Curiously enough, the matter came to a head with England during the trip made by Jefferson in the spring of 1786. He held several conferences with the British merchants and tried to obtain with them a sort of compromise by which American merchants would repay in full the capital of debts contracted before and after the war, but withdrawing payment of the interest for the period of the war. It was then that Jefferson put forth the principle he was to maintain persistently with the French,--namely that the matter of commerce and the question of the debts could not be separated, "were it only as a means of enabling our country to pay its debts."[136]
The chief fault of Jefferson's solution, however, was that there was very little America could sell to England, while the Americans themselves were eagerly buying goods manufactured in England. There was great danger of seeing that economic vassalage perpetuated, for "instead of a proper equilibrium, everything at present lies all in the British scale."[137] Importations being permitted, fashion and folly requiring English products, the country was sinking deeper and deeper into poverty, and all the news on the matter received by Jefferson "filled him with despair."
However, something had to be done at once in the case of the French debt, as Jefferson knew that the French Minister of Finance was "at his wit's end to raise supplies for the ensuing year."[138] It does not appear that the French Court had made any representation on the debt to the American Plenipotentiary, but Jefferson fully realized that he was placed in a position of inferiority as long as the vexing question remained unsettled and payments on the interest were overdue. This was the more deplorable, as France was the only European nation with which the United States could hope to develop really satisfactory relations. It was at this juncture that a very interesting proposition was made through Dumas by the Dutch bankers. The French debt's most objectionable feature was that it placed the American Government under direct obligation to the French; in other words, as we would say now, it was a political debt, but means might be found to change it into a purely commercial debt. If a company of bankers were formed to pay off France at once, the American Government would be able to treat with them on a business basis, the greatest advantage being that in case of delayed payments, no political pressure could be exerted or political advantage claimed.