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Subject Area: Political Theory
Topic: The American Revolution and Constitution

TO JAMES WARREN. - John Adams, The Works of John Adams, vol. 9 (Letters and State Papers 1799-1811) [1854]

Edition used:

The Works of John Adams, Second President of the United States: with a Life of the Author, Notes and Illustrations, by his Grandson Charles Francis Adams (Boston: Little, Brown and Co., 1856). 10 volumes. Vol. 9.

Part of: The Works of John Adams, 10 vols.

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TO JAMES WARREN.

Baltimore, 12 February, 1777.

Dear Sir,—

The certificates and check-books for the loan-office I hope and presume are arrived in Boston before this time, and, notwithstanding the discouraging accounts which were given me when I was there, I still hope that a considerable sum of money will be obtained by their means.

It is my private opinion, however, that the interest of four per cent. is not an equitable allowance. I mean that four per cent. is not so much as the use of the money is honestly worth in the ordinary course of business, upon an average for a year; and I have accordingly exerted all the little faculties I had, in endeavoring, on Monday last, to raise the interest to six per cent. But after two days’ debate, the question was lost by an equal division of the States present, five against five. New Hampshire, Massachusetts Bay, New Jersey, Pennsylvania, and Virginia on one side, and Rhode Island, Connecticut, North Carolina, South Carolina, and Georgia, on the other. Here was an example of the inconvenience and injustice of voting by States. Nine gentlemen, representing about eight hundred thousand people, against eighteen gentlemen, representing a million and a half nearly, determined this point. Yet we must not be startled at this.

I think it my duty to mention this to you, because it must be astonishing to most people in our State, that the interest is so low. I know they are at a loss to account for it upon any principles of equity or policy, and consequently may be disposed to blame their delegates; but you may depend upon it, they are not in fault.

I tremble for the consequences of this determination. If the loan officers should not procure us money, we must emit more, which will depreciate all which is already abroad, and so raise the prices of provisions and all the necessaries of life, that the additional expense to the continent for supplying their army and navy will be vastly more than the two per cent. in dispute, besides all the injustice, chicanery, extortion, oppression, and discontent, which is always occasioned everywhere by a depreciating medium of trade. I am much afraid of another mischief. I fear that for want of wisdom to raise the interest in season, we shall be necessitated, within a few months, to give eight or ten per cent., and not obtain the money we want after all.

I have been so often a witness of the miseries of this after-wisdom, that I am wearied to death of it.

Had a bounty of twenty dollars a man been offered soldiers last June, it would have procured more than the enormous bounties that are now offered will procure. Had government been assumed in the States twelve months sooner than it was, it might have been assumed with spirit, vigor, and decision, and would have obtained an habitual authority before the critical time came on, when the strongest nerves of government are necessary; whereas now, every new government is as feeble as water, and as brittle as glass.

Had we agreed upon a non-exportation, to commence when the non-importation commenced, what an immense sum should we have saved! Nay, very probably we should have occasioned a very different House of Commons to be chosen, the ministry to have been changed, and this war avoided. Thus it is. You, who will make no ill use of these observations, may read them, but the times are too delicate and critical to indulge freely and generally in such speculations. It is best, I believe, that no mention should be made that the rate of interest has been again debated, lest some saving men should withhold their money in hopes of compelling the public to raise the interest. If the interest should never be raised, those who lend in our State will fare as well as others; if it should, the interest of all will be raised, that which is borrowed now as well as that which shall be borrowed hereafter. I sincerely wish that our people would lend their money freely. They will repent of it if they do not. We shall be compelled to emit such quantities, that every man, except a few villains, will lose more by depreciation than the two per cent. Not to mention again the scene of anarchy and horror, that a continuation of emissions will infallibly bring upon us.

The design of loan-offices was to prevent the farther depreciation of the bills by avoiding farther emissions. We might have emitted more bills promising an interest, but if those had been made a legal tender like the other bills, and, consequently mixed in the circulation with them, they would instantly have depreciated all the other bills four per cent., if the interest was four, and more than that, too, by increasing the quantity of circulating cash. In order to prevent these certificates from circulation, and consequently from depreciating the bills, we should give them such attributes as will induce men of fortune and others who usually lend money, to hoard them up. The persons who usually lend money are, 1. Men of fortune, who live upon their income, and these generally choose to have a surplusage to lay up every year to increase their capitals. 2. Opulent merchants who have more money than they choose to risk, or can conveniently employ in trade. 3. Widows, whose dower is often converted into money and placed out at interest, that they may receive an annual income to live upon, without the care and skill which is necessary to employ money advantageously in business. 4. Orphans, whose guardians seldom incline to hazard the property of their wards in business. 5. A few divines, lawyers, and physicians, who are able to lay by a little of their annual earnings. 6. Here and there a farmer and a tradesman, who is forehanded and frugal enough to make more money than he has occasion to spend. Add to these,—7. Schools, colleges, towns, parishes, and other societies, which sometimes let money. All these persons are much attached to their interest, and so anxious to make the most of it, that they compute and calculate it even to farthings and single days. These persons can get six per cent., generally, of private borrowers, on good security of mortgages or sureties.

Now, is it reasonable in the State to except that monied men will lend to the public at a less interest than they can get from private persons?

I answer, yes, when the safety of the State is not in doubt, and when the medium of exchange has a stable value, because larger sums may be put together, and there is less trouble in collecting and receiving the interest, and the security is better. But the case is otherwise, when men are doubtful of the existence of the State, and it is worse still, when men see a prospect of depreciation in the medium of trade. All governments in distress are obliged to give a higher interest for money than when they are prosperous.

The interest of money always bears some proportion to the profits of trade. When the commerce of a country is small, lodged in few hands, and very profitable, the interest of money is very high. Charles the Fifth was necessitated to give twenty-four per cent. for money; afterwards it fell in Europe to twelve, and since to six, five, four, and three.

I think I shall never consent to go higher than six per cent., as much as I am an advocate for raising it to that, and in this I have been constant for full nine months. The burden of six per cent. upon the community will very soon be heavy enough. We must fall upon some other methods of ascertaining the capitals we borrow. A depreciating currency we must not have, it will ruin us. The medium of trade ought to be as unchangeable as truth, as immutable as morality. The least variation in its value does injustice to multitudes, and in proportion it injures the morals of the people, a point of the last importance in a republican government.

15 March, 1777.

Thus far I had written a long time ago, since which, after many days deliberation and debate, a vote passed for raising the interest to six per cent. If this measure should not procure us money, I know not what resource we shall explore.

To read this will be punishment enough for your omission to write to me all this while. I have received nothing from you since I left Boston.