end of every higher than forty to one, for this will ten years; and the whole of give it about the degree of value that the last to be redeemed at the is most salutary; at the same time that expiration of the six years it will avoid a second breach of faith, specified by Congress, with the which would cause a violent death to interest of five per cent. The all future credit. A stable currency is United States, in compensation an idea fundamental to all practicable for this responsibility, to schemes of finance. It is the duty and establish certain funds for an interest of the public to give stability annuity, payable to the Bank, to that which now exists; and it will be equal to the discharge of the the interest of the Bank, which alone whole amount of the paper can effect it, to co-operate. I have currency in thirty years, with not mentioned the amount of the annuity an interest of two per cent. to be paid by Congress, because I have per annum. not materials to judge what quantity of paper money now exists; since it will be necessary to take all the State emissions into the calculation. I suppose (including State emissions) there may be about four hundred millions of dollars of the old standard, and about four millions of the new.[16] This will give us, in specie-value, about fourteen millions of dollars. This is what the Bank is to become answerable for, and what the public is to pay, by an annuity of thirty years, with two per cent. interest. This annuity would amount to six hundred and eleven thousand, three hundred and thirty-three, and one-third, dollars, for which funds are to be provided. By a rough calculation, I find that the Bank would gain, in the thirty years, about three millions of dollars, on the simple footing of interest; and that it will, at different periods, have more public money in its possession, than it will be in advance at others: so that, upon the whole, the sum it will gain in interest, will be for the loan of its credit to the public, not of any specific sum of cash. Besides, the interest of the Bank may gain a very considerable sum by the purchases it may make of the old paper at its current value, before the influence of this plan has time to bring it back to the point at which it is intended to be fixed.[17] It is the obvious interest of the United States to concur in this plan, because, by paying three millions of dollars in interest to the Bank, more than it would have to pay to the money-holders, agreeably to its present engagements, it would avoid a new breach of faith, fix its circulating medium increased in value more than one-half, render the taxes more productive, and introduce order into its finances, without which our independence is lost. It will also have only about two-thirds of the funds to establish for this plan that are required by the Act of March, ’80, to discharge the new bills: it will, of course, reserve a large balance towards the current expenses, which is no insignificant consideration. Perhaps it may be imagined, that the same funds established for the redemption of the money in the same time, without passing through the Bank, would have an equal effect upon its credit, and then we should save the interest of two per cent. Experience proves the contrary. We find the new notes depreciating in the States which have provided good funds. The truth is, there is not confidence enough in any funds merely public. The responsibility of the Bank would beget a much stronger persuasion of the paper being redeemed, and have incomparably more efficacy in raising and confirming its credit. Besides, the Bank might immediately reduce the quantity by purchase, which the public could not do. It will be observed, that of the six millions of dollars which constitute our annual revenue, I require nine hundred and seventy-nine thousand, three hundred and thirty-three, and one-third, dollars, in funds, to reimburse the loan for the first year, and pay off the annuity for the redemption of the old paper. It may be asked, where these funds are to be procured in the present impotence of our federal government. I answer, there are ample means for them, and they must be had. Congress must deal plainly with their constituents. They must tell them, that power without revenue is a bubble; that unless they give them substantial resources of the latter, they will not have enough of the former, either to prosecute the war, or to maintain the Union in peace; that, in short, they must, in justice to the public and to their own honor, renounce the vain attempt of carrying on the war without either; a perseverance in which, can only deceive the people, and betray their safety. They must demand an instant, positive, and perpetual investiture of an impost on trade; a land tax, and a poll tax, to be collected by their own agents. This Act to become a part of the Confederation.

It has ever been my opinion that Congress ought to have complete sovereignty in all but the mere municipal law of each State; and I wish to see a convention of all the States, with full power to alter and amend, finally and irrevocably, the present futile and senseless Confederation.

The taxes specified, may be made to amount to three millions of dollars; the other three millions to be raised by requisition, as heretofore.

Art. XV. The Bank Remark 15. It is essential that notes to be received in payment all taxes should be raised, throughout of all public customs and the United States, in specie, or taxes, at an equivalent with Bank notes at par, or the old paper gold and silver. at its current value at the time of payment. This will serve to increase the circulation and credit of the Bank notes; but no person should be obliged to receive them in private dealings. Their credit must depend on opinion; and this opinion would be injured by legislative interposition.

Art. XVI. The Bank to Remark 16. This permission dissolve itself whenever it to dissolve or sell at pleasure, will thinks proper, making effectual encourage men to adventure; and, when provision for the payment of once engaged, the profits will make them its debts; and a proprietor willing to continue. of Bank stock to have the privilege of selling out whenever he pleases.

Art. XVII. The Bank to Remark 17. This is chiefly be established for thirty years to prevent some speculative men being by way of experiment. alarmed, who, upon the whole, may think a paper credit detrimental and dangerous, though they would be willing, from necessity, to encourage it for a limited time. Experience, too, may show the defects of this plan, and give rise to alterations for the better.

Art. XVIII. No other Remark 18. Other Banks might Bank, public or private, to be excite a competition prejudicial to the permitted during that period. interests of this, and multiply and diversify paper credit too much.

Art. XIX. Three Banks Remark 19. These Banks ought to be erected in Massachusetts, to be in the interior of the country, Pennsylvania, and Virginia, to remote from danger, with every precaution facilitate the circulation and for their security in every way. Their payment of the Bank notes. distance from the capital trading points, will be an advantage, as it will make applications for the payment of Bank notes less convenient.

Art. XX. The affairs Remark 20. It is necessary, for of the Bank to be managed by reciprocal security of the public, the twelve general Directors, men proprietors, and the people, that the of reputation and fortune; affairs of the Bank should be conducted eight of them to be chosen under a joint direction. by the private proprietors, and four by Congress. The Minister of Finance to have the privilege of inspecting all their proceedings.

These, as has been already observed, are only intended as outlines; the form of administration for the Bank, and all other matters, may be easily determined, if the leading principles are once approved. We shall find good models in the different European Banks, which we can accommodate to our circumstances. Great care, in particular, should be employed to guard against counterfeits; and I think methods may be devised that would be effectual.

I see nothing to prevent the practicability of a plan of this kind, but a distrust of the final success of the war, which may make men afraid to risk any considerable part of their fortunes in the public funds; but, without being an enthusiast, I will venture to assert, that, with such a resource as is here proposed, the loss of our independence is impossible. All we have to fear is, that the want of money may disband the army, or so perplex and enfeeble our operations, as to create in the people a general disgust and alarm, which may make them clamor for peace on any terms. But if a judicious administration of our finances, assisted by a Bank, takes place, and the ancient security of property is restored, no convulsion is to be apprehended. Our opposition will soon assume an aspect of system and vigor, that will relieve and encourage the people, and put an end to the hopes of the enemy. ’Tis evident they have it not in their power to subdue us by force of arms. In all these States they have not more than fifteen thousand effective troops, nor is it possible for them much to augment this number. The East and West Indies demand reinforcements. In all the Islands, they have not, at this time, above five thousand men; a force not more than equal to the proper garrisoning of Jamaica alone; and which, the moment they lose a maritime superiority in those seas, will leave them much cause to fear for their possessions. They will probably send out fifteen hundred or two thousand men, to recruit their regiments already here; but this is the utmost they can do.

Our allies have five thousand men at Rhode Island, which, in the worst event that can happen, will be recruited to eight, to co-operate with us on a defensive plan. Should our army amount to no more than fifteen thousand men, the combined forces, though not equal to the expulsion of the enemy, will be equal to the purpose of compelling them to renounce their offensive, and content themselves with maintaining one or two capital points. This is on the supposition that the public have the means of putting their troops in activity. By stopping the progress of their conquests, and reducing them to an unmeaning and disgraceful defensive, we destroy the national expectation of success, from which the ministry draw their resources. It is not a vague conjecture, but a fact founded on the best information, that, had it not been for the capture of Charleston, and the victory of Camden, the ministry would have been in the utmost embarrassment for the supplies of this year. On the credit of those events, they procured a loan of five and twenty millions. They are in a situation where a want of splendid successes is ruin. They have carried taxation nearly to its extreme boundary; they have mortgaged all their funds; they have a large unfunded debt, besides the enormous mass which is funded. This must necessarily create apprehensions in their most sanguine partisans: and if these are not counteracted by flattering events, from time to time, they cannot much longer continue the delusion. Indeed, in this case, I suppose they must themselves despair.

The game we play is a sure game, if we play it with skill. I have calculated, in the preceding observations, on the most disadvantageous side. Many events may turn up, in the course of the summer, to make even the present campaign decisive.

If we compare the real ability of France, for revenue, with that of Great Britain; the economy and sagacity in the conduct of the finances of the former; the extravagance and dissipation which are overwhelming those of the latter; there will be found every reason to believe, that the resources of France will outlast those of her adversary. Her fleet is not much inferior, independent of that of Spain and Holland. Combined with that of Spain, it is greatly superior. If the Dutch enter into the war in earnest, and add their fleet, the superiority will be irresistible. Notwithstanding the injury they may sustain in the first instance, the Dutch will be still formidable: they are rich in credit, and have extensive means for maritime power.

Except the Emperor, who is hostile, and the Dane, who is neutral, all the rest of Europe are either friends to France or to our independence. Never did a nation unite more circumstances in its favor than we do: we have nothing against us but our own misconduct.

There are two classes of men among us, equally mistaken: one who, in spite of daily experience, of accumulated distress, persist in a narrow line of policy, and, amidst the most threatening dangers, fancy every thing in perfect security. Another, who, judging too much from the outside, alarmed by partial misfortunes, and the disordered state of our finances, without estimating the real faculties of the parties, give themselves up to an ignorant and ill-founded despondency. We want to learn to appreciate our true situation and that of the enemy. This would preserve us from a stupid insensibility to danger on the one hand, and inspire us with a reasonable and enlightened confidence on the other.

But let us suppose the worst, that we shall, after all, fail in our independence; our return to Great Britain, whenever it should happen, would be by compact. The war would terminate by a mediation. It cannot be supposed that the mediator would be so devoted to Great Britain, or would have so little consideration for France, as to oblige us to revert to our former subjection by an unconditional surrender. While they might confirm his dominion over us, they would endeavor to save appearances for the honor of France, and stipulate terms as favorable to us as would be compatible with a state of dependence. A general amnesty, and the security of private property (of course the payment of public debts), would be among the most simple and most indispensable. This would comprehend the concerns of the Bank; and if, unfortunately for our virtue, such a circumstance could operate as an inducement, it might be added, that our enemies would be glad to find, and to encourage such an institution among us for their own benefit.

A question may arise concerning the abilities of these States to pay their debts after the establishment of their independence; and though any doubt on this head must originate in gross ignorance, it may be necessary to oppose it with more than general argument, as has been done heretofore. A very summary and obvious calculation will show that there is nothing to be dreaded on this head.

The funds of nine hundred and seventy-nine thousand, three hundred and thirty-three, and one-third, dollars, proposed to be established for paying off the loan of the first year, and for redeeming the present paper, will, in thirty years, wipe off all the debts of the States, except those contracted to foreigners, which, I imagine, do not amount to four millions of dollars. Suppose we should be obliged, for two years besides the present, to borrow an equal sum each year from the Bank; the fund requisite to discharge these loans, on the same terms with the first, will amount to seven hundred and thirty-six thousand dollars, to be deducted from the five million, and twenty thousand, six hundred and sixty-six, and two-thirds, dollars, remaining on the annual revenue; which will reduce it to four millions, two hundred and eighty-four thousand, six hundred and sixty-six, and two-thirds, dollars: then the debt unfunded will be,

To foreigners already contracted by supposition, $4,000,000

Deficiency of Revenue to the expense to be obtained on credit, the first year, besides the loan from the Bank, 1,479,333⅓

Deficiency of Revenue for the second year deducting the fund for discharging the loan of this year, 1,847,333⅓

Deficiency of Revenue for the third year, making the same deduction, 2,215,333⅓ ---------- $9,542,000

Should, then, the war last three years longer, which must probably be the utmost term of its duration, we shall find ourselves with an unfunded debt of nine million, five hundred and forty-two thousand dollars, and an unappropriated revenue of four million, two hundred and eighty-four thousand, six hundred and sixty-six, and two-thirds, dollars.

The surplus of four millions, which is two hundred and eighty-four thousand, six hundred and sixty-six, and two-thirds, dollars, and the funds appropriated to the payment of the other debts which will revert to the public at the end of thirty years, will be a sufficient fund for the redemption of this debt in about thirty-five years: so that, according to my plan, at the end of thirty-five years these States have paid off the whole debt contracted on account of the war; and, in the mean time, will have a clear revenue of four millions of dollars, for defraying the expenses of their civil and military establishments.

This calculation supposes the ability of these States for revenue to continue the same as they now are, which is a supposition both false and unfavorable. Speaking within moderate bounds, our population will be doubled in thirty years; there will be a confluence of emigrants from all parts of the world; our commerce will have a proportionable progress; and of course our wealth and capacity for revenue. It will be a matter of choice if we are not out of debt in twenty years, without at all encumbering the people.

A national debt, if it is not excessive, will be to us a national blessing. It will be a powerful cement of our Union. It will also create a necessity for keeping up taxation to a degree which, without being oppressive, will be a spur to industry, remote as we are from Europe, and shall be from danger. It were otherwise to be feared our popular maxims would incline us to too great parsimony and indulgence. We labor less now than any civilized nation of Europe; and a habit of labor in the people, is as essential to the health and vigor of their minds and bodies, as it is conducive to the welfare of the State. We ought not to suffer our self-love to deceive us in a comparison upon these points.

I have spun out this letter to a much greater length than I intended. To develope the whole connection of my ideas on the subject, and place my plan in the clearest light, I have indulged myself in many observations which might have been omitted. I shall not longer intrude upon your patience than to assure you of the sincere sentiments of esteem with which I have the honor to be,

Sir, your most obedient and humble servant, A. Hamilton.

[12] It is to be feared, too, that this sum is rated too high. Hitherto we have not four hundred men from that State, nor very promising accounts of those which may be expected.