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REPUDIATION.

EARLY REPUDIATION.

Our first assumption of the burden of a national debt was undertaken in June, 1775, when the Continental Congress ordered an issue of $2,000,000 in bills of credit. Another million was ordered in July, and three more in the following November. During the next year the issue amounted to $19,000,000, and the rate went on increasing, until the certificates of outstanding indebtedness amounted in 1783 to $241,522,380. As early as December, 1778, Congress took pains to assure the nation's creditors of the national good-faith, and again, in September, 1779, emphasized that assurance by this declaration : “We should pay an ill compliment to the understanding and honesty of every true American, were we to adduce many arguments to show the baseness or bad policy of violating our national faith or omitting to pursue the measures necessary to preserve it. A bankrupt, faithless republic would be a novelty in the political world, and appear among reputable nations like a common prostitute among chaste and reputable matrons. Apprised of these consequences, knowing the value of national character, and impressed with a due sense of the immutable laws of honesty and justice, it is impossible that Americans should think without horror of such an execrable deed.” Scarcely six months had passed when, in the teeth of this explicit and unqualified declaration in favor of national honesty, Congress passed a measure of "readjustment,” which wears such a modern air that it seems to suggest itself as a prototype of the Virginia acts

I

“ The new

passed at the dictation of Riddleburger and Mahone. On March 18, 1780, specie certificates at the rate of 1:40 were authorized to redeem bills of credit, and the faith of the nation was pledged in aid of the new issue. certificates,” says Mr. Walker, in his work on “Money,” p. 331, “soon sank to one eighth their nominal value, so that the account of a holder of $320 in Continental paper-money might be thus quoted : $320 X 10 = $8 in certificates ; $8

40 at 125 = $i in silver!"

As early as 1775 the State of New Hampshire had emitted large issues of paper to pay the troops furnished by it; and in aid of the General Government. The bills were made a legal tender, and the credit of the Commonwealth pledged to their redemption in coin. The inevitable depreciation caused, it is said, a necessary further issue, from time to time, to compensate the soldiers for the decline in value. By 1786 the people were reduced to such poverty, attributed, in a measure, to the wretched management and condition of the State's finances, as to lead to a popular revolt. It was believed that at least temporary relief could be secured by a State loan of £50,000, to be made on land security, and at six-per-cent. interest. The Legislature assembled at Exeter submitted this proposition to the different towns, but it was contemptuously rejected, and an armed mob collected at Exeter to force the Assembly to agree to an unlimited issue of paper. Distinct traces of the wild theories of the greenbacker and the inflationist of to-day may be found in the utterances of the forgotten demagogues who stirred to riot the sober New Hampshire farmers a hundred years ago. Vermont alone had refused from the first to incur obligations which she could not meet, and thus avoided the taint of repudiation. In April, 1781, the State issued bills to the amount of £25,155, payable in Spanish milled dollars, at the rate of six shillings each, or in gold or silver equivalents. The bills fell due June 1, 1782.

. “ These were the only bills of credit ever issued by Vermont,” says Zadock Thompson (“ Hist. Vermont,” p. 135,) "and to the credit of the State it may be added they suffered no depreciation, and were all faithfully redeemed."

Massachusetts and New Hampshire had been forced to adopt all sorts of shifts to meet the strain. Both States in 1785 passed acts which smacked of the Middle Ages, declaring that cattle and other enumerated articles of property should be a legal tender on execution upon a fair appraisement, for which provision was made. But the Legis. lature of Rhode Island surpassed that of any other State in the enactment and attempted enforcement of measures of the rankest dishonesty. In 1786 it was made a crime to refuse paper-money at par. But the Supreme Court promptly decided the act unconstitutional. Nothing daunted, the legislators proceeded with fatuous obstinacy to attempt the passage of a Test Act, which disfranchised any one who refused under oath to accept depreciated paper at its face value (Arnold's “Hist. R. I.," p. 527). Finally, a measure of downright repudiation was successfully introduced. In October, 1787, a committee recommended the redemption in paper of the old notes scaled at one fortieth. The committee emphasized the bad faith of their proposition by admitting in their report that many had advanced specie for the now worthless notes. A bill was at once passed requiring all holders of State securities to present them within six weeks for redemption in the new issue at five shillings to the pound. If not presented, they were declared forfeited. Interest was to cease at the close of the session. The act was a virtual repudiation of nearly the whole debt. Dishonest private debtors at once took advantage of the opportunity to clear off their obligations by a nominal settlement. At the ensuing term of the Superior Court at Newport over twenty bills in equity were filed for the redemption of mortgaged estates, and the suitors thronged the court, ready to make tender, with bags and pillow-cases stuffed with the worthless paper (Arnold's “Hist. R. I.," p. 535). On March 9, 1789, the General Assembly extinguished the remainder of the State debt by requiring all outstanding notes not already forfeited to be brought in for redemption in paper before the 8th of the following May. “Had a general act of insolvency, relieving all debtors from their liabilities and the State from its legal obligations, been passed in the first instance, the same end would have been more speedily accomplished, and the means would not have differed very widely from those that were actually employed” (Arnold, p. 553). The creditor classes, of course, regarded the act as legalized robbery. So powerful was public indignation against the odious law, that some of the churches expelled those of their members who took advantage of its operation. The Quakers protested against it, and the Order of the Cincinnati of Rhode Island deprived of membership a man who sought to avoid full payment of his debt by a tender under the act (Hildreth's “U. S.," vol. iv., p. 35).

The earliest sessions of Congress, after the adoption of the Federal, Constitution, were mainly devoted to a discussion of the method of settling the national and State debts. Foremost among the reasons adduced in behalf of the new form of government had been the necessity of preserving inviolate the national faith, which, it was claimed, could be far better secured by the enactments of a National Assembly, backed by the sanction of a Federal Constitution, than if left to the Legislatures of the different States. John Jay had declared in an early number of the Federalist (No. 3) that the temptations which in this State or that might be strong enough to cause a breach of the public honor, would be likely to operate with far less force upon the National Government, to cause it to swerve from the straight line of honesty and good-faith. In answer to an intimation that the proposed Federal Government would in all probability repudiate the debts of the States, Madison emphasized (Federalist, No. 42) his sense of the national obligation by

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