4. On 18 March Congress adopted a plan that was intended to stem the runaway inflation that was crippling the economy and damaging the war effort. Under the new measure the monthly payments by the states, which had been set at $15,000,000 by a resolution of 7 Oct. 1779, would be redeemed at the rate of forty continental dollars to one Spanish milled dollar (
, 16:262–267, 15:1150). This had the immediate effect of revaluing the existing emission from $200,000,000 to $5,000,000, but was to result in a new emission, as the old was redeemed and destroyed over a period of approximately thirteen months, of $10,000,000. So that they would retain their value, the new bills were to be backed by both the states and
Congress and carry a five percent interest rate. The plan failed because it proved impossible for the states to remit all of the funds due Congress in the form of continental currency, with the result that by June of 1781 only $31,000,000 of the old emission had been retired. At that point the currency was valued at 500 to 1 and for all intents had ceased to exist except as a vehicle for speculation (E. James Ferguson, The Power of the Purse
, Chapel Hill, 1961, p. 51–53, 64–66).
For the effect of Congress' action on JA's relations with Vergennes, see The Revaluation Controversy, 16 June –1 July, Editorial Note
; Vergennes to JA, 21 June
; JA to Vergennes, 22 June
(second letter), all below.