The real danger, as both Adams and Jefferson saw it, came from unwise speculation in American domestic bonds, since the bankers had tried to use these bonds as a sort of lever; consequently the transfer of domestic bonds to Europe was to be discouraged by every possible means. "If the transfer of these debts to Europe, meet with any encouragement from us, we can no more borrow money here, let our necessities be what they will."[146]
How desperate the situation was at that date appears in two letters written to General Washington May 2, 1788, and to James Madison, May 3, 1788.[147] Jefferson's visit at Amsterdam had convinced him that the credit of the United States was at its lowest ebb and in great danger of being reduced to nil. The nation with the highest credit was Great Britain, because the English never asked for a loan without providing by new taxes for the repayment of it. He indicated that no doubt was entertained by any one in Holland about the ultimate repayment of the capital, but that repeated failures to pay the interest on the old loans had stopped any further borrowing. As to the French debt, the Court had carefully avoided any public mention of it, "the government here, saying nothing about it, the public have supposed they wished to leave us at our ease as to the payment. It is now seen that they call for it, and they will publish annually the effect of that call." The most pressing need was an order from the Treasury to pay the arrears for the last three years to the French officers. With much difficulty Jefferson had prevented them from holding a meeting to agree on concerted action on the matter, and when he came back he prevented them from taking "desperate measures" till July. But a solution could not be deferred much longer. The necessary sum was comparatively small: twenty thousand florins a year would have sufficed "to suppress these clamors", and through diplomacy he finally succeeded in staying the address they intended to send to Congress and to the king, asking him to intervene on their behalf.[148]
Fortunately the loan launched in Holland to meet the payment of the June interest had succeeded and had been finally ratified by Congress.[149] It was a beginning that brought some respite to Jefferson, but he insisted again that the next step to take was the funding of the foreign debt, for the French Government expected "a very satisfactory provision for the payment of their debt, from the first session of the new Congress."[150] He was enclosing two tables "showing what fund will suffice to discharge the principal and interest, as it shall become due aided by occasional loans, which the same fund will repay." This very detailed and technical proposal now preserved in the Jefferson papers of the Library of Congress would repay careful study.