Alexander Hamilton's Money Mischief

       Yes the title is inspired by Milton Friedman's "Moments in Monetary Mischief." It occurred to me that the pioneer in such mischief in US history was Alexander Hamilton himself. His early advocacy of the national government paying down war debt-rather than it being payed on a state by state basis-earned him the kind of fulminations against him that sound like they could come out of the mouth of an Austrian crank like Major Freedom:

    "The paramount problem facing Hamilton was a huge national debt. He proposed that the government assume the entire debt of the federal government and the states. His plan was to retire the old depreciated obligations by borrowing new money at a lower interest rate."

     "States like Maryland, Pennsylvania, North Carolina, and Virginia, which had already paid off their debts, saw no reason why they should be taxed by the federal government to pay off the debts of other states like Massachusetts and South Carolina. Hamilton's critics claimed that his scheme would provide enormous profits to speculators who had bought bonds from Revolutionary War veterans for as little as 10 or 15 cents on the dollar. "

      "For six months, a bitter debate raged in Congress, until James Madison and Thomas Jefferson engineered a compromise. In exchange for southern votes, Hamilton promised to support locating the national capital on the banks of the Potomac River, the border between two southern states, Virginia and Maryland."

     "Hamilton's debt program was a remarkable success. By demonstrating Americans' willingness to repay their debts, he made the United States attractive to foreign investors. European investment capital poured into the new nation in large amounts."

       http://www.digitalhistory.uh.edu/database/article_display.cfm?HHID=6

        What's striking is how much the pious kvetching of the states is just like the same kind of pious kvetching you hear today in the EU out of Germany. It too kind of wants something like the old Articles of Confederation.

         Indeed you hear these same arguments today being made against fiscal stimulus as well-we still hear the old states rights argument-why should there be a "transfer"from State A to State B? Much of Hamilton's has bee achieved though not without much bloodshed and the war continues.

        Who knows how much Andrew Jackson's destruction of the National Bank really caused? We know the immediate effect was the Depression of 1837.

         "Hamilton's next objective was to create a Bank of the United States, modeled after the Bank of England. A national bank would collect taxes, hold government funds, and make loans to the government and borrowers. One criticism directed against the bank was "unrepublican"--it would encourage speculation and corruption. The bank was also opposed on constitutional grounds. Adopting a position known as "strict constructionism," Thomas Jefferson and James Madison charged that a national bank was unconstitutional since the Constitution did not specifically give Congress the power to create a bank."

          "Hamilton responded to the charge that a bank was unconstitutional by formulating the doctrine of "implied powers." He argued that Congress had the power to create a bank because the Constitution granted the federal government authority to do anything "necessary and proper" to carry out its constitutional functions (in this case its fiscal duties). "

           "In 1791, Congress passed a bill creating a national bank for a term of 20 years, leaving the question of the bank's constitutionality up to President Washington. The president reluctantly decided to sign the measure out of a conviction that a bank was necessary for the nation's financial well-being.
Finally, Hamilton proposed to aid the nation's infant industries. Through high tariffs designed to protect American industry from foreign competition, government subsidies, and government-financed transportation improvements, he hoped to break Britain's manufacturing hold on America."

            That Hamiltion was the wave of the future is underscored by the opposition of his most famour rival, Thomas Jefferson:

             "The most eloquent opposition to Hamilton's proposals came from Thomas Jefferson, who believed that manufacturing threatened the values of an agrarian way of life. Hamilton's vision of America's future challenged Jefferson's ideal of a nation of farmers, tilling the fields, communing with nature, and maintaining personal freedom by virtue of land ownership"

             "Alexander Hamilton offered a remarkably modern economic vision based on investment, industry, and expanded commerce. Most strikingly, it was an economic vision that had no place for slavery. Before the 1790s, the American economy--North and South--was intimately tied to a trans-Atlantic system of slavery. States south of Pennsylvania depended on slave labor to produce tobacco, rice, indigo, and cotton. The northern states conducted their most profitable trade with the slave colonies of the West Indies. A member of New York's first antislavery society, Hamilton wanted to reorient the American economy away from slavery and colonial trade."

           Yet even today we have all these who preach "power back to the states" that progress goes in the direction of devolving back to state power.  But it's clear who was on the "Wrong Side of History" here and it's not even close.