hamilton to short
April 16, 1792.
The fluctuation of the price of the stocks in the United States is a circumstance that cannot have failed to attract your attention, nor to excite a temporary feeling in the minds of foreigners. Though I doubt not it will be well explained by the agents of those citizens of other countries who have vested their moneys in our funds, I think it necessary that some ideas should be communicated to you, on which you can found a true opinion, either for your own satisfaction or that of persons interested in our national welfare, with whom you may have occasion to confer.
The moderate size of the domestic debt of the United States appears to have created the most intemperate ideas of speculation in the minds of a very few persons, whose natural ardor had been increased by great success in some of the early stages of the melioration of the market value of the stock. To combinations of private capitals thus acquired or increased, sums of specie, obtained as well at the most extravagant rates of premium as at common interest, were added, and to these were joined purchases of stock on credits, for various terms, so as to create a delusive confidence that the concentration of so much stock in a few hands would secure a very high market rate. This expectation was increased by comparing the market values of the several species of our funds, with those of the same species of stock in Great Britain, the United Netherlands, and other parts of Europe, without due allowance for the deductions which should have been made on account of the great difference in the value of money, and the objections arising from our distance from those European money-holders whose capitals they expected to attract, and other relative circumstances. At the time when many heavy engagements thus formed were becoming due, some contentions among the dealers in, and proprietors of, the debt, took place, and counter combinations were formed to render the crisis of payment and speculation as inconvenient and disadvantageous as possible. By these means those eventual contracts, it was probably hoped, could be more cheaply complied with; and, moreover, that a reduced market would afford further opportunities of beneficial speculation. The extreme indiscretion of the first-mentioned speculations, and the distress which, it was manifest, they must produce, excited, perhaps, and animated the movements of the other party, and brought on a scene of private distress for money, both artificial and real, which probably has not been equalled in this country. It happened in the winter season, when the influx of cash articles of trade, as returns from abroad, is nearly suspended, and when quantities of specie were sent from the seaports to the interior country, for the purchase of produce to supply the demand for the spring exportation.
The banks, who can always perceive the approach of these things, were influenced to limit their operations, and particularly the Bank of the United States, which was then preparing for the opening of its branches, or offices of discount and deposit, in Boston, New York, Baltimore, and Charleston.
The United States, you would presume, could not be insensible of so fit a moment to make purchases of the public stock, and the Treasurer was accordingly authorized to buy; but, though the appearances of private distress for money were so great, he could not obtain for several days the sum of fifty thousand dollars, at the highest rates at which the public purchases had before been made. The holders who were free from engagements were averse to selling; the principal persons, who were under engagements they could not comply with, were obliged or disposed to place their effects in the hands of their creditors, who did not choose to add to their own disappointments of great profits actual losses by unseasonable sales of the bankrupts’ property. The stock in the market, therefore, was really made scarce. A quarter's interest has just been paid. Some of the cautious moneyed people have begun to purchase. The specie is returning from the country, and the heaviest private engagements having now fallen due, the declension of stock may be considered as arrested. There is little doubt that the difficulty for money among the dealers in the debt will be at no time so great as it has been, after the present week, and that changes of a favorable complexion are to be confidently expected; at first moderate, perhaps, afterwards such as will carry the funds up to their due value.
Should you be of opinion that the state of things in France will render some intimation of these events useful there, you will be good enough to communicate them to Mr. Morris, our minister at that court.