New York, January 24, 1790

Dear Sir

A dysenteric attack at Georgetown with its effects retarded my journey so much that I did not arrive here till a few days ago. I am free at present from the original complaint, but a little out of order with the piles generated by that or the medicine it required.

The Cato in which were the busts of P. Jones and the box of books for myself never arrived till the day before yesterday, having sprung a leak which obliged her to put into an English Port. Everything consigned to me appears as far as the parcels are yet opened to have escaped injury. I beg you to accept my unfeigned thanks for the proof medals, of which the value is much enhanced in my estimation by the circumstance which demands that tribute. I have supposed that I could not better dispose of the letters to Mr Eppes as well as that to Col: Lewis than by inclosing them to yourself.

The business of Congs. is as yet merely in embryo. The principal subjects before them are the plans of revenue and the Militia, reported by Hamilton & Knox. That of the latter is not yet printed, and being long is very imperfectly understood. The other has scarcely been long enough from the press to be looked over. It is too voluminous to be sent entire by the mail. I will by the next mail commence a transmission in fractions. Being in possession at present of a single copy only I cannot avail myself of this opportunity for the purpose. You will find a sketch of the plan in one of the Newspapers herewith inclosed. Nothing has passed either in Congs or in conversation from which a conjecture can be formed of the fate of the Report. Previous to its being made, the avidity for stock had raised it from a few shillings to 8s or 10s in the pound, and emissaries are still exploring the interior & distant parts of the Union in order to take advantage of the ignorance of holders. Of late the price is stationary, at or fluctuating between the sums last mentioned. From this suspence it would seem as if doubts were entertained concerning the success of the plan in all its parts.

I take for granted that you will before the receipt of this, have known the ultimate determination of the President on your appointment. All that I am able to say on the subject is that a universal anxiety is expressed for your acceptance, and to repeat my declarations that such an event will be more conducive to the general good, and perhaps to the very objects you have in view in Europe, than your return to your former station.

I do not find that any late information has been received with regard to the Revolution in France. It seems to be still unhappily forced to struggle with the adventitious evils of public scarcity, in addition to those naturally thrown in its way by antient prejudices and hostile interests. I have a letter from Havr. of the 13th Novr., which says that wheat was then selling at 10 livrs. per Bushel, and flour at 50 livs. per 100 , and the demand pressing for all kinds of materials for bread. The letter adds that a bounty of 2 livs. per 100 . marc on wheat & on flour in proportion &c &c was to commence the 1st Decr last & continue till the 1st of July next, in favr. of imports from any quarter of the Globe.

With sincerest affection I am Dr. Sir Your Obedt friend & Servt.

January 9, 1790
(Read the complete report.)

Communicated to the House of Representatives

The Secretary of the Treasury, in obedience to the resolution of the House of Representatives of the twenty-first day of September last, has, during the recess of Congress, applied himself to the consideration of a proper plan for the support of the public credit, with all the attention which was due to the authority of the House, and to the magnitude of the object.

In the discharge of this duty, he has felt, in no small degree, the anxieties which naturally flow from a just estimate of the difficulty of the task, from a well-founded diffidence of his own qualifications for executing it with success, and from a deep and solemn conviction of the momentous nature of the truth contained in the resolution under which his investigations have been conducted,—“That an adequate provision for the support of the public credit is a matter of high importance to the honor and prosperity of the United States.”

With an ardent desire that his well-meant endeavors may be conducive to the real advantage of the nation, and with the utmost deference to the superior judgment of the House, he now respectfully submits the result of his inquiries and reflections to their indulgent construction.

In the opinion of the Secretary, the wisdom of the House, in giving their explicit sanction to the proposition which has been stated, ["That an adequate provision for the support of the Public Credit, is a matter of high importance to the honor and prosperity of the United States."] cannot but be applauded by all, who will seriously consider, and trace through their obvious consequences, these plain and undeniable truths.

That exigencies are to be expected to occur, in the affairs of nations, in which there will be a necessity for borrowing.

That loans in times of public danger, especially from foreign war, are found an indispensable resource, even to the wealthiest of them.

And that in a country, which, like this, is possessed of little active wealth, or in other words, little monied capital, the necessity for that resource, must, in such emergencies, be proportionably urgent.

And as on the one hand, the necessity for borrowing in particular emergencies cannot be doubted, so on the other, it is equally evident, that to be able to borrow upon good terms, it is essential that the credit of a nation should be well established.

For when the credit of a country is in any degree questionable, it never fails to give an extravagant premium, in one shape or another, upon all the loans it has occasion to make. Nor does the evil end here; the same disadvantage must be sustained upon whatever is to be bought on terms of future payment.

From this constant necessity of borrowing and buying dear, it is easy to conceive how immensely the expences of a nation, in a course of time, will be augmented by an unsound state of the public credit.

To attempt to enumerate the complicated variety of mischiefs in the whole system of the social oeconomy, which proceed from a neglect of the maxims that uphold public credit, and justify the solicitude manifested by the House on this point, would be an improper intrusion on their time and patience.

In so strong a light nevertheless do they appear to the Secretary, that on their due observance at the present critical juncture, materially depends, in his judgment, the individual and aggregate prosperity of the citizens of the United States; their relief from the embarrassments they now experience; their character as a People; the cause of good government.

If the maintenance of public credit, then, be truly so important, the next enquiry which suggests itself is, by what means it is to be effected? The ready answer to which question is, by good faith, by a punctual performance of contracts. States, like individuals, who observe their engagements, are respected and trusted: while the reverse is the fate of those, who pursue an opposite conduct.

Every breach of the public engagements, whether from choice or necessity, is in different degrees hurtful to public credit. When such a necessity does truly exist, the evils of it are only to be palliated by a scrupulous attention, on the part of the government, to carry the violation no farther than the necessity absolutely requires, and to manifest, if the nature of the case admits of it, a sincere disposition to make reparation, whenever circumstances shall permit. But with every possible mitigation, credit must suffer, and numerous mischiefs ensue. It is therefore highly important, when an appearance of necessity seems to press upon the public councils, that they should examine well its reality, and be perfectly assured, that there is no method of escaping from it, before they yield to its suggestions. For though it cannot safely be affirmed, that occasions have never existed, or may not exist, in which violations of the public faith, in this respect, are inevitable; yet there is great reason to believe, that they exist far less frequently than precedents indicate; and are oftenest either pretended through levity, or want of firmness, or supposed through want of knowledge. Expedients might often have been devised to effect, consistently with good faith, what has been done in contravention of it. Those who are most commonly creditors of a nation, are, generally speaking, enlightened men; and there are signal examples to warrant a conclusion, that when a candid and fair appeal is made to them, they will understand their true interest too well to refuse their concurrence in such modifications of their claims, as any real necessity may demand.

While the observance of that good faith, which is the basis of public credit, is recommended by the strongest inducements of political expediency, it is enforced by considerations of still greater authority. There are arguments for it, which rest on the immutable principles of moral obligation. And in proportion as the mind is disposed to contemplate, in the order of Providence, an intimate connection between public virtue and public happiness, will be its repugnancy to a violation of those principles.

This reflection derives additional strength from the nature of the debt of the United States. It was the price of liberty. The faith of America has been repeatedly pledged for it, and with solemnities, that give peculiar force to the obligation. There is indeed reason to regret that it has not hitherto been kept; that the necessities of the war, conspiring with inexperience in the subjects of finance, produced direct infractions; and that the subsequent period has been a continued scene of negative violation, or non-compliance. But a diminution of this regret arises from the reflection, that the last seven years have exhibited an earnest and uniform effort, on the part of the government of the union, to retrieve the national credit, by doing justice to the creditors of the nation; and that the embarrassments of a defective constitution, which defeated this laudable effort, have ceased.

From this evidence of a favorable disposition, given by the former government, the institution of a new one, cloathed with powers competent to calling forth the resources of the community, has excited correspondent expectations. A general belief, accordingly, prevails, that the credit of the United States will quickly be established on the firm foundation of an effectual provision for the existing debt. The influence, which this has had at home, is witnessed by the rapid increase, that has taken place in the market value of the public securities. From January to November, they rose thirty-three and a third per cent, and from that period to this time, they have risen fifty per cent more. And the intelligence from abroad announces effects proportionably favourable to our national credit and consequence.

It cannot but merit particular attention, that among ourselves the most enlightened friends of good government are those, whose expectations are the highest.

To justify and preserve their confidence; to promote the encreasing respectability of the American name; to answer the calls of justice; to restore landed property to its due value; to furnish new resources both to agriculture and commerce; to cement more closely the union of the states; to add to their security against foreign attack; to establish public order on the basis of an upright and liberal policy. These are the great and invaluable ends to be secured, by a proper and adequate provision, at the present period, for the support of public credit.

To this provision we are invited, not only by the general considerations, which have been noticed, but by others of a more particular nature. It will procure to every class of the community some important advantages, and remove some no less important disadvantages.

The advantage to the public creditors from the increased value of that part of their property which constitutes the public debt, needs no explanation.

But there is a consequence of this, less obvious, though not less true, in which every other citizen is interested. It is a well known fact, that in countries in which the national debt is properly funded, and an object of established confidence, it answers most of the purposes of money. Transfers of stock or public debt are there equivalent to payments in specie; or in other words, stock, in the principal transactions of business, passes current as specie. The same thing would, in all probability happen here, under the like circumstances.

The benefits of this are various and obvious.

First. Trade is extended by it; because there is a larger capital to carry it on, and the merchant can at the same time, afford to trade for smaller profits; as his stock, which, when unemployed, brings him in an interest from the government, serves him also as money, when he has a call for it in his commercial operations.

Secondly. Agriculture and manufactures are also promoted by it: For the like reason, that more capital can be commanded to be employed in both; and because the merchant, whose enterprize in foreign trade, gives to them activity and extension, has greater means for enterprize.

Thirdly. The interest of money will be lowered by it; for this is always in a ratio, to the quantity of money, and to the quickness of circulation. This circumstance will enable both the public and individuals to borrow on easier and cheaper terms.

And from the combination of these effects, additional aids will be furnished to labour, to industry, and to arts of every kind.

But these good effects of a public debt are only to be looked for, when, by being well funded, it has acquired an adequate and stable value. Till then, it has rather a contrary tendency. The fluctuation and insecurity incident to it in an unfunded state, render it a mere commodity, and a precarious one. As such, being only an object of occasional and particular speculation, all the money applied to it is so much diverted from the more useful channels of circulation, for which the thing itself affords no substitute: So that, in fact, one serious inconvenience of an unfunded debt is, that it contributes to the scarcity of money.

This distinction which has been little if at all attended to, is of the greatest moment. It involves a question immediately interesting to every part of the community; which is no other than this--Whether the public debt, by a provision for it on true principles, shall be rendered a substitute for money; or whether, by being left as it is, or by being provided for in such a manner as will wound those principles, and destroy confidence, it shall be suffered to continue, as it is, a pernicious drain of our cash from the channels of productive industry.

The effect, which the funding of the public debt, on right principles, would have upon landed property, is one of the circumstances attending such an arrangement, which has been least adverted to, though it deserves the most particular attention. The present depreciated state of that species of property is a serious calamity. The value of cultivated lands, in most of the states, has fallen since the revolution from 25 to 50 per cent. In those farthest south, the decrease is still more considerable. Indeed, if the representations, continually received from that quarter, may be credited, lands there will command no price, which may not be deemed an almost total sacrifice.

This decrease, in the value of lands, ought, in a great measure, to be attributed to the scarcity of money. Consequently whatever produces an augmentation of the monied capital of the country, must have a proportional effect in raising that value. The beneficial tendency of a funded debt, in this respect, has been manifested by the most decisive experience in Great-Britain.

The proprietors of lands would not only feel the benefit of this increase in the value of their property, and of a more prompt and better sale, when they had occasion to sell; but the necessity of selling would be, itself, greatly diminished. As the same cause would contribute to the facility of loans, there is reason to believe, that such of them as are indebted, would be able through that resource, to satisfy their more urgent creditors.

It ought not however to be expected, that the advantages, described as likely to result from funding the public debt, would be instantaneous. It might require some time to bring the value of stock to its natural level, and to attach to it that fixed confidence, which is necessary to its quality as money. Yet the late rapid rise of the public securities encourages an expectation, that the progress of stock to the desireable point, will be much more expeditious than could have been foreseen. And as in the mean time it will be increasing in value, there is room to conclude, that it will, from the outset, answer many of the purposes in contemplation. Particularly it seems to be probable, that from creditors, who are not themselves necessitous, it will early meet with a ready reception in payment of debts, at its current price.

All of which is humbly submitted.

Alexander Hamilton,

Secretary of the Treasury.

(Read the complete report.)

Source: (

January 8, 1790

Fellow Citizens of the Senate, and House of Representatives,

I embrace with great satisfaction the opportunity, which now presents itself, of congratulating you on the present favourable prospects of our public affairs. The recent accession of the important state of North Carolina to the Constitution of the United States (of which official information has been received)--- the ruling credit and respectability of our country--- the general and increasing good will towards the government of the union, and the concord, peace and plenty, with which we are blessed, are circumstances auspicious, in an excellent degree, to our national prosperity.

In reforming your consultations for the general good, you cannot but derive encouragement from the reflection, the measures of the last session have been as satisfactory to your constituents as the novelty and difficulty of the work allowed you to hope.-- Still further to realize their expectations, and to secure the blessings which a gracious Providence has placed within our reach, will in the course of the present important session, call for the cool and deliberate exertion of your patriotism, firmness and wisdom.

Among the many interesting objects which will engage your attention, that of providing for the common defence will merit particular regard. To be prepared for war is one of the most effectual means of preserving peace.

A free people ought not only to be armed but disciplined; to which end a uniform and well digested plan is requisite: And their safety and interest require that they should promote such manufactories, as tend to render them independent on others, for essential, particularly for military supplies.

The proper establishment of the troops which may be deemed indispensable, will be entitled to mature consideration. In the arrangement which will be made respecting it, it will be of importance to conciliate the comfortable support of the officers and soldiers with a due regard to economy.

There was reason to hope, the pacifick measures adopted with regard to certain hostile tribes of Indians, would have relieved the inhabitants of our southern and western frontiers from their depredations. But you will perceive, from the information contained in the papers, which I shall direct to be laid before you, (comprehending a communication from the Commonwealth of Virginia) that we ought to be prepared to afford protection to those parts of the Union; and, if necessary, to punish aggressors.

The interests of the United States require, that our intercourse with other nations should be facilitated by such provisions as will enable me to fulfill my duty, in that respect, in the manner which circumstances may render most conducive to the publick good: And to this end, that the compensations to be made to the persons who may be employed, should, according to the nature of their appointments, be defined by law; and a competent fund designated for defraying the expenses incident to the conduct of our foreign affairs.

Various considerations also render it expedient, that the terms on which foreigners may be admitted to the rights of Citizens, should be speedily ascertained by a uniform rule of naturalization.

Uniformity in the currency, weights and measures of the United States, is an object of great importance, and will, I am persuaded, be duly attended to.

The advancement of agriculture, commerce and manufactures, by all proper means, will not, I trust, need recommendation. But I cannot forbear intimating to you the expediency of giving effectual encouragement as well to the introduction of new and useful inventions from abroad, as to the exertions of skill and genius in producing them at home; and of facilitating the intercourse between the distant parts of our country by a due attention to the Post Office and Post Roads.

Nor am I less persuaded, that you will agree with me in opinion, that there is nothing which can better deserve your patronage, than the promotion of Science and Literature. Knowledge is in every country the surest basis of publick happiness. In one, in which the measures of government receive their impression so immediately from the sense of the community, as in our's, it is proportionately essential. To the security of a free Constitution it contributes in various ways: By convincing those who are entrusted with the publick administration, that every valuable end of government is best answered by the enlightened confidence of the people: And by teaching the people themselves to know, and to value their own rights; to discern and provide against invasions of them; to distinguish between oppression and the necessary exercise of lawful authority; between burthens proceeding from a disregard to their convenience, and those resulting from the inevitable exigencies of society; to discriminate the spirit of liberty from that of licentiousness, cherishing the first, avoiding the last, and uniting a speedy, but temperate vigilance against encroachments, with an inviolable respect to the laws.

Whether this desirable object will be best promoted by affording aids to seminaries of learning already established, by the institution of a national university, or by any other expedients, will be well worthy of a place in the deliberations of the Legislature.
Gentlemen of the House of Representatives,

I saw with peculiar pleasure, at the close of the last session, the resolution entered into by you, expressive of your opinion, that an adequate provision for the support of the publick credit, is a matter of high importance to the national honour and prosperity.-- In this sentiment, I entirely concur.-- And to a perfect confidence in your best endeavors to devise such a provision as will be truly consistent with the end, I add an equal reliance on the cheerful cooperation of the other branch of the Legislature.-- It would be superfluous to specify inducements to a measure in which the character and permanent interests of the United States so obviously and so deeply concerned; and which has received so explicit a sanction from your declaration.
Gentlemen of the Senate, and House of Representatives,

I have directed the proper officers to lay before you respectively such papers and estimates as regards the affairs particularly recommended to your consideration, and necessary to convey to you that information of the state of the union, which it is my duty to afford.

The welfare of our country is the great object to which our cares and efforts ought to be directed.-- And I shall derive great satisfaction from a cooperation with you, in the pleasing though arduous task of ensuring to our fellow citizens the blessings which they have a right to expect, from a free and equal government.

George Washington


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