American Finances

Although the motives of France in forming an alliance were purely selfish (for the king hated republicans, and Vergennes was a thorough monarchist), and no real support had been given to the Americans by the French down to the close of the fourth year of the war, the fact served to give the patriots the moral strength of expectation, which, happily, was not powerful enough to make them neglect the use of their own resources in a reliance upon others, or to lose sight of real and constant danger. The Netherlands felt an earnest sympathy with the struggling republicans, and, as we have seen, refused to loan troops to Great Britain to fight her resisting subjects in America. Frederick the Great of Prussia had learned to distrust the friendship of England, and was coquetting with France; and early in 1778, he authorized his minister to write to the American commissioners at Paris: "The king desires that your generous efforts may be crowned with complete success. He will not hesitate to recognize your independence, when France, which is more directly interested in the event of the contest, shall have given the example."

Spain was hostile to the republican movement, for her monarch saw in the dissolution of the ties which bound the American colonies to Great Britain, a sure prophecy of the destruction of her own colonial system in America. He was willing to weaken Great Britain; and therefore Spain, for a time, secretly feigned a friendship for the Americans, for she desired to exhaust the resources of the British government. At the same time she strongly opposed the French alliance. When it was accomplished, the Spanish monarch was undecided what to do. He deceived the British minister at his court by the false pretence that he was ignorant of what France had been doing in the matter, and so he postponed a final determination. Franklin, whose sagacity had penetrated the depths of Spanish diplomacy, had, from the beginning, advised his countrymen not to woo Spain, and now he urged that advice more vehemently. He saw that all the friendship she might profess would be false, and lead to embarrassment. At this time, the Congress, wearied by the dissensions of rival commissioners, and perceiving that Vergennes preferred to treat with Franklin alone, determined to abolish the joint commission. They did so in September, 1778, and appointed Franklin sole envoy at the French court.

The Americans entered upon the fifth year of the struggle for independence with clouded prospects. They had no national government. Their representatives had adopted a pattern for one, but, as we have observed, the several States were tardy in confirming their action. The finances of the country were in a wretched condition. Bills of credit or "Continental Money" representing one hundred million dollars were then in circulation, without adequate security, for the Congress, having no power to levy taxes, had very little credit. The coin value of the paper money was then rapidly depreciating. In January, 1779, one hundred dollars in gold or silver would purchase seven hundred and forty-two dollars in bills; and from that time the depreciation was so rapid that, at the close of the year, one hundred dollars in specie would purchase twenty-six hundred in bills. While the amount of the issues was small the credit of the bills was good, and they were taken freely by the people for the space of eighteen months after the first issue in the summer of 1775; but when new and larger emissions took place, without adequate provisions for their redemption, suspicion supplanted confidence in the public mind. It was perceived that depreciation was inevitable. To prevent this disastrous tendency, the Congress, in January, 1777, when the bills had shrunk one-half in value, asked the several States to declare them a lawful tender, and denounced every person who refused to take them at par as enemies, liable to forfeit whatever he or she might offer for sale. The States complied; and they were invited to cancel their respective quotas of Continental bills, and to become creditors of the common treasury for such sums as they might thereafter advance. They were requested to call in their own bills of credit which they had put in circulation, and to issue no more; but they would not consent to these proposed financial arrangements.

In the autumn of 1776, the Congress opened loan-offices in the several States, and authorized a lottery to raise money "for defraying the expenses of the next campaign." The prizes of the lottery were made payable in loan-office certificates. But loans came in slowly, and so few lottery tickets were purchased that the scheme was finally abandoned. The treasury became almost exhausted; and by drafts from the commissioners in Europe, the loan-offices were over-drawn upon. Attempts to borrow adequate sums abroad, utterly failed. The financial embarrassments had been increased by the circulation of an immense amount of counterfeits of the Continental bills, by the British and Tories, after the spring of 1777. They were sent out of the city of New York literally by cart-loads. The business was no secret. An advertisement in a New York paper ran thus: "Persons going into other colonies may be supplied with any number of counterfeited Congress notes for the price of the paper per ream;" and they were assured that the counterfeit was so "neatly and exactly executed" that there was "no risk in getting them off."