Alexander Hamilton\'s Financial Plans First

Alexander Hamilton's Financial Plans

First of all, Alexander Hamilton's financial plans addresses the immediate liquidity and debt problems of the new government, which included a $54 million debt, plus interest, and an additional $25 million owed by the individual states members of the federation. In order to counter this, Alexander Hamilton proposed a new emission of obligations at a lower interest rate, with which he retired the existing old obligations. The fact that the government proved both willing and able to cover its older debts (represented by the older obligations) was a sign for foreign investors that the new government was trustworthy. At the same time, paying off the entire states' debt was a positive sign for the central federal government in its relations with both the states and foreign creditors.

One of the central entities for any monetary policy and economy, the central bank, was also proposed during Alexander Hamilton's time as Secretary of Treasury. This was modeled on the Bank of England and was primarily aimed at providing a more stable paper currency. At the same time, he proposed a mercantilist approach to economy, with a protectionist policy aimed at defending the emerging American manufacturing from the European imports.

Through these three main measures, Alexander Hamilton ensured the main instruments with which a young economy could be built and become competitive in the future: strong public credit, corroborated with a central financial and monetary institution which would regulate monetary policies and with protectionist tariffs that would defend the manufacturing industry against the cheaper imports from Europe.