Foreign debt

“ I have no doubt at all but that they will be paid, with their interest at six per cent. 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 debt 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 ”

“ The high regard I have for the nature and circumstances of the foreign debt, induced me to let the first proposition pass without any animadversion. The vote which has been taken on that point will serve to show foreigners that we are concerned to preserve our credit with them by a rigid performance of our stipulations; trusting, at the same time, that our fellow-citizens cannot object to a distinction so just and proper in itself; for, notwithstanding what the domestic creditors may say, it is the money of foreigners that has, in a great measure, established our independence. ”

“ Provision for the payment of the foreign debt was made without any difficulty. The debt funded amounted to about 75,000,000 dollars; and it was especially enacted that no certificate should be obtained from a state-creditor, which it could not be ascertained had been issued for the express purposes of compensation, services, or supplies, during the late war. The proceeds of the western lands and the surplus revenue, with the addition of 2,000,000 dollars which the president was authorised to borrow at 5 per cent, constituted a sinking fund to be applied to the reduction of the debt. ”

“ 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. ”

“ The weight which presses upon a large portion of the people and the States is an enormous debt, foreign and domestic. The foreign debt of our States, corporations, and men of business can scarcely be less than $200,000,000, requiring more than $10,000,000 a year to pay the interest. ”

“ As for the remaining mass of domestic and foreign debt, there can be no hope for its gradual extinction but by the sale of national domains, in payment for which the titles of debt of all classes may be, as some now are, receivable in payment. ”

“ 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. ”

“ By hard work, sparing consumption of luxuries, and a big industrial output, we can soon make the debt charge look smaller and smaller as compared with our aggregate income. Our foreign debt we can only meet by shipping goods and rendering services. But since it was all raised to be lent to our Allies and our lending of it was essential to a victory which has rid mankind of a terrible menace, it is surely reasonable that our creditors should not press for repayment in the first few difficult years, but should fund our short-dated debts into loans with twenty-five or thirty years to run. ”

“ For the record, our foreign debt stands today in excess of $28 billion. The increase from $26.3 billion when we took power is largely accounted for by the weakening of the dollar against major currencies. ”

“ 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? ”

“ Its extraordinary increase in times of foreign war will be the proper and sufficient fund for any measures of safety or precaution which that state of things may render necessary in our neutral position.
Remittances for the installments of our foreign debt having been found practicable without loss, it has not been thought expedient to use the power given by a former act of Congress of continuing them by reloans, and of redeeming instead thereof equal sums of domestic debt, although no difficulty was found in obtaining that accommodation. ”

“ The systematic approach we have adopted over the past four years has been beneficial to our people, to our constituents. This approach has favored our economic growth; price stability; and our renewed access to the international financial market.
Our economy today is one of the best performing among nations with substantial foreign debt. And this has been possible only because our creditors believe that they can count on our word and commitment. ”

“ The last three items had an important bearing on the commercial relations of France. Loans from the Bank of France took the form of bank notes, paper money, which inflated the currency and tended to raise the rate of foreign exchange on other countries far above the normal par; the unsettled finances evidenced by the floating debt tended to cause violent fluctuations of the rate; a foreign debt would, if interest were paid on it, involve remittance at high rates and would require an increase of exports if no other resource were available. ”

“ 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. ”

“ Therefore, if war has provided you with a trade, it has been at an enormous cost; but I think it is by no means doubtful that your trade would have been no less in amount and no less profitable, had peace and justice been inscribed on your flag instead of conquest and the love of military renown. But even in this year, 1858—we have got a long way into the century—we find that within the last seven years our public debt has greatly increased. Whatever be the increase of our population, of our machinery, of our industry, of our wealth, still our national debt goes on increasing. ”

“ 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. ”

“ 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 members of Congress, at the subsequent session, with remarkable unanimity, concurred in these recommendations of the Secretary of the Treasury for the redemption of the national obligations, including both the debt owed to foreign nations and that incurred to domestic holders during the exigencies of the war. But upon another proposition, that the United States should assume the debts incurred by the several States during the war, there was strong opposition. ”

“ 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. ”

“ A foreign war meant to him the disarrangement of domestic affairs, interference with domestic development, and the accumulation of a debt which must fall in the last analysis upon the common people, the least able to bear it. To a correspondent he expressed his desire to avoid war until the national debt was discharged, when the regular income would meet the expense of a war and so prevent a new debt and increased taxes. ”

“ Furthermore, and this is the opportune time to say so, the sum asked for by the government appears small to us, for we believe it very difficult to obtain any money from foreign countries without the previous payment of the coupons of our debt, and if this were necessary, the amount destined for the sole bank of issue would come out much less, and we believe that if any foreign loan must be agreed upon, we should strive resolutely to procure up to the sum necessary to improve our credit in foreign countries and to solve economic difficulties in the interior. ”

“ If the United States shall be forced into a state of actual war, all the resources of the country must be called forth to make it efficient, and new loans will undoubtedly be wanted. But whilst peace is preserved the revenue will, at all events, be sufficient to pay the interest and to defray necessary expenses. I do not ask that in the present situation of our foreign relations the debt be reduced, but only that it shall not be increased so long as we are not at war. ”

“ 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 ”

“ This evidence of debt is not the kind of foreign investment suitable for the man or woman with savings to employ because it is [Pg 177] more or less a banking transaction. These credits usually net about 61⁄2 per cent.
With the exception of a comparatively small amount of German and Austrian Bonds bought in the main by natives of these two countries for purely sentimental and patriotic reasons, the entire bulk of European loans placed in America is for the Allied countries, principally England and France who are our heaviest customers in trade. ”

“ The solution of which is, That it is not necessary that public credit should ever fail, from any augmentation of debts whatever, due to natives; and that it must fail, so soon as the nation becomes totally unable either to export commodities equal to all their imports and foreign debts, or to pay off a proportional part of their capital, sufficient to turn the balance to the right side. ”

“ The geographical situation of the United States, their history since the Revolution, and above all present events remove every apprehension of frequent wars. It may therefore be confidently expected that a revenue derived solely from duties on importations, though necessarily impaired by war, will always be amply sufficient during long intervals of peace not only to defray current expenses, but also to reimburse the debt contracted during the few periods of war. ”

“ In other words, these nations are creditor, or money-lending, communities. The imports of all money-lending coun [Pg 889] tries, like France, England, Germany, the Netherlands, and others, considerably exceed the exports, while the exports of all borrowing, developing, or unequally developed countries, like Russia, the United States, Argentina, Rumania, and many others, exceed the imports, as the foreign investor must be paid his interest, and the only source of money for such payment is eventually either the product of the soil or of industry. ”

“ The balance of trade may be entirely against England, though the amount of American securities in English hands should immensely exceed that balance.
⁠The case of the coupons attached to such stock is very different. The interest which they bear is a constant and important feature in national indebtedness. It constitutes an immediate liability incurred by the borrowing country; it is expenditure in favour of a foreign creditor. A country which has large sums of interest pay annually abroad, must import so much less or export so much more. ”

“ But surely this is not the end of all endeavours to reach a settlement of the question of inter-Allied debts. We cannot rest satisfied with an arrangement which effectively binds us to pay without prospect of the slightest contribution from our debtors. [Pg 259] What America cannot indulge in we cannot afford. The gold of Europe now lies in its coffers. Who are we—plunged in the mire of debt up to our nostrils—to give ourselves airs of generosity superior to the only golden land left in this war-stripped earth? ”

“ The great debt of the world is by no means yet paid. Whether or not Germany pays to the material limit, is not so much. Whether or not we get back a tenth of our war money, is not so much—that is not the way the great debt of the world is going to be paid. ”

“ The country will doubtless remain a debtor under some heads (private remittance, tourists) . At the close of the war it certainly was not collecting interest and dividends in the form of an excess of imports, as the figures show. It continued to invest capital in foreign countries, particularly in Europe, in North America, and in South America; the capital value of the loans far exceeded any annual interest charge on them. ”

“ The embargo cost the nation at least forty millions; non-intercourse twenty more; the war in three years added one hundred and thirteen millions to the debt, with at least an equal loss by the sacrifice of commerce and heavy drafts by taxes: and if the embargo, non-intercourse, and war can be traced to the loss of the navy, we find a saving of a million per annum in ships dearly purchased by a loss of capital which, at compound interest, would exceed to-day one-third the computed wealth of the nation. ”