Thomas Jefferson, the Apostle of Americanism

by Gilbert Chinard

I turn to this precious resource—he wrote to a friend—as that which will, in every event, liberate us from our domestic debt, and perhaps too, from our foreign one; and this much sooner than I had expected. I do not think anything could have been done with them in Europe. Individual speculators and sharpers had duped so many with their unlocated land-warrants, that every offer would be suspected.[142]

In the meantime something had to be done to reassure the creditors of the United States, and Jefferson pressed Dumas to publish a series of articles in the Gazette of Leyden to demonstrate the financial stability of his country. The situation had to be presented as follows: two sales of five million and two million acres respectively had been made, another for four million was in process and Jefferson considered that these sales had absorbed seven million dollars of the domestic Federal debt. The States had absorbed by taxation and otherwise about ten million dollars, so "that the debt stands now at about ten millions of dollars, and will probably be all absorbed in the course of next year. There will remain then our foreign debt, between ten and twelve millions, including interest. The sale of land will then go on for payment of this."[143] But in spite of this official optimism the Commissioners of the Treasury had informed Willincks and Van Staphorsts that they should "not be able to remit one shilling till the New Government gets into action" and that consequently they were not to pay anything towards the interest of the Dutch loan except out of the proceeds of the last loan. To which the Dutch bankers had answered that "there was not much prospect to raise as much on that new loan as would cover the next June interest and that the credit of the United States was in danger of being wiped off."[144] As Adams was about to leave for America, Jefferson, at the request of the Dutch bankers, met him at Amsterdam and for several days the two American envoys did their best to convince close-fisted financiers, who had speculated in American bonds and refused to do anything until paid for the interest on the domestic bonds they held. They finally yielded, but to avoid further embarrassment Jefferson and Adams decided to provide at one stroke for the years 1789 and 1790 by signing new bonds for a million florins, subject to approval of Congress.[145]

The real danger, as both Adams and Jefferson saw it, came from unwise speculation in American domestic bonds, since the bankers had tried to use these bonds as a sort of lever; consequently the transfer of domestic bonds to Europe was to be discouraged by every possible means. "If the transfer of these debts to Europe, meet with any encouragement from us, we can no more borrow money here, let our necessities be what they will."[146]

How desperate the situation was at that date appears in two letters written to General Washington May 2, 1788, and to James Madison, May 3, 1788.[147] Jefferson's visit at Amsterdam had convinced him that the credit of the United States was at its lowest ebb and in great danger of being reduced to nil. The nation with the highest credit was Great Britain, because the English never asked for a loan without providing by new taxes for the repayment of it. He indicated that no doubt was entertained by any one in Holland about the ultimate repayment of the capital, but that repeated failures to pay the interest on the old loans had stopped any further borrowing. As to the French debt, the Court had carefully avoided any public mention of it, "the government here, saying nothing about it, the public have supposed they wished to leave us at our ease as to the payment. It is now seen that they call for it, and they will publish annually the effect of that call." The most pressing need was an order from the Treasury to pay the arrears for the last three years to the French officers. With much difficulty Jefferson had prevented them from holding a meeting to agree on concerted action on the matter, and when he came back he prevented them from taking "desperate measures" till July. But a solution could not be deferred much longer. The necessary sum was comparatively small: twenty thousand florins a year would have sufficed "to suppress these clamors", and through diplomacy he finally succeeded in staying the address they intended to send to Congress and to the king, asking him to intervene on their behalf.[148]

Fortunately the loan launched in Holland to meet the payment of the June interest had succeeded and had been finally ratified by Congress.[149] It was a beginning that brought some respite to Jefferson, but he insisted again that the next step to take was the funding of the foreign debt, for the French Government expected "a very satisfactory provision for the payment of their debt, from the first session of the new Congress."[150] He was enclosing two tables "showing what fund will suffice to discharge the principal and interest, as it shall become due aided by occasional loans, which the same fund will repay." This very detailed and technical proposal now preserved in the Jefferson papers of the Library of Congress would repay careful study.

During the spring of the same year, however, Jefferson made a startling discovery which added to his distress. The international bankers of Amsterdam were not as politically disinterested as he had thought at first. He even suspected that, by careful manipulations, they intended to keep control of the credit of the United States.

I have observed—wrote Jefferson—that as soon as a sum of interest is becoming due, they are able to borrow just that, and no more; or, at least, only so much more as may pay our salaries and keep us quiet.... I think it possible, they may choose to support our credit to a certain point, and let it go no further, but at their will; to keep it poised, as that it may be at their mercy. By this, they may be sure to keep us in their own hands.[151]

This had to be remedied at once; energetic representations were sent to the bankers and an order of the Treasury was obtained deciding that "money for the captives and foreign affairs was to be furnished before any other payment of interest."[152]

In spite of these tremendous handicaps, due to the apathy of Congress, to the "stagnation" of American affairs, Jefferson succeeded, through sheer persistency and hard work, in gaining at least a few points. The history of his negotiations concerning the debt and the commerce of the United States may not be so dramatic and picturesque as some other episodes of his long career; but it cannot be neglected without doing injustice to his sense of duty, to his industry and above all to his political vision and understanding of international psychology. The application to the present situation is so obvious that it needs not to be elaborated upon. More fortunate than many recent negotiators, Jefferson had been able to obtain a settlement of the debt question satisfactory to both parties, and succeeded in eliminating the political factor from the situation; the debt to France was no longer an obstacle to the maintenance of friendly relations between the two countries. He was not the man to boast of his achievements but the legitimate pride he felt at having done his work to the best of his ability appears in the letter he wrote to John Jay shortly before his departure from France:

I am well informed that our credit is now the first at that exchange (Amsterdam), (England not borrowing at present). Our five per cent. bonds have risen to ninety-seven and ninety-nine. They have been heretofore at ninety-three. There are, at this time, several companies and individuals here, in England and Holland, negotiating to sell large parcels of our liquidated debt. A bargain was concluded by one of these the other day, for six hundred thousand dollars. In the present state of our credit, every dollar of this debt will probably be transferred to Europe within a short time.[153]