In 1803 the US bought a great swath of land from France for $15 million (The Louisiana Purchase).
In 1867 the US bought what is now Alaska from the Russians for $7.2 million.
Obviously this is way before electronic transfers of money so…how were such large sums paid for back then? A ship laden with US currency? Gold or silver or other commodities physically shipped from one to another?
More broadly, how did they settle accounts that were much smaller? Account for the money over three months and then send a ship with the difference? Just keep track on a balance sheet? Something else?
We had a thread recently about the Louisiana Purchase. IIRC, it was bought by two things: assumption of French debt to Americans (~$5 million, I think) and bonds issued by the US Treasury. The bonds were bought from the French by Baring Bank (British bank) at a discount but they paid with gold.
“He had contacts at Britain’s Baring & Co. Bank, which agreed, along with several other banks, to make the actual purchase and pay Napoléon cash. The bank then turned over ownership of the Louisiana Territory to the United States in return for bonds, which were repaid over 15 years at 6 percent interest, making the final purchase price around $27 million.”
If you owe me $100 and then say your friend Joe has taken on that debt I am not sure I would be cool with that. I’d rather you paid the debt and then dealt with Joe on your own.
Isn’t it the other way around? Joe owes you $100. You want to buy Fred’s prettiest pig, and he’s asking $150 for it. You give him $50 in cash, and the IOU between you and Joe.
Its up to Fred to accept the debt in lieu of payment. If he knew Joe was basically a deadbeat, for whom the words ‘pinky promise’ were meaningless, he might still take it but at a discount, say worth $50 only to mitigate the risk of the feckless Joe.
I don’t know the exact details of debt assumption, but the same thing was done when the US bought Florida. I don’t think any money changed hands on that deal, it was all assumption of debt.
At any rate, the French were getting out of owning land on the North American mainland, so it would be more difficult for someone to collect money the French owed them going forward. Transferring the debt to a local country would most likely make it easier for people to collect their money, all other things being equal.
If they were like bonds issued a century later, the buyer would receive a certificate (“bearer bond” - anyone with the certificate could use it and cash it in) with the value of the bond on it, and coupons - each with a dollar value representing interest for a certain period (3 months, 6 months, a year, whatever). The owner would cut out (“clip”) the coupon, present it to a bank teller, and receive the cash, In turn - the bank would go through a process to get reimbursed for the coupon from the bond issuer. At maturity - the owner would present his certificate to a bank, broker, government, whomever - and receive cash for its full value.
I have no idea if bonds worked that way in the early 1800s, but I remember my parents clipping coupons well into the 1970s. Most (if not all) bonds eventually became registered under a person’s name rather than “bearer” so that interest payments could be made by cheque/check.
Negotiable bearer bonds. Bank vaults with deposit boxes would have a pair of scissors there for the clippers. They were just like cash as far as getting lost or stolen, so they kind of got away from them.
So, you hand Russia a big check. They take it to their bank? What does their bank do with it? The present it to the US Treasury? And they get paid how? Gold?
I kind of understand how it would work in 2023, but how would that have worked in the mid 1800s?
European banks were already very sophisticated for money transfers. The Russian government could deposit the cheque to their European bank, which would then debit it against the bank account maintained by the United States with a European bank. A lot of banking transactions were by credits, based ultimately on the reliability of each bank. Banks like Barings were considered as solid as the British government, for example, so if you got a government cheque drawn on a reliable main bank, it was good as gold. Then you could withdraw it in gold from your bank, if you wanted, but you’d have to be careful not to trigger a run on your own bank. Since the amount was already credited to your account, you could gradually withdraw in gold, then put that in you government treasury.
The Treasury check was cashed, with de Stoeckl’s endorsement on the back, at Riggs Bank in Washington D.C., and his handwritten receipt verifies he got the specified amount “in coin”. The warrant itself looks like…a check, albeit a schmancy one, quite impressively featuring engraved figures, flowery 19th century handwriting filling in the standard information, Skinner’s distinctive signature, and a large blue stamp saying “PAID” with the date.
