Your eleventh Question, will give an Opportunity of making Some Observations upon a Subject, that is quite misunderstood, in every Part of Europe. I shall answer it with great Pleasure according to the best of my Information,1 and with the utmost Candour.

The Question is.

How great is the present Debt of America? What has she, occasion for yearly, to act defensively? Are those Wants Supplied, by the Inhabitants themselves, or by other Nations? If in the latter case, what does America loose of her Strength by it? Are they not in one manner or other, recompensed, again by some equivalent Advantage? If So, in what manner? What would be required, to act offensively? And by that means shorten the War?

All Europe has a mistaken Apprehension of the present Debt of America. This Debt is of two Sorts, that which is due from the thirteen United States, in Congress assembled: and that which is owing from each of the thirteen States in its Seperate Capacity. I am not able to Say, with Precision, what the Debt of each Seperate State is. But all these added together, fall far short, of the Debt of the United States.

The Debt of the United States consists of three Branches. 1. The Sums which have been lent them, by France and Spain, and by Mr. Beaumarchais and Company. These have been for purchasing some Supplies of Cannon, Arms, Ammunition, and Cloathing, for the Troops, for assisting Prisoners escaped from England, and for some other Purposes. But the whole Sum amounts to no great Thing.

2. The Loan Office Certificates, which are promissory Notes given to Individuals in America who have lent Paper Money to the Congress, and Are their Securities for the Payment of the Principal and Interest.2 These the Congress have equitably3 determined Shall be paid, according to the Value of the Paper Bills in Proportion to Silver, at the Time of their dates.

3. The Paper Bills, which are now in Circulation, or which were in Circulation on the Eighteenth day of March last. These Bills, amounted to the nominal sum of Two hundred Millions of Dollars, but the real Value of them to the Possessors, is estimated at forty for one, amounting to five Millions of Spanish Dollars, or one Million and a quarter Sterling. This is the full Value of them, perhaps more. But this estimation of them has given Satisfaction in America to the Possessors of them, who certainly obtained them in general at a cheaper Rate.

These three Branches of Debt, which are the whole, According to a Calculation made last May, and sent me by a Member of Congress,4 who has been four Years a Member of their Treasury Board and is perfect Master of the subject, amount, in the whole to five Millions sterling, and no more. The national Debt of America, then is five Millions sterling.

In order to judge of the Burthen of this Debt, We may compare it with the Numbers of People. They are three Millions. The national Debt of Great Britain is two hundred Millions. The Number of People in England and Scotland is not more than Six millions. Why should not America, with three Millions of People be able to bear a Debt of one hundred Millions, as Well as Great Britain with six millions of People, a debt of two hundred Millions.

We may compare it, with the Exports of America. In 1774 The Exports of America, were Six millions sterling. In the same Year the Exports of Great Britain were twelve Millions. Why would not the Exports of America, of Six millions, bear a national Debt of one hundred Millions, as well as the twelve millions of British Exports bear a Debt of Two hundred Millions?

We may compare it, in this manner, with the national Debt of 231France, Spain, the United Provinces, Russia, Sweeden, Denmark, Portugal, and you will find, that it is but small in comparison.

We may compare it, in another Point of View. Great Britain, has already Spent in this War, Sixty Millions sterling—America five Millions. Great Britain has annually added, to her national Debt, more than the whole Amount of her annual Exports. America has not added to hers, in the whole Course of five Years war, a sum equal to one Years Exports.

The Debt of Great Britain is, in a large Proportion of it, due to Foreigners, for which they must annually pay the Interest by sending Cash abroad. A very trifle of the American Debt is yet due to Foreigners.

Lord North borrowed last Year, Twelve Millions, and every future Year of the War, must borrow the Same or a larger Sum. America could carry on this Way, an hundred Years, by borrowing only one Million sterling a year.

The annual Expence of America has not hitherto exceeded one Million a Year— that of Great Britain, has exceeded Twenty Millions, some years. America may therefore carry on this War, an hundred Years, and at the End of it will be no more in Debt in Proportion to her present5 Numbers of People and her Exports in 17746 than Great Britain is now.

There is another Consideration of some Weight. The Landed Interest in America is vastly greater in Proportion to the mercantile Interest, than it is in Great Britain. The Exports of America are the Productions of the soil, annually, which increase every year. The Exports of Great Britain were Manufactures, which will decrease every Year, while this War with America lasts.

The only Objection to this Reasoning is this, that America, is not used to great Taxes, and the People there are not yet disciplined to such enormous Taxation as in England. This is true. And this makes all their Perplexity at present. But they are capable of bearing as great Taxes in Proportion as the English, and if the English force them to it, by continuing the War, they will reconcile themselves to it: and they are in fact, now taxing themselves more and more every Year, and to an Amount that a Man who knew America only twenty year ago would think incredible.

Her Wants have hitherto been supplied by the Inhabitants themselves, and they have been very little indebted to foreign Nations. But on Account of the Depreciation of her Paper, and in order to introduce a more stable Currency, she has now Occasion to borrow a sum 232of Money abroad, which would enable her to support her Credit at home, to exert herself more vigorously against the English both by sea and Land, and greatly assist her in extending her Commerce with foreign Nations especially the Dutch. America would not loose of her Strength by borrowing Money, but on the Contrary would gain vastly. It would enable her to exert herself more by Privateering, which is a Mine of Gold to her. She would make Remittances in Bill of Exchange to foreign Merchants for their Commodities, and it would enable Many Persons to follow their true Interest in Cultivating the Land instead of attending to Manufactures, which being indispensable, they are now obliged more or less to follow, tho less profitable. The true Profit of America, is the continual Augmentation of the Price and Value of Land. Improvement in Land, is her principal Employment, her best Policy, and the principal source of her growing Wealth.

The last Question is easily answered. It is. What would be required to act offensively, and by that means, shorten the War?

To this I answer, nothing is wanted, but a Loan of Money, and a Fleet of ships.

A Fleet of ships, only Sufficient to maintain a superiority over the English, would enable the Infant Hercules to Strangle all the Serpents that environ his Cradle. It is impossible to express in too Strong terms, the Importance of a few ships of the Line to the Americans. Two or three French or Dutch or Spanish ships of the Line, Stationed at Rhode Island, Boston, Delaware River, or Chesapeak Bay, would have prevented, the dreadful Sacrifice at Penobscot. Three or four ships of the Line would have prevented the whole Expedition to Charlestown. Three or four ships of the Line more, added to the Squadron of the Chevalier de Ternay, would have enabled the Americans to have taken New York.7

A Loan of Money is now wanted, to give Stability to the Currency of America—to give Vigour to the Inlistments for the Army—to add Alacrity to the fitting out Privateers—and to give an Ample Extension to their Trade.

The Americans, will labour through, without a Fleet and without a Loan. But it is ungenerous and cruel, to put them to such Difficulties, and to keep Mankind embroiled in all the Horrors of War, for Want of such Trifles, which so many of the Powers of Europe wish they had and could so easily furnish. But if Mankind must be embroiled and the Blood of Thousands must be shed, for want of a little 233Magnanimity in some, the Americans must not be blamed, it is not their Fault.

I have the Honour to be &c,

We are now come to your Twelfth Head of Inquiry, which is. What Countenance have the Finances? How much does the Expence exceed the Yearly Income? Does the annual Revenue, deriving from the Taxes, increase or diminish? in the whole, or in any Particulars? and what are the Reasons to be given for it?

Here I am apprehensive, I shall find a Difficulty to make my self under Stood, as the American Finances, and Mode of Taxation, differ so materially from any, that I know of in Europe.

In the Month of May, 1775, when the Congress came together, for the first Time, after the Battles of Lexington and Concord, they found it necessary, to raise an Army, or rather to adopt an Army already raised, at Cambridge, in order to oppose the British Troops and shut them up, in the Prison of Boston. But they found, that the Colonies, were but just got out of Debt, had just paid off the Debts contracted in the last French War. In the Several Treasuries of the Colonies, they found only a few Thousand Pounds. They had before them a Prospect of a Stagnation, or Interruption of their Trade, pretty universally, by the British Men of War. They had a thousand Perplexities before them, in the Prospect of passing through thirteen Revolutions of Government, from the Royal Authority to that under the People. They had Armies and Navies to form, they had new Constitutions of 234Government to attend to. They had, twenty Tribes of Indians to negotiate with. They had vast Numbers of Negroes to take care of. They had all sorts of Arms, Ammunition, Artillery, to procure, as well as Blanketts and Cloathing, and subsistance for the Army, they had Negotiations to think of in Europe and Treaties to form of Alliance and Commerce, and they had even Salt to procure for the Subsistance of the Inhabitants and even of their Cattle as well as their Armies.

In this situation, with so many Wants and demands, and no Money, or Revenues to recur to, they had recourse to an Expedient, which had been often practiced in America, but no where else. They determined to emit, Paper Money.

The American Paper Money, is nothing but Bills of Credit, by which the Publick, the Community, promises to pay the Possessor, a certain Sum in a limited Time. In a Country where there is no Coin, or not enough in circulation, these Bills may be emitted to a certain Amount, and they will pass at Par, but as Soon as the Quantity exceeds, the Value of the ordinary Business of the People, it, will depreciate, and continue to fall in its Value in Proportion to the Augmentation of the Quantity.

The Congress on the 18 of March last, Stated this Depreciation at forty for one. This may be nearly the Average, but it often passes much lower. By this Resolution All the Bills in Circulation, on that day, and none have been emitted Since, amount to about one Million and a Quarter sterling. To this if you add the Money borrowed upon Loan Certificates, and the debt contracted abroad in France and Spain, the whole does not amount to but little more than five Millions.

Yearly Income, We have none, properly Speaking. We have no Imposts or Duties laid upon any Articles of Importation Exportation, or Consumption. The Revenue consists entirely in Grants annually made by the Legislatures, of Sums of Money for the current service of the Year and appropriated to certain Uses. These Grants are proportioned upon all the Polls and Estates, real and personal in the community, and they are levied and paid into the publick Treasury with great Punctuality, from whence they are issued in Payments of the demands upon the Public.

You see then that it is in the Power of the Legislatures, to raise what sums are wanted, at least as much as the People can bear, and they are usually proportioned to the publick Wants and the Peoples Abilities. They are now constantly laying on and paying very heavy 235Taxes, altho for the three or four first Years of the War, the Obstructions of Trade &c. made it difficult to raise any Taxes at all. The yearly Taxes, annually laid on have increased every Year, for these three Years past, and will continue to be increased in Proportion To the abilities of the People. This ability no doubt increases in Proportion as Population increases, as new Lands are cultivated, and as Property is in any Way added to the common stock. It will also increase as our Commerce increases, and as the Success in Privateering Increases.

But by the Method of Taxing you see that it is in the Power of the Legislature to increase the Taxes every Year, as the publick Exigences may require, and they have no other Restraint or Limit than the Peoples Ability.

I have the Honour to be, with great Esteem &c.