Public credit

“ If the borrowings of a state be only in proportion to the extinction of the old capitals, or of what I have called determinate annuities, then the debts will not increase.
When a statesman, therefore, establishes a system of public credit, the first object which should fix his attention is to calculate how far the constitution of the state, and its internal circumstances, render it expedient to throw the revenue of it into the hands of a money’d interest. ”

“ The usefulness, therefore, of an inquiry into the principles of public credit, has not so much for its object to discover the interest of states in adopting one mode of credit preferably to another, as to discover the consequences of every one ”

“ He smote the rock of the national resources, and abundant streams of revenue gushed forth. He touched the dead corpse of the Public Credit, and it sprung upon its feet. ”

“ The public credit must be supported, or the Government will lose the confidence of the people. The public credit must be supported, or you put at hazard the best interests of the country; you hazard, indeed, the very existence of the Government. In popular Governments there is always a reluctance to laying burdens upon the people. If, then, while creating a public debt, we neglect to provide [Pg 539] the means of payment, what will be the consequence? Will it be less difficult or unpopular to do this after the debt has accumulated to an enormous amount? No, sir. ”

“ Government inspection.—The principal support of universal credit through banking is the assurance that uniform methods, honest in principle and accurate in execution, are followed. To secure these results a system of government inspection and guaranty seems absolutely necessary. If the public faith is to be maintained, the ground of that faith must be publicly established. The more complete the examination by trusted officials and the more frequent the publication of official reports, the better the public credit. ”

“ This masterly report, which is justly regarded as the corner-stone of American public credit, excites the admiration of the reader by the clearness of its analysis, the cogency of its argument, and the broad range of its vision. The principles of action that it embodied, however, were few and simple, chief among them being exact and punctual fulfillment of contract. "States, like individuals, who observe their engagements, are respected and trusted; while the reverse is the fate of those who pursue an opposite conduct." To discharge the principal of the public debt was of course impracticable ”

“ The public debt is considerable, and the public credit must be lost, if the interest of it be not provided for. Congress have done their duty in requesting revenue, and I have done mine in soliciting a compliance with their request. It only remains for me to bear testimony against those who oppose that compliance, and to declare, that they and they only, must be responsible for the consequences. They are answerable to the other States, to their fellow citizens, to the public creditors, and to the whole world. ”

“ To relieve these difficulties by use of the public credit would be to substitute a public calamity for private misfortune, and would end in the certain necessity of imposing grievous burdens in the way of taxes upon the many for the benefit of the few. ”

“ You will, therefore, show the necessity of setting our credit upon a firm basis, the prospect we have of accomplishing it, from the great confidence in the integrity and abilities of the financier, from the economy which is introduced into our departments, from the industry which money excites, and which a fluctuating medium had destroyed, and from the total debility which much attend another shock to public credit. ”

“ When there are no specific sinking-fund attachments to public debts, the repayment of public debt might be regarded, so far as the contract with creditors is concerned, as a work of supererogation. But just as a business man gains in credit by prompt or anticipated payments, so a policy more liberal to creditors than legal requirements demand redounds to the credit of the State. Repayment of the principal is not essential, as we have seen, to the maintenance of public credit, as States whose debt continues to increase stand in good repute, but is a policy to be recommended. ”

“ It is a pledge of the national credit. It is a promise by the government to pay dollars; it is not an attempt to make dollars. The standard of value is not changed. The government simply demands that its credit shall be accepted and received by public and private creditors during the pending exigency. . . .
'No one supposes that these government certificates are never to be paid, that the day of specie payments is never to return. ”

“ Paper credit never was long supported in any country, on a national scale, where it was not founded on a joint basis of public and private credit. An attempt to establish it on public credit alone, in France, under the auspices of Mr. Law, had nearly ruined the kingdom. We have seen the effects of it in America; and every successive experiment, proves the futility of the attempt. Our new money is depreciating almost as fast as the old; though it has, in some States, as real funds as paper money ever had. The reason is, that the moneyed men have not an immediate interest to uphold its credit. ”

“ The neglect in funding the public debt, has introduced a practice of issuing Loan Office certificates, for the interest due on other Loan Office certificates. This I have absolutely forbidden, nor will I ever consent to it. Such accumulation of debt, while it distresses the public, and destroys its credit, by no means relieves the unfortunate individual, who is a public creditor; for if revenue is not provided, increasing the certificates would only lessen their value. ”

“ The power 'to borrow money on the credit of the United States' is the power to raise money for the public use on a pledge of the public credit, and may be exercised to meet either present or anticipated expenses and liabilities of the government. It includes the power to issue, in return for the money borrowed, the obligations of the United States in any appropriate form, of stock, bonds, bills or notes ”

“ The principles which influence the doctrine of public credit are so few, and so plain, that it is surprising to see how circumstances could possibly involve them in the obscurity into which we find them plunged on many occasions. ”

“ In this case, if the public credit is good, they may borrow a certain sum, and raise for the present only enough to pay the interest, deferring the payment of the principal till the public is more able to bear it. In the other case, where no money can be borrowed, there is no resource, if the whole sum cannot be raised immediately. ”

“ Though the price of public paper is considered as the barometer of the public credit, it is truly so only as to the general average of prices. The real credit of the United States depends on their ability, and the immutability of their will, to pay their debts. ”

“ When, in the early times of public credit, the repayment of the capital was the chief object of the lender, a much more extensive fund was necessary than at present, when no more is required than the payment of the interest. As such funds never can be formed but from taxes, or general contributions from the people, the greater they are, the larger must the contribution be. ”

“ A measure of this kind certainly cannot increase confidence in the ability, or the integrity of the country. It can make us no better than we are today, so far as the foundation of all public credit is concerned. ”

“ Supposing there had been hitherto no such thing as a bank, and the question were now first proposed, whether it would be safer to circulate unlimited bills in a private credit, or bills to a limited value on the public credit of the community, what would men think? ”

“ In spite of dishonest and subtle counsel, and in spite of great temptation, we have dealt with the public debt on the simple and honest principle that the only thing to do with a debt is to pay it. The National credit is the best in the world, and the National debt has ceased to be an object either of anxiety or consideration. ”

“ There is a common bond of union between the various branches of social improvement; a good system of public works would exercise a powerful influence on the extension of credit, and, reciprocally, a liberal system of public and private credit, would communicate activity to public enterprises. I go further; it is impossible that our public works should be carried forward with vigour, without the aid of credit. To pretend to execute them wholly by means of taxes, would be madness. Without public and private credit, the Americans would never have had any public works. ”

“ Another proposition equally clear is, that at the time the Constitution was adopted, it was, and had for a long time been, the practice of most, if not all, civilized governments, to employ the public credit as a means of anticipating the national revenues for the purpose of enabling them to exer cise their governmental functions, and to meet the various exigencies to which all nations are subject ”

“ You must guard against this at all hazards—but never by taking from the rich and giving it to the poor. Nothing is so requisite to the State as public credit—which cannot exist unless debtors be made to pay what they owe. ”

“ In January, 1795, he sent a letter to Congress on the subject of the public credit, which is one of his ablest productions, full of sound financial doctrine, and showing that he was in advance of most men on those economical questions the proper settlement of which so closely concerns the welfare of nations. ”

“ At all events, as a measure of justice to the holders of the nation's certificates of indebtedness, I would recommend that no more legislation be had on this subject, unless it be to correct errors of omission or commission in the present laws, until sufficient time has elapsed to prove that it can be done and still leave sufficient revenue to meet current expenses of Government, pay interest on the public debt, and provide for the sinking fund established by law. The preservation of our national credit is of the highest importance ”

“ While the keeping of the public revenue in a separate and independent treasury and of collecting it in gold and silver will have a salutary influence on the system of paper credit with which all banks are connected, and thus aid those that are sound and well managed, it will at the same time sensibly check such as are otherwise by at once withholding the means of extravagance afforded by the public funds and restraining them from excessive issues of notes which they would be constantly called upon to redeem. ”

“ Let it be understood that no repudiator of one farthing of our public debt will be trusted in public place, and it will go far toward strengthening a credit which ought to be the best in the world, and will ultimately enable us to replace the debt with bonds bearing less interest than we now pay. To this should be added a faithful collection of the revenue, a strict accountability to the Treasury for every dollar collected, and the greatest practicable retrenchment in expenditure in every department of Government. ”

“ 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. ”

“ Of the seventy or eighty millions now estimated to be in the country, ten millions would be abundantly sufficient for that purpose provided an accumulation of a large amount of revenue beyond the necessary wants of the Government be hereafter prevented. If to these considerations be added the facilities which will arise from enabling the Treasury to satisfy the public creditors by its drafts or notes receivable in payment of the public dues, it may be safely assumed that no motive of convenience to the citizen requires the reception of bank paper. ”

“ Every private company which is instituted with a view to the purposes of banking may indeed issue promissory notes, which meet with a voluntary credit from the country; but these are distinguished from the public banks instituted by the authority of Government, and where credit does not depend upon the goodwill of any individual, as every man must accept in payment their notes when tendered to him. ”

“ I encourage all Americans—particularly business people, educators, public officials, consumer advocates, community organizations, and members of the media—to observe this week with appropriate programs and activities to educate and inform consumers about their credit rights and responsibilities and about the benefits of the wise use of credit. ”

“ That funds, which shall be appropriated for the payment of public creditors, shall not, during the time of such appropriation, be diverted or applied to any other purpose, and that the committee prepare a clause or clauses for restraining the legislature of the United States from establishing a perpetual revenue. ”

“ The different classes of the public creditors, he observed, were not all put on an equal footing by this bill; but in the bill for the disposal of the Western Territory this had been thought essential. The holders of six per cent. securities will derive undue advantages. Creditors at a distance, and the holders of three per cent. securities, ought to be considered, as the public good is most essentially promoted by an equal attention to the interest of all. ”

“ The laws of credit, therefore, ought to rest upon a permanent foundation: neither is law necessary to restrain credit; for if, in a commercial state, it becomes detrimental by its over growth, it finds itself a remedy. ”