The system of commercial restrictions was responsible for thus, at the most critical moment of the war, throwing the control of the national finances into the hands of the Boston Federalists. Against the protests of the Federalists, manufactures had been forced upon them by national legislation until New England supplied the Union with articles of necessary use at prices practically fixed by her own manufacturers. From the whole country specie began to flow toward Boston as early as the year 1810, and with astonishing rapidity after the war was declared. The British blockade stimulated the movement, and the embargo of December, 1813, which lasted till April, 1814, cut off every other resource from the Southern and Western States. Unable longer to send their crops even to New England for a market, they were obliged to send specie, and they soon came to the end of their supply. The Massachusetts banks, which reported about $820,000 in specie in 1809, returned more than $3,680,000 in June, 1812; which rose to $5,780,000 in June, 1813, and reached nearly $7,000,000 in June, 1814. In five years the Massachusetts banks alone drew more than six million dollars in specie from the Southern and Middle States,[478] besides what they sent to Canada in payment for British bills.
No one knew how much specie the country contained. Gallatin afterward estimated it at seventeen million dollars,[479] and of that amount the banks of New England in 1814 probably held nearly ten millions. The Massachusetts banks, with seven millions in specie, had a bank-note circulation of less than three millions. The Middle, Southern, and Western States must have had a bank-note circulation approaching forty millions in paper, with seven or eight millions in specie to support it,[480] while the paper was constantly increasing in quantity and the specie constantly diminishing. Bank paper, as was believed, could not with safety exceed the proportion of three paper dollars to every specie dollar in the bank vaults; but the banks in 1814 beyond New England were circulating at least four paper dollars to every silver or gold dollar, and in many cases were issuing paper without specie in their possession.
Already the banks of New England were pressing their demands on those of New York, which in their turn called on Philadelphia and Baltimore. The specie drained to New England could find its way back only by means of government loans, which New England refused to make in any large amount. On the other hand, Boston bought freely British Treasury notes at liberal discount, and sent coin to Canada in payment of them.[481] Probably New England lent to the British government during the war more money than she lent to her own. The total amount subscribed in New England to the United States loans was less than three millions.
This situation was well understood by Congress. In the debate of February, 1814, the approaching dangers were repeatedly pointed out. The alarm was then so great that the Committee of Ways and Means reported a bill to incorporate a new national bank with a capital of thirty million dollars, while Macon openly advocated the issue of government paper,[482] declaring that “paper money never was beat.” Congress after a diffuse debate passed only a loan bill for twenty-five millions, and an Act for the issue of five million interest-bearing Treasury notes, leaving with the President the option to issue five millions more in case he could not borrow it. The legislation was evidently insufficient, and satisfied no one. “You have authorized a loan for twenty-five millions,” said Grundy in the debate of April 2, “and have provided for the expenditure of so much money. Where is the money?”
Without attempting to answer this question, April 18 Congress adjourned.
CHAPTER XVI.
While Congress was thus employed, much occurred behind the scenes that bore directly on the movements of war. The French minister, Serurier, alone made official reports, and his letters became less interesting as his importance diminished; but occasionally he still threw a ray of light on Madison’s troubles. At midsummer in 1813 he was in high spirits.
“Within the past week,” Serurier wrote, July 21, 1813,[483] “we have received, one after another, news of the fresh successes at the beginning of the campaign,—the battle of Lützen, the offer of armistice, and the battle of Bautzen. These events, so glorious for France, have been so many thunder-strokes for the enemy in America. Their consternation is equal to their previous confidence, which had no bounds. The Republicans of Congress, on the other hand, have received these news in triumph. All have come to congratulate me, and have told me that they, not less than we, had been victorious at Lützen. The ascendency, henceforward irresistible, which his Majesty is acquiring over his enemies, will, I hope, supply a little tone and vigor to this Government, which had need of them.”
When the President returned to Washington, Oct. 25, 1813, Serurier reported with less enthusiasm, but still with confidence, that Madison remained firm:
“He expressed himself in very proper, though very measured, terms on the monstrous coalition that has been renewed against his Majesty. I remarked to him that among our advantages we must doubtless count the fact that the coalition had ten heads, while France had but one. ‘And what a powerful head!’ replied the President, instantly, with less grace than conviction in his whole countenance.”