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So Immense a Power in the Affairs of War: The Restoration of Public Credit

So Immense a Power in the Affairs of War: The Restoration of Public Credit

Chapter:
(p.81) Chapter Three So Immense a Power in the Affairs of War: The Restoration of Public Credit
Source:
A Hercules in the Cradle
Author(s):
Max M. Edling
Publisher:
University of Chicago Press
DOI:10.7208/chicago/9780226181608.003.0004

In the modern era public credit is essential to governments’ ability to finance extraordinary expenses such as war. The newly independent United States had so mismanaged its loans that it had earned a credit rating of zero and was therefore in a precarious situation. This changed rapidly after the adoption of the Constitution and the creation of a productive fiscal system (ch. 2). Chapter three analyzes how under the leadership of Alexander Hamilton the first federal congress adopted a plan that transformed the public debt from a liability to an asset. State debts were federalized and the consolidated debt was funded. Government bonds rose to par and public credit was restored. The federal government could borrow again and did do so extensively in the years that followed. Contrary to accusations that he tried to perpetuate the debt, Hamilton engineered and adopted a repayment plan,which repaid the revolutionary war debt.

Keywords:   Alexander Hamilton, federal government, first federal Congress, bonds, public credit, United States

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