External debt

“ Every contract creates a debt, hence the necessity of a debt-paying instrument.
Barbarous nations resort to barter; that is, giving one product or commodity for another, and yet with all of our boasted civilization we have men—some prominent ones too—who claim that money is a commodity.
I propose dealing in facts, as they are the stern sentinels of truth. Every nation enacts laws compelling its citizens to tender certain things, variously called “dollars,” “pounds,” “francs,” etc., as the only legal means of payment of debts and taxes. This is the vital point of the whole money question. ”

“ We find, then, that the evils attending the increase of debt are greatly counteracted by the debt itself, and that, to a certain amount, it is productive of a very considerable advantage to a trading nation. ”

“ So long as a willingness of the foreign lender and a sufficient export of our productions to meet any necessary partial payments leave the flow of credit undisturbed all appears to be prosperous, but as soon as it is checked by any hesitation abroad or by an inability to make payment there in our productions the evils of the system are disclosed. The paper currency, which might serve for domestic purposes, is useless to pay the debt due in Europe. ”

“ Debt, debt abroad, is the only element that can, with always a sound currency, enter into our affairs to cause any continued depression in the industries and prosperity of our people.
A great conflict for national existence made necessary, for temporary purposes, the raising of large sums of money from whatever source attainable. ”

“ All modern states, it may be said, have been compelled to have recourse to loans, either to meet war expenses, to carry out great public undertakings or to make up the recurrent deficits of a mismanaged revenue. Resources obtained in this way are what constitute national debt proper. ”

“ If a country contracts debts to foreigners, is it not just the same case as when one man contracts a debt to another in the same society? Must not the ultimate consequence of this debt be, that it must be paid, either with the coin, with the moveables, or with the solid property of the debtor, transferred to the creditor, in lieu of the money owing? ”

“ They know that our national debt is considerable; the interest on our foreign loans, and the instalments due, amount to two millions of dollars. This arrearage, together with the domestic debt, is of great magnitude, and it will be attended with the most dreadful consequences to let these affairs run into confusion and ruin, for want of proper regulations to keep them in order. ”

“ Every sign of business is hopeful. We have paid off immense amount of our debts. We do not owe Europe anything of consequence. We have gone through the debt paying process. A few years ago we were running in debt at the rate of $100,000,000 a year, but lately we have been paying off our debt at the rate of $100,000,000 a year. ”

“ In new and undeveloped countries also the national debt takes an unusual prominence in discussions of national finance because it is regularly a foreign debt, at least in majority, and carries with it, therefore, possible complications with other powers. ”

“ The pressure of our foreign debt would be three times as great as it is, whilst the six hundred millions, which is about the sum now probably due to the banks from the people, would be multiplied into eighteen hundred millions. ”

“ Under the system of sales, matured as it has been by experience, and adapted to the exigencies of the times, the lands will continue as they have become, an abundant source of revenue; and when the pledge of them to the public creditor shall have been redeemed by the entire discharge of the national debt, the swelling tide of wealth with which they replenish the common Treasury may be made to reflow in unfailing streams of improvement from the Atlantic to the Pacific Ocean. ”

“ Our foreign debt is already computed by the Secretary of the Treasury at $850,000,000; citizens of foreign countries receive interest upon a large portion of our securities, and American taxpayers are made to contribute large sums for their support. The idea that such a debt is to become permanent should be at all times discarded as involving taxation too heavy to be borne, and payment once in every sixteen years, at the present rate of interest, of an amount equal to the original sum. ”

“ It rests with you therefore to prove that a case can exist where it may become the interest of a nation to pay a debt by the transmission of money rather than in any other mode, when money is not the cheapest exportable commodity,—when money (taking into account all expenses which may attend the exportation of different commodities as well as money) will not purchase more goods abroad than it will at home. ”

“ But I cannot say that they are as secure and solid as the funds which constitute our foreign debt; because no man in America ever entertained a doubt that our foreign debts is to be paid fully; but some people in America have seriously contended, that the certificates, and other evidences of our domestic debt, ought to be redeemed only at what they have cost the holder; for I must observe to you, that these certificates of domestic debt, having as yet no provision for the payment of principal or interest, and the original holders being mostly needy, have been sold at a very great discount. ”

“ But, while there are circumstances sufficiently strong to authorize a considerable degree of reliance on the aid of foreign capital, toward the attainment or the object in view, it is satisfactory to have good grounds of assurance, that there are domestic resources, of themselves adequate to it. It happens that there is a species of capital, actually existing with the United States, which relieves from all inquietude, on the score of want of capital. This is the funded debt. ”

“ No one knows as yet just who owns the bonds in the several nations. From Germany we hear that they are widely held. It is the policy of the government of any nation to distribute a heavy debt as widely as possible; and we have in recent history instances of great patriotism in assuming debts of this kind. Now it is fair to say that the more widely the debt is distributed, the greater its likelihood of permanency. The larger the number of poor people who own it, the harder it will be to lessen the burden of the nation. ”

“ Should enlarged appropriations be made, the necessary consequence will be to postpone the payment of the debt. Though our debt, as compared with that of most other nations, is small, it is our true policy, and in harmony with the genius of our institutions, that we should present to the world the rare spectacle of a great Republic, possessing vast resources and wealth, wholly exempt from public indebtedness. ”

“ Hence it is obvious, that debt, so far from being either strength or credit, is a diminution of both ; and that freedom from debt, is the only genuine source of national strength depending on revenue. ”

“ It is easy to see how such an immense fund as the western territory may be applied to the payment of the foreign debt. Purchasers of the land would as willingly procure any kind of the produce of the United States as they would buy loan office certificates to pay for the land. The produce thus procured would easily be negotiated for the benefit of our foreign creditors. ”

“ Now the one thing common to all these nations, and to all commercial nations, is the universal use of Credit, in the transactions of business. We conceive, therefore, that the existing condition of things may be most correctly and comprehensively described as a suspension of credit, and the consequent pressure for payment of immense masses of outstanding debt. ”

“ CHAPTER XXX.ToC MAMMON DOMINATES THE NATIONS.
The debt habit has been diligently cultivated and encouraged, until the nations are enslaved. Public bonds imply bondsmen, and the nations are no longer free. There is a mortgage upon the inventive genius, industry and productive energy of the world.
Usurers greatly prefer an organized government as a debtor. The individual may die, but a nation's debts bind from age to age, are bequeathed by the fathers to the children, and thus descend from generation to generation. The bonds of no corporation, however great and rich, can be so secure. ”

“ In the face of this enormous debt are we to conclude, with certain authors of repute, that when the payment of the interest on the public debt absorbs more than 40 per cent. of a nation’s revenue, that nation is in the most serious situation, not far removed from bankruptcy? ”

“ Our business men have also conned the lesson of example, and devoted themselves body and mind to the promotion of foreign interests. If States can steep themselves in debt, with any propriety in times of peace, why may not merchants import merchandise on credit? If the one can bond the labor and property of generations yet unborn, why may not the other contract debts against the yearly crops and daily labor of their contemporary fellow citizens? ”

“ By degrees the Bank of England became the eternal creditor of the nation, and so arose the national debt, together with an international credit system, which has often concealed one or other of the sources of primitive accumulation of this or that people. One of the main lines of international business is the lending out of enormous amounts of capital by one country to another. ”

“ A penultimate Disadvantage of Credit may be noted in the facility which it offers for contracting great national Debts. There are certain aspects, under which a Nation may be properly regarded as a moral person, and as such person may pledge the public faith for the present and the future, becoming a debtor to its own people or to foreigners, and thus a public debt may be made a sort of mortgage on the national property and income. ”

“ A credit had been established for the country, whose soundness no capitalist doubted—an immense floating debt had been funded in a manner perfectly satisfactory to the creditors, and a revenue had been secured sufficiently ample for the national demands. ”

“ The funding their foreign debts, according to express contract, passed without a debate and without a dissenting voice. The modeling and funding the domestic debt occasions great debates and great difficulty. ”

“ The currency, being of fluctuating value, and therefore unsafe to hold for legitimate transactions requiring money, became a subject of speculation within itself. These two causes, however, have involved us in a foreign indebtedness, contracted in good faith by borrower and lender, which should be paid in coin, and according to the bond agreed upon when the debt was contracted—gold or its equivalent. The good faith of the Government can not be violated toward creditors without national disgrace. But our commerce should be encouraged ”

“ While the colonies, under the national production, borrow money cheaply on the public credit, the United Kingdom borrows more cheaply still. Low as is the rate of interest paid on the National Debt, for many purposes of investment it is deemed the most satisfactory, because the most secure, of all. ”

“ But while we have the National debt will it not be well to put it to the best use we can? When at last, after twenty-five or thirty years, we have paid it off until we come down to the last four hundred millions, will it not then be time enough to discuss whether it may be best to pay off that little amount too, or to keep it as a basis for bank circulation? ”

“ As to the payment of our own debt, the government represent the real sentiment of the nation as a whole. The British taxpayer is no doubt fully alive to the fact that this heavy debt was incurred by him during the war in the main in order to finance American supplies to our Allies. We could [Pg 245] have paid for all the supplies we required for our own use without resort to any loan from the American government. Nevertheless, the money was advanced by the lender on our credit and our signature. ”

“ The nation ought undoubtedly to become responsible for the public debt, inasmuch as the sums which compose that debt have been lent to the nation, have been employed by the nation, and have been entrusted to the only recognised representative of the nation. In fact, properly speaking, the nation cannot be said to be security for the debt, for the nation is the debtor itself.
“The guarantee which the nation would grant to the bank should be of a totally different nature. ”

“ All the warring nations had internal obligations to meet. In the period of reconstruction as well as during the actual war years, successive loans had been floated, partly by pyramiding, at increasing rates of interest. In every country the national debt had grown beyond belief. ”

“ As this is the only way in which the means of payment can be obtained, and as therefore much more time will be required for the payment of the debt than was occupied in its creation, it becomes the Government to encourage the industry of the country to the utmost, by freeing it from restrictions. ”

“ Most of the Western debts, whether on the farm of the settler, the stock of the merchant, or the bonds of the industrial corporation, had been created in legal-tender dollars of the value of the depreciated greenbacks. Any appreciation which might come to the greenbacks must increase the content-value of the debt. ”

“ For, first, the enormous taxes, that are raised upon the necessaries of life for the payment of the interest of this debt, are a hurt both to trade and manufactures, by raising the price as well of the artificer's subsistence, as of the raw material, and of course, in a much greater proportion, the price of the commodity itself. Secondly, if part of this debt be owing to foreigners, either they draw out of the kingdom annually a considerable quantity of specie for the interest; or else it is made an argument to grant them unreasonable privileges in order to induce them to reside here. ”

“ If it be necessary, let the public debt be increased until it reaches and exceeds the public liabilities of the most indebted Government of Europe. We and our descendants will cheerfully pay the interest on that expenditure which purchased so great a blessing as national endurability. ”