Fiscal machinery.—The most difficult problem which Congress had to solve was the raising of sufficient funds to carry on the Revolution. To handle the public moneys and devise means for raising revenue, fiscal machinery gradually came into existence. In 1775 two treasurers were appointed to receive and disburse public funds. Soon a committee of claims of thirteen members was appointed, and in February, 1776, a standing committee of five known as the Treasury Board, which supervised financial officials and attended to the emission of instruments of credit. This board, under which was an auditor-general at the head of the office of accounts, was the germ of the later treasury. In 1778 the book-keeping system was remodeled and a comptroller, auditor, treasurer, and two chambers of accounts were provided. In 1779 the old treasury board was set aside and in its place a commission of five was appointed, of which three were not congressional delegates.
Bills of credit.—Congress had three principal means of raising money: by issuance of bills of credit, by requisitions upon the states, and by domestic and foreign loans. In addition there was a considerable income from prizes and captures. The need of raising money drove Congress to the doubtful expedient of issuing large quantities of paper money unbacked by bullion or specie but based upon the credit of the states. Between June, 1775, and November, 1779, Congress authorized the issuance of $241,552,780 in denominations varying from one-sixth of a dollar to sixty-five dollars. In addition the states issued over $200,000,000 in paper money. Such large amounts of unbacked paper could lead to but one result, a steadily increasing depreciation. At first the people took the continental money with little protest, but as issue followed issue in rapid succession, depreciation set in, and by January, 1779, the ratio of currency to specie was eight to one, by June twenty to one, and by the end of that year forty to one. In May, 1781, it ceased to pass as currency. Financiers have found it difficult to estimate the specie value of the various issues, but a careful economist has calculated that it was worth between $37,000,000 and $41,000,000.
Requisitions upon the states.—As military demands became more and more insistent, Congress found it necessary to make requisitions upon the states. The demands were met in a niggardly manner; between November, 1777, and February, 1781, the moneys received, figured in specie value, amounted to only $2,737,000. In 1780 Congress was driven to demanding specific supplies, such as corn, meat, and hay.
Domestic loans.—With the exception of a small loan for the purchase of gunpowder, Congress did not authorize a domestic loan until October, 1776, when it voted to borrow $5,000,000 at four per cent, and to establish state loan offices. Subsequent loans were at six per cent. After money from foreign loans began to come in in September, 1777, interest on the domestic debt was paid, enabling Congress to borrow more freely than before. From October, 1776, to September, 1777, only $3,787,000 was obtained from the states, and during the rest of the war $63,289,000 in paper was subscribed.
Foreign loans.—Most of the foreign financial aid came from France. In the years before France formally recognized the independence of the American states, large sums were loaned to Congress. In May, 1776, Vergennes secured a loan of a million livres from the French treasury and also obtained a small loan from Spain. Through the fictitious company of "Hortalez et Cie" in Paris organized by Beaumarchais, and the Spanish firm of Josef Gardoqui and Sons, large quantities of clothing, military stores, and considerable sums of money were placed at the disposal of the revolutionary agents. During 1777-1780 Congress borrowed from France $1,633,500.
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