A person with whom I am well acquainted, is the projector of the loan abovementioned, and although for near three months I have known that such a measure was in agitation, I was not able to discover the plan, it having been preserved with great secrecy, in order to secure its successful and complete operation. As this measure is so far important to Congress, as it may influence the conduct of the Court with respect to money matters, and affect the credit of the nation in future, on which all the vigor of military operations in a great measure depends, I will endeavor to give the outlines of the money negotiation to the Committee, and will forward the plan and the King's ordinance thereon as soon as I receive them.
The original design of this loan was to procure nine millions of dollars, or thirtysix millions of livres in four months, and possibly to enlarge the sum according to exigencies. The projector was to receive ten per cent for expenses and profit, which he was at liberty to divide as he thought proper with the original lenders. To these, I think, he gave three, or three and a half per cent for the use of their money for four months, which money they were to remit in bills of exchange on Spain, and to redraw at the end of four months for their principal and interest. The great secret of the operation is, that government instead of repaying their bills in specie, issues paper to repay them, the credit of which is guarantied by the Crown and the different Chambers or Councils of the Kingdom, viz of Castile, &c. &c. This paper bears an interest of four per cent. A cedula, or royal ordinance, will be published the 20th or 21st of this month, which gives it currency, and inflicts severe penalties on any one who refuses it as a legal payment. M. Necker did not discover the latter part of the scheme until large sums had been remitted from France, and I suppose, fearing that its operation would be complete before his representations of what he thought its evil tendency, could be attended to here, he immediately gave orders not to receive the bills of exchange of the houses concerned in this measure at the Caisse Royale in France. Besides, the house of Gerardot, Haller & Co. one of the most considerable in Europe, and of which he was once the head, and his brother is still a partner, wrote circular letters to all parts of Europe discrediting the loan.
The consequence has been, that the persons in France and elsewhere, whose bills were refused at the Caisse Royale have been pushed here so hard by their creditors, that the Spanish government has been obliged to make considerable remittances to support their credit, that further advances of money have been stopped, and that bills of exchange on Spain have sold at a loss of one and one and a half per cent. This has irritated the merchants here, and perhaps we may be the innocent victims. For I am persuaded, that Spain, without obtaining it by loans, has not money in Europe to afford us considerable aids, how great soever her inclination may be to assist us, and I think the Committee will be of the same opinion, on reading the information I gave Mr Jay on the subject of the revenues of this country, in consequence of his instructions to me at Cadiz.
I shall be happy to have it in my power to inform the Committee, that my apprehensions have been ill grounded.
The fate of our bills must soon be determined. More than forty thousand dollars have been presented, of which the amount of about fourteen thousand have been accepted by order of the Minister. The Count d'Estaing will leave this in a few days, and go to Cadiz; by the time he can arrive at that port, the whole of the combined fleet will be assembled; thirtysix sail are now at Cadiz, seven on a cruise, and two of a hundred and one hundred and ten guns are on their voyage from Brest. The Count will urge a vigorous and decisive conduct, and seems to enjoy the King's esteem, and the good will of most of the Ministers and Courtiers.
The English emissary, Mr Cumberland, is still at Madrid, and is permitted to receive from and send couriers to London. The conduct of the Court appears unaccountable, and I cannot persuade myself, that it can be agreeable to France, although the Count de Montmorin frequently assures me, that we need not have any inquietude on account of the gentleman's residence. He no doubt, however, endeavors to insinuate many things to our disadvantage, and makes propositions to alienate Spain from the alliance with France, and from supporting the United States. Those about him are perpetually circulating bad news from America, and assert with confidence, that several States and many individuals in others, are negotiating to make their peace with Great Britain. Spain may possibly be amusing his employers, as he is employed to amuse the Spanish Ministry.
The treaty for an armed neutrality was signed by Sweden the 4th of August; Denmark had not signed it the 8th of the same month, but there is no doubt she will. The English party in Holland opposed and retarded it there as long as possible, and finally clogged it with such conditions as they hope will prostrate the negotiation; for instance, they propose to the contracting powers, to guaranty all their possessions in Europe, Asia, and America, but as the States have gone so far, they will scarce recede, should this article be refused by the others. The eyes of Europe are anxiously turned to America and the West Indies; the friends of liberty hope everything from our union and perseverance, and the expectations of our enemies are founded on the reverse. Neither Mr Jay nor myself have received letters from Congress since we left America, except one from the Committee, enclosing the bills of exchange, so that we are without intelligence, without money, or the certainty of conveying to Congress as regularly as we wish, the information necessary for them to receive, which will plead my apology with the Committee for the repetitions they will meet in this letter of what several other letters contain.
I have the honor to be, &c.
WILLIAM CARMICHAEL.
P. S. The declaration of Portugal, shutting their ports against the armed vessels of the nations at war, which I mentioned in a letter of the 6th, has not yet been made public. It is supposed that the present Parliament will be dissolved and a new one called, while the influence of the present Ministry continues high. Considering the scarcity of cash in this country, and the present situation of affairs, perhaps Congress will do well to stop drawing on Mr Jay, until they receive information that their bills will be paid punctually. There appears no forwardness in this Court to enter into treaty; the navigation of the Mississippi is the great obstacle; the situation of America will guide the determinations of Congress, and I hope it will be such as to enable them to preserve the rights of all the States. Negotiations will, probably, be set on foot this winter, and it is likely this Court will be the theatre of them. As Spain has as yet taken no decided part in our revolution, England will rather choose to apply to this Court, and keep up the old idea of restoring peace by her mediation, than that of Versailles. Hints have been given, that it would be more convenient for Spain to furnish the States with money in America than here, but as they seem to think that America has not proposed an equivalent for what they demand, I am afraid assistance will be given very faintly.