The Atlantic Monthly, Volume 14, No. 85, November, 1864

But early in 1776 reports came of English negotiations for foreign mercenaries to help put down the rebellion,—reports which soon took the shape of positive information. No immediate end of the war now: already, too, independence was looming up on the turbid horizon; already the current was bearing them onward, deep, swift, irresistible: and thus seizing still more eagerly upon the future, they poured out other four millions in February, five millions in May, five millions in July. The Confederacy was not yet formed; the Declaration of Independence had nothing yet to authenticate it but the signatures of John Hancock and Charles Thompson; and the republic that was to be was already solemnly pledged to the payment of twenty millions of dollars.

Thus far men's faith had not faltered. They saw the necessity and accepted it, giving their goods and their labor unhesitatingly for a slip of paper which derived all its value from the resolves of a body of men who might, upon a reverse, be thrown down as rapidly as they had been set up. And then whom were they to look to for indemnification? But now began a sensible depreciation,—slight, indeed, at first, but ominous. Congress took the alarm, and resolved upon a loan,—resolved to borrow directly what they had hitherto borrowed indirectly, the goods and the labor of their constituents. Accordingly, on the third of October, a resolve was passed for raising five millions of dollars at four per cent; and in order to make it convenient to lenders, loan-offices were established in every Colony with a commissioner for each.

Money came in slowly, but ran out so fast that in November Congress ordered weekly returns from the Treasury, not, of sums on hand, but of what parts of the last emission remained unexpended. The campaign of '77 was at hand; how the campaign of '76 would close was yet uncertain. The same impenetrable veil that hid Trenton and Princeton from their eyes concealed the disasters of Fort Washington and the Jerseys. They still looked hopefully to the lower line of the Hudson. They resolved, therefore, to make an immediate effort to supply the Treasury by a lottery to be drawn at Philadelphia.

A lottery,—does not the word carry one back, a great many years back, to other times and other manners? The Articles of War were now on the table of Congress for revision, and in the second and third of those articles officers and soldiers had been earnestly recommended to attend divine service diligently, and to refrain, under grave penalties, from profane cursing or swearing. And here legislators deliberately set themselves to raise money by means which we have deliberately condemned as gambling. But years were yet to pass before statesmen, or the people rather, were brought to feel that the lottery-office and gaming-table stand side by side on the same broad highway.

No such thoughts troubled the minds of our forefathers, well stored as those minds were with human and divine lore; but, going to work without a scruple, they prepared an elaborate scheme and fixed the first of March for the day of drawing,—"or sooner, if sooner full." It was not full, however, nor was it full when the subject next came up. Tickets were sold; committees sat; Congress returned to the subject from time to time: but what with the incipient depreciation of the bills of credit, the rising prices of goods and provisions, and the incessant calls upon every purse for public and private purposes, the lottery failed to commend itself either to speculators or to the bulk of the people. Some good Whigs bought tickets from principle, and, like many of the good Whigs who took the bills of credit for the same reason, lost their money.

In the same November the Treasury was ordered to make every preparation for a new issue; and to meet the wants of the retail trade, it was resolved at the same time to issue five hundred thousand dollars in bills of two-thirds, one-third, one-sixth, and one-ninth of a dollar. Evident as it ought now to have been that nothing but taxation could relieve them, they still shrank from it. "Do you think, Gentlemen," said a member, "that I will consent to load my constituents with taxes, when we can send to our printer and get a wagon-load of money, one quire of which will pay for the whole?" It was so easy a way of making money that men seemed to be getting into the humor of it.

The campaign of '77, like the campaign of '76, was fought upon paper-money without any material depreciation. The bills could never be signed as fast as they were called for. But this could not last. The public mind was growing anxious. Extensive interests, in some cases whole fortunes, were becoming involved in the question of ultimate payment. The alarm gained upon Congress. Burgoyne, indeed, was conquered; but a more powerful, more insidious enemy, one to whom they themselves had opened the gate, was already within their works and fast making his way to the heart of the citadel. The depreciation had reached four for one, and there was but one way to prevent it from going lower. Congress deliberated anxiously. Thus far the public faith had supported the war. But, they reasoned, the quantity of the money for which this faith stood pledged already exceeded the demands of commerce, and hence its value was proportionably reduced. Add to this the arts of open and secret enemies, the avidity of professed friends, and the scarcity of foreign commodities, and it is easy to account for the depreciation. "The consequences were equally obvious and alarming,"—"depravity of morals, decay of public virtue, a precarious supply for the war, debasement of the public faith, injustice to individuals, and the destruction of the safety, honor, and independence of the United States." But "a reasonable and effectual remedy" was still within their reach, and therefore, "with mature deliberation and the most earnest solicitude," they recommended the raising by taxes on the different States, in proportion to their population, five millions of dollars in quarterly payments, for the service of 1778.

But having explained, justified, and recommended, the power of Congress ceased. Like the Confederation, it had no right of coercion, no machinery of its own for acting upon the States. And, unhappily, the States, pressed by their individual wants, feeling keenly their individual sacrifices and dangers, failed to see that the nearest road to relief lay through the odious portal of taxation. Had the mysterious words that Dante read on the gates of Hell been written on it, they could not have shrunk from it with a more instinctive feeling:—

"All hope abandon, ye who enter here!"

Some States paid, some did not pay. The sums that came in were wholly insufficient to relieve the actual pressure, and that pressure, unrelieved, grew daily more severe. They had tried the regulating of prices,—they had tried loans,—they had tried a lottery; and now they were forced back again to their earliest and most dangerous expedient, paper-money. New floods poured forth, and the parched earth drank them greedily up. One may almost fancy, as he looks at the tables, that he sees the shadowy form of sickly Credit tottering feebly forth to catch a gleam of sunshine, a breath of pure air, while myriads of little sprites, each bearing in his hand an emblazoned scroll with "Depreciation" written upon it in big yellow letters, dance merrily around him, thrusting the bitter record in his face, whichever way he turns, with gibes and taunts and demoniac laughter. But his course was almost ended: the grave was nigh, an unhonored grave; and as eager hands heaped the earth upon his faded form, a stern voice bade men remember that they who strayed from the path as he had done must sooner or later find a grave like his.

It was not without a desperate struggle that Congress saw the rapid decline and shameful death of its currency. The ground was fought manfully, foot by foot, inch by inch. The idea that money derived its value from acts of government seemed to have taken deep hold of their minds, and their policy was in perfect harmony with their belief. In January, 1776, they had solemnly resolved that everybody who refused to accept their bills, or did anything to obstruct the circulation of them, should, upon due conviction, "be deemed, published, and treated as an enemy of his country, and be precluded from all trade or intercourse with the inhabitants of these Colonies." And to enforce it there were Committees of Inspection, whose power seldom lay idle in their hands, whose eyes were never sealed in slumber. In this work, which seemed good in their eyes, the State Assemblies and Conventions and Committees of Safety joined heart and hand with Congress. Tender-laws were tried, and the relentless hunt of creditor after debtor became a flight of the recusant creditor from the debtor eager to wipe out his responsibility for gold or silver with a ream or two of paper. Limitation of prices was tried, and produced its natural results,—discontent, insufficient supplies, heavy losses. Threatening resolves were renewed, and fell powerless. It was hoped that some relief might come from the sales of confiscated property; but property changed hands, and the Treasury was none the better off: just as in France, a few years later, the whole landed property of the kingdom changed hands, and left the government assignats what it found them,—bits of waste-paper.

Meanwhile speculation ran riot. Every form of wastefulness and extravagance prevailed in town and country,—nowhere more than at Philadelphia, under the very eyes of Congress,—luxury of dress, luxury of equipage, luxury of the table. We are told of one entertainment at which eight hundred pounds were spent in pastry. As I read the private letters of those days, I sometimes feel as a man would feel who should be permitted to look down upon a foundering ship whose crew were preparing for death by breaking open the steward's room and drinking themselves into madness.

An earnest appeal was made to the States. The sober eloquence and profound statesmanship of John Jay were employed to bring the subject before the country in its true light and manifold bearings,—the state of the Treasury, the results of loans and of taxes, and the nature and amount of the obligations incurred. The natural value and wealth of the country were held to view as the foundations on which Congress had undertaken to build up a system of public finances, beginning with bills of Credit because there was no nation they could have borrowed of, coming next to loans, and thus "unavoidably creating a public debt: a debt of $159,948,880, in emissions,—$7,545,196-67/90, in money borrowed before the first of March, 1778, with the interest payable in France,—$26,188,909, money borrowed since the first of March, 1778, with interest due in America,—about $4,000,000, of money due abroad." The taxes had brought in only $3,027,560; so that all the money supplied to Congress by the people was but $36,701,665-67/90.

"Judge, then, of the necessity of emissions, and learn from whom and whence that necessity arose. We are also to inform you, that, on the first day of September instant, we resolved that we would on no account whatever emit more bills of credit than to make the whole amount of such bills two hundred million dollars; and as the sum emitted and in circulation amounted to $159,948,880, and the sum of $40,051,120 remained to complete the two hundred million above mentioned, we, on the third day of September instant, further resolved that we would emit such part only of the said sum as should be absolutely necessary for public exigencies before adequate supplies could otherwise be obtained, relying for such ratios on the exertions of the several States."

Coming to the depreciation, they reduce the causes to three kinds,—natural, or artificial, or both. The natural cause was the excess of the supply over the demands of commerce; the artificial cause was a distrust of the ability or inclination of the United States to redeem their bills; and assuming that both causes have combined in producing the depreciation of the Continental money, they proceed to prove that there can be no doubt of the ability of the United States to pay their debt, and none of their inclination. Under the head of inclination the argument is divided into three parts:—

First, Whether, and in what manner, the faith of the United States has been pledged for the redemption of their bills.

Second, Whether they have put themselves in a political capacity to redeem them.

Third, Whether, admitting the two former propositions, there is any reason to apprehend a wanton violation of the public faith. The idea that Congress can destroy the money, because Congress made it, is treated with scorn.

"A bankrupt, faithless Republic would be a novelty in the political world.... The pride of America revolts from the idea; her citizens know for what purposes these emissions were made, and have repeatedly plighted their faith for the redemption of them; they are to be found in every man's possession, and every man is interested in their being redeemed.... Provide for continuing your armies in the field till victory and peace shall lead them home, and avoid the reproach of permitting the currency to depreciate in your hands, when, by yielding a part to taxes and loans, the whole might have been appreciated and preserved. Humanity as well as justice makes this demand upon you; the complaints of ruined widows and the cries of fatherless children, whose whole support has been placed in your hands and melted away, have doubtless reached you: take care that they ascend no higher.... Determine to finish the contest as you began it, honestly and gloriously. Let it never be said that America had no sooner become independent than she became insolvent."

But it was not only the Continental money that was blocking up the channels through which a sound currency would have carried vigor and health. The States had their debts and their paper-money too,—wheel within wheel of complicated, desperate insolvency. The two hundred millions had been issued and spent. There was no money to send to Washington for his army, and he was compelled for a while to support them by seizing the articles he needed, and giving certificates in return. The States were called upon for specific supplies, beef, pork, flour, for the use of the army,—a method so expensive, irregular, and partial, that it was soon abandoned. One chance remained: to call in the old money by taxes, and burn it as soon as it was in; then to issue a new paper,—one of the new for every twenty of the old; and the whole of the old was cancelled, to issue only ten millions of the new,—four millions of it subject to the order of Congress, and the remaining six to be divided among the States: the whole redeemable in specie within six years, and bearing till then an interest of five per cent., payable in specie annually or on redemption, at the option of the holder. By this skilful change of base it was hoped that a bold front could still be presented to the enemy, and the field, which had been so long and so obstinately contested, be finally won.

But the day of expedients was past. The zeal which had blazed forth with such energy at the beginning of the war was fast sinking to a fitful, smouldering flame. Individual interests were again taking the precedence of general interests. The moral sense of the people had contracted a deadly taint from daily contact with corruption. The spirit of gambling, confined in the beginning and lost to the eye, like Le Sage's Devil, had swollen to its full proportions, and, in the garb of speculation, was undermining the foundations of society. Rogues were growing rich; the honest men who were not already poor were daily growing poor. The laws that had been made in the view of propping the currency had served only to countenance unscrupulous men in paying their debts at a discount ruinous to the creditor. The laws against forestallers and engrossers, who, it was currently believed, were leagued against both army and country, were powerless, as such laws always are. Even Washington wished for a gallows like Haman's to hang them on; but the army was kept starving none the less.

The seasons themselves—God's visible agents—seemed to combine against our cause. The years 1779 and 1780 were years of small crops. The winter of 1780 was severe far beyond the common severity even of a Northern winter. Provisions were scarce, suffering universal. Farmers, as if forgetting their dependence on rain and sunshine, had planted less than usual,—some from disaffection, some because they were irritated at having to give up their corn and cattle for worthless bills, and certificates which might prove equally worthless. Some, who were within reach of the enemy, preferred to sell to them, for they paid in silver and gold. There were riots in Philadelphia, put down at the point of the sword. There was mutiny in the army, and this, too, was put down by the strong hand,—though the fearful sufferings which had caused it justified it almost in the eye of sober reason.

It is easy to see why farmers should have been loath to raise more than they needed for their own use,—why merchants should have been unwilling to lay in stores which they might be compelled to sell at prices so truly nominal that the money which they received would often sink to half they had taken it for before they were able to pass it. But it is not so easy to see why this wretched substitute for values should have circulated so freely to the very last. Even at two hundred for one, with the knowledge that the next twenty-four hours might make that two hundred two hundred and fifty, or even more, without the slightest hope that it would ever be redeemed at its nominal value, it would still buy everything that was to be sold,—provisions, goods, houses, lands, even hard money itself. Down to its last gasp there were speculations afoot to take advantage of the differences in the degree of its worthlessness at different places, and buy it up in one place to sell it at another,—to buy it in Philadelphia at two hundred and twenty-five for one, and sell it in Boston at seventy-five for one. It was possible, if the ball passed quickly from hand to hand, that some might gain; it was very manifest that some must lose: and thus outcrops that pernicious doctrine, that true, life-giving, health-diffusing commerce consists in stripping one to clothe another.

And thus we reach the memorable year 1781, the great, decisive year of the war. While Greene was fighting Cornwallis and Rawdon, and Washington watching eagerly for an opportunity to strike at Clinton, Congress was busy making up its accounts. One circumstance told for them. There was no longer the same dearth of gold and silver which had embarrassed them so much at the beginning of the war. A gainful commerce was now opened with the West Indies. The French army and the French fleet were here, and hard money with them. Louis-d'ors and livres and Spanish dollars,—how welcome must their pleasant faces have looked, after this long, long absence! With what a thrill must the hand which had touched nothing for years but Continental bills have closed upon solid gold and silver! It is easy to conceive that a new spirit must soon have manifested itself in the wide circle of contractors and agents,—that shopkeepers must speedily have discovered that their business was shifting its ground as they obtained a reliable standard for counting their losses and gains,—that every branch of commerce must have felt a new vigor diffusing itself through its veins. But it is equally evident, that, while the gold and silver which flowed in upon them from these sources strengthened the people for the work they were to do and the burdens they were to bear, the comparisons they were daily making between fluctuating paper and steadfast metal were not of a nature to strengthen their faith in money that could be made by a turn of the printing-press and a few strokes of the pen.

Another circumstance told for them, too. The accession of Maryland had fulfilled the conditions for the acceptance of the Confederation so long held in abeyance, and the finances were taken from a board and intrusted to the hands of a skilful and energetic financier. Robert Morris, who had protested energetically against the tender-laws, made specie-payments the condition of his acceptance of office; and on the twenty-second of May, though not without a struggle, Congress resolved "that the whole debts already due by the United States be liquidated as soon as may be to their specie-value, and funded, if agreeable to the creditors, as a loan upon interest; that the States be severally informed that the calculations of the expenses of the present campaign are made in solid coin, and therefore that the requisitions from them respectively, being grounded on those calculations, must be complied with in such manner as effectually to answer the purpose designed; that, experience having evinced the inefficacy of all attempts to support the credit of paper-money by compulsory acts, it is recommended to such States, where laws making paper-bills a tender yet exist, to repeal the same."

Another public body, the Supreme Executive Council of Pennsylvania, dealt it another blow, fixing the ratio at which it was to be received in public payments at one hundred and seventy-five for one. Circulation ceased. In a short time the money that had been carted to and fro in reams disappeared from the shop, the counting-room, the market. All dealings were in hard money. Gold and silver resumed their legitimate sway, and men began to look hopefully forward to a return of economy, frugality, and an invigorating commerce.

The Superintendent of Finance set himself seriously to his task. One great obstacle had been removed; one great and decisive step had been made towards the restoration of that sense of security without which industry and enterprise are powerless. As a merchant, he was familiar with the resources of the country; as a Member of Congress, he was familiar with the wants of Government. His resources were taxes and loans; his obligations, an old debt and a daily expenditure. Opposed as he was to the irresponsible currency which had brought the country to the brink of ruin, he was a believer in banks and bills resting on a secure basis. One of his earliest measures was to prepare, with the aid of his Assistant-Superintendent, Gouverneur Morris, a plan of a bank, which soon after, with the sanction of Congress, went into operation as the Bank of North America. Small as the capital with which it started was,—only four hundred thousand dollars,—its influence was immediately felt throughout the country. It gave an impulse to legitimate enterprise which had long been wanting, and a confidence to buyer and seller which they had not felt since the first year of the war. In his public operations the Superintendent used it freely, and, using it at the same time wisely, was enabled to call upon it for aid to the full extent of its ability without impairing its strength.

Henceforth the financial history of the Revolution, although it loses none of its importance, loses much of its narrative-interest. No longer a hand-to-hand conflict between coin and paper,—no longer the melancholy spectacle of wise men doing unwise things, and honorable men doing things which, in any other form, they would have been the first to brand with dishonor,—it still continues a long, a wearisome, and often a mortifying struggle: men knowing their duty and refusing to do it, knowing consequences and yet blindly shutting their eyes to them. I will give but one example.

After a careful estimate of the operations of 1782, Congress had called upon the States for eight millions. Up to January, 1783, only four hundred and twenty thousand had come into the Treasury. Four hundred thousand Treasury-notes were almost due; the funds in Europe were overdrawn to the amount of five hundred thousand by the sale of drafts. But Morris, waiting only to cover himself by a special authorization of Congress, made fresh sales upon the hopes of the Dutch loan and the possibility of a new French loan, and still held on—as cautiously as he could, but ever boldly and skilfully—his anxious way through the rocks and shoals that menaced him on every side. He was rewarded, as such men too often are, by calumny and suspicion. But when men came to look closely at his acts, comparing his means with his wants, and the expenditure of the Treasury Board with the expenditure of the Finance Office, it was seen and acknowledged that he had saved the country thirteen millions a year in hard money.