ROBERT MORRIS.
TO ALEXANDER HAMILTON.
Office of Finance, October 5th, 1782.
Sir,
I have now before me your letters of the 14th and 21st of last month. I am sorry to find that you are less sanguine in your pecuniary expectations than the Governor appears to be; for I have always found that the worst forebodings on this subject are the truest.
I am not surprised to find that the contractors apply with their paper, in the first instance, to the receivers and collectors. This I expected, because much of that paper is not fit for other purposes. Some of it, however, which is payable to the bearer, is calculated for circulation, which you observe, is not so general as otherwise it might have been, by reason of the largeness of the sums in the notes. Mr Duer's letters contain the same sentiment.
In issuing this paper, one principal view was to facilitate the payment of taxes, by obviating the too general, though unjust, complaint of the want of a circulating medium. In substituting paper for specie, the first obstacle to be encountered, was the difference which has arisen from the late profusion of it. Had a considerable quantity been thrown into the hands of that class of people, whose ideas on the subject of money are more the offspring of habit than of reason, it must have depreciated. That this apprehension was just, is clear from this fact, that the paper I first issued, and the bank paper which came out after it, did depreciate from ten to fifteen per cent in the Eastern States, notwithstanding all the precautions which were used. If I had not taken immediate measures to create a demand for it on the spot, and to stop issues to that quarter, its credit would have been totally lost for a time, and not easily restored. Besides that the quantities, which were pouring in from thence would have done mischief here. Confidence is a plant of slow growth, and our political situation is not too favorable to it. I am, therefore, very unwilling to hazard the germ of a credit, which will in its greater maturity become very useful. If my notes circulate only among mercantile people, I do not regret it, but rather wish that the circulation may be for the present confined to them and to the wealthier members of the professions.
It is nothing but the greater convenience, which will induce people to prefer any kind of paper to the precious metals, and this convenience is principally felt in large sums. Whenever the shop-keepers in general discover that my paper will answer as a remittance to the principal ports, and will be readily exchanged by the receivers, they will as readily exchange it for other people. When the people in general, find that the shop-keepers receive it freely, they will begin to look after it, and not before. For you must know, whatever fine plausible speeches may be made on this subject, the farmers will not give full credit to money merely because it will pay taxes, for that is an object they are not very violently devoted to; but that money that goes freely at the store and the tavern, will be sought after as greedily as those things which the store and the tavern contain.
Still, however, your objection remains good, that the trafficking in which the greater part of the community engage, do not require sums so large as twenty dollars. This I shall readily acknowledge; but you will observe, that there is infinitely less danger that notes, which go only through the hands of intelligent people will be counterfeited, than small ones that come to the possession of illiterate men. When public credit is firmly established, the little shocks it receives from the counterfeiters of paper money, do not lead to material consequences; but in the present ticklish state of things, there is just ground of apprehension. Besides this, the value of paper will depend much upon the interchanges of it for specie; and these will not take place when there is a circulation of small paper. Lastly, I have to observe, that until more reliance can be placed on the revenues required, I dare not issue any very considerable amount of this paper, lest I should be run upon for more than I could answer; and as the circulation of what I dare issue, by increasing the general mass, enables people (as far as it goes) more easily to get hold of other money, it consequently produces, in its degree, that object of facilitating taxation, which I had in view.