“During the colonial period, and under the confederation, the financial operations of the Government were based on the law of necessity, and depended for success upon the patriotism of the people, the co-operation of the several States, and the assistance of foreign powers friendly to our cause.
“It was the willingness of the people to receive the various kinds of paper money issued under authority of the Continental Congress, and used in payment for services and supplies, together with the issue of similar obligations by the different States, for the redemption of which they assumed the responsibility; aided by the munificent gift of money from Louis XVI. of France, followed by loans for a large amount from both France and Holland, that made victory possible, and laid the foundations for the republic of to-day, with its credit unimpaired, and with securities commanding a ready sale at a high premium in all the principal markets of the world.
“Authorities vary as to the amount of paper money issued and the cost of the war for independence. On the 1st of September, 1779, Congress resolved that it would ‘on no account whatever emit more bills of credit than to make the whole amount of such bills two hundred millions of dollars.’ Mr. Jefferson estimates the value of this sum at the time of its emission at $36,367,719.83 in specie, and says; ‘If we estimate at the same value the like sum of $200,000,000 supposed to have been emitted by the States, and reckon the Federal debt, foreign and domestic, at about $43,000,000, and the State debt at $25,000,000, it will form an amount of $140,000,000, the total sum which the war cost the United States. It continued eight years, from the battle of Lexington to the cessation of hostilities in America. The annual expense was, therefore, equal to about $17,500,000 in specie.’
“The first substantial aid rendered the colonies by any foreign power was a free gift of money and military supplies from Louis XVI. of France, amounting in the aggregate to 10,000,000 livres, equivalent to $1,815,000.
“These supplies were not furnished openly, for the reason that France was not in a position to commence a war with Great Britain. The celebrated Caron de Beaumarchais was employed as a secret agent, between whom and Silas Deane, as the political and commercial agent of the United States, a contract was entered into whereby the former agreed to furnish a large amount of military supplies from the arsenals of France, and to receive American produce in payment therefor.
“Under this arrangement supplies were furnished by the French Government to the amount of 2,000,000 livres. An additional 1,000,000 was contributed by the Government of Spain for the same purpose, and through the same agency. The balance of the French subsidy was paid through Benjamin Franklin. In 1777 a loan of 1,000,000 livres was obtained from the ‘Farmers General of France’ under a contract for its repayment in American tobacco at a stipulated price. From 1778 to 1783, additional loans were obtained from the French King, amounting to 34,000,000 livres. From 1782 to 1789, loans to the amount of 9,000,000 guilders were negotiated in Holland, through the agency of John Adams, then the American Minister to the Hague.
“The indebtedness of the United States at the organization of the present form of government (including interest to December 31, 1790) may be briefly stated, as follows:
| Foreign debt | $11,883,315.96 |
| Domestic debt | 40,256,802.45 |
| Debt due foreign officers | 198,208.10 |
| Arrears outstanding (since discharged) | 450,395.52 |
| Total | $52,788,722.03 |
To this should be added the individual debts of the several States, the precise amount and character of which was then unknown, but estimated by Hamilton at that time to aggregate about $25,000,000.
“The payment of this vast indebtedness was virtually guarantied by the provisions of Article VI. of the Constitution, which says: ‘All debts contracted, and engagements entered into, before the adoption of this Constitution shall be as valid against the United States under this Constitution as under the confederation.’ On the 21st of September, 1789, the House of Representatives adopted the following resolutions: