An Offer You Can't Refuse
October 1787. Having become provisional president, Washington handed over the drafting of the Constitution and the details of the federation to the Constitutional Convention and headed to New York. It was for negotiations with France.
Upon arriving at the French legation, Washington received an enthusiastic welcome from the French. "You must have had a tiring journey from Philadelphia to New York. You need to rest from the fatigue, so let's not talk business for a few days."
The staff at the French legation insisted he needed to recover from the journey and dragged out time with banquets for several days. "Do you see this? It's the sulfuric acid match that the Academy has recently standardized for mass production. Just dip it in sulfuric acid, and it lights on fire. Would you like to try lighting one? It's concentrated sulfuric acid, so be careful with your hands."
Washington was impatient but didn't press them. Urging them on wouldn't be gentlemanly.
"We've got a bottle of Champagne wine. You have to try it—no refusals. Do you know this? Carbon dioxide—oh, pardon me. America might not know that term yet. Anyway, do you know that the fizzy taste in wine comes from fixed air? The Academy principal researched it and figured out the exact formula, but apparently Champagne wine was making it naturally all along."
The people at the French legation boasted about France's various scientific achievements during the banquets. "This is currently the most expensive agricultural product on the mainland. Ten francs per kilo. Oh, you don't know kilograms? About 2.2 pounds. Luckily, we have a bronze scale here at the legation. We'll give it to you as a gift when you leave."
They also boasted about ammonium sulfate fertilizer. "Anyway, if you dissolve this sulfuric alkali in water and sprinkle it on wheat fields, the grain kernels grow three times larger and sturdier. Not only that, but it prevents most diseases. Even bugs stay away, and all the crops in the treated sections become top quality. It's the same for wheat and other crops alike. Thanks to it, the mainland's apparently suffering from surpluses these days."
This boasting wasn't just for good vibes. It was diplomatic maneuvering to belittle America's staple exports like grain.
"Is your head hurting a bit? That's probably from the bleach we sprinkled. It's a cleaning product that whitens anything you spray it on. Spray it on walls and floors for a clean environment, on wool for pristine white wool, on cotton for spotless cotton. Perfect for bleaching. Unfortunately, you can't use it on flour. Bread made with bleach dough is so clean it purifies your insides if you eat it. Then again, who in this world is pure enough never to have sinned?"
The French diplomats continued to disparage American wool and cotton.
"Have you enjoyed the banquets enough? You look fully rested now, so shall we discuss the balance of trade?"
Having sufficiently boasted, France began the negotiations with Washington's group. "What can America sell? Don't think about prices—just list everything you can sell."
"The North can sell timber and livestock products, dairy, and meat; the Midwest, grains and other foodstuffs and processed goods; the South, tobacco, rice, indigo, and other cash crops."
The French envoy, basing the talks on all the boasts from the banquet period, steered the negotiations very favorably for France. "In our France, there's a trend these days toward 'scientific' foods. There's even self-reflection about depleting the soil with unscientific fertilizers like animal dung. So, regrettably, it's hard to buy at that price."
It was somewhat rude, but they pressed on with the arrogance befitting a hegemonic power. In the end, America had no choice but to sell at prices slightly above local rates—effectively local selling price minus a 5% margin once logistics costs were factored in.
"This treaty will surely benefit the friendship and interests of both nations, President Washington."
But it wasn't an unconditional loss for America. "It's getting chilly now that it's fall. Let me add some firewood." Twenty million dollars' worth of continental bonds had just vanished in an instant.
"President, don't be too disheartened. Just opening the export route is a huge step forward for America. Later, when we can compete with French products, we can renegotiate at fairer prices. It renews every five years, doesn't it? Let's climb the stairs step by step through steady negotiations."
Above all, since the trade agreement didn't include most-favored-nation status, military garrisons, or cessions of territory—making it no unequal treaty— it was a passable deal from America's perspective. It was just regrettable they couldn't sell at higher prices, but there were no major issues like sovereignty violations.
"Now that export routes are open, we'll need transportation. If you're paving roads, we can lend you our engineers. Our engineer NCOs have paved roads in France and Italy too—they're as good as Roman legionaries at it."
All in all, it was tantamount to a victory for America. Forming the federation increased the nation's weight class and potential, enabled tax collection, and adjusted the balance of trade to sustain the United States form. In other words, it had gone from a proto-state to a real nation.
"President Washington, there's an edict His Majesty sent about two months ago. If America wishes, France can exchange francs for dollar silver coins at equivalent value. However, it's unlimited duration—until one nation perishes—and includes a clause that if either side wants to reverse the exchange, it must be done immediately."
France took it one step further here, subtly proposing to bind America to the French currency bloc. Silver 1 dollar for 5 francs in brass, rounded to 100-dollar units; upon exchange, France burns continental bonds equal to the amount.
"Of course, doing it with actual silver and brass would paralyze international markets, as His Majesty predicted. So, reverse exchanges will be settled via bond offsets. What do you think? Naturally, prices rise yearly, so the offset amount grows at 2% compound interest annually."
Principal grows 2% compounded yearly; reverse swaps only via bond offsets. It was France's ironclad determination to drag America into its currency sphere.
"I'll consult with Congress and get back to you."
*Washington didn't accept the proposal hastily. He returned to the Philadelphia Congress and tossed the issue to the economists. "How much are our national debts right now?"
"Continental bonds about 70 million dollars; including the 13 states' local bonds, it's pushing 200 million."
"That's a lot."
Alexander Hamilton, Robert Morris, and other economists in Philadelphia, along with France experts like Benjamin Franklin, gathered to debate the currency swap.
"First off, the biggest advantage of this deal is that France guarantees the dollar's value," Morris laid out the merits of the currency swap.
"1 dollar for 5 francs. Whether that's true value would need a scale to check, but it's probably set a tiny bit favorably for France, maybe a few ounces. But it doesn't matter much. It's called a dollar, but most are Spanish reales anyway, right? People shave the edges, so the real value's already down 10-20%."
He pointed out, first, that the dollar's intrinsic value wasn't that high.
"If they guarantee it, we can hand over silver worth 3.5-5.5 francs and get solid 5-franc coins in return."
Second, he explained the benefits of being a real nation, not a proto-state.
"And now with the federation, we'll trade—and we'll buy from Britain or France, so we need francs or pounds. Even Britain uses francs privately, so francs are more convenient and straightforward for trade than silver that needs endless exchanges."
Third, he outlined short- and long-term gains.
"Above all, the bond burnings are great. It resolves recklessly issued continental bonds, and future offsets allow another burn. France insures America, America insures France—mutual benefit. We can offset high-interest bonds as needed to reduce future debt burdens."
Hamilton agreed with Morris but raised the cons. "However, it all starts with surrendering monetary sovereignty. An influx of tens of millions in francs could inflate prices, and francs flooding the private sector might squeeze out the dollar."
But the cons could become pros. "Mr. Hamilton, we're critically short on domestic silver due to trade deficits right now. This is the time to inject money."
As a newborn nation without an independent mint, minimal gold and silver mining, and severe trade deficits, America's domestic currency was drying up fast. Unlike France, which had vacuumed up Europe's gold and silver via MEPO bill scams, America was leaking its own out voluntarily.
"It's an offer we can't refuse."
Inevitably, with economic collapse looming across Europe, America had no choice but to accept France's proposal. Better to swap currencies now while there's still capacity than revert to barter after total collapse and hand over concessions to get francs.
"How much silver is circulating in America right now?"
"Not sure about private holdings, but our state has about 1.6 million dollars."
"Ours is similar."
"Our state too..."
Realizing the domestic silver dollar supply, America had no choice but to accept France's offer. "I wish we could swap all the bonds, but with no money, we can only burn 20 million dollars' worth."
They had to admit the problem they'd ignored was surprisingly severe.