Alexander Hamilton's Solution To The Hamiltonian Financial Crisis

The American Revolution happened to be a very expensive war for America. In order to supply for her military, congress found it necessary to accept loans from France. Following the Revolutionary War, America faced a debt of roughly $80 million to both foreign nations and American citizens. This debt damaged the economy by devaluing money issued by the Continental Congress. Wanting to find quick solutions to these timorous problems as quickly as possible, George Washington granted Alexander Hamilton the task of resolving the issues by writing policies regarding America’s interaction with foreign nations and finance management. Alexanders policies became known as the Hamiltonian Financial policies. These policies worked and had a huge impact

During the revolutionary war, America paid her citizens who supplied for the military with notes. These notes represented actual money that would be repaid in full to all note-owners once America’s treasury had recovered. This caused problems after the war because many of these notes were bought by investors for a fraction of their face value. These notes became so prominent that the states soon owed over 50 percent of their post-war debt to American citizens. Hamilton believed a federal bank would keep the economy stable through the use of paper currency. He wanted Americans to invest in a federal bank that could be used to pay foreign and local debts. In order to entice investors, he offered an annual four percent interest rate. This would allow investors to get rich on paper, but it also relied on the fact that everyone would not remove their money simultaneously. The introduction of this banking technique into America made such a huge impact, that it is still relevant today. The National Bank was deconstructed in 1811 by President Andrew Jackson. Following the War of 1812 and the economic chaos that ensued it became quite clear the Alexander’s vision of a federal bank was correct. He also created what is known as an excise tax, which is a tax on wines, coffee, tea, and spirits. The excise tax was intended to raise more revenue for the federal government with which to pay off debts. George Washington liked Hamilton’s solution and saw the impact it could have on America; therefore, he approved the founding of the first federal Bank of the United