Chapter 7, Section 2 Hamilton and National Finance



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Chapter 7, Section 2

Hamilton and National Finance

Settling the Debt

  • Alexander _____________

  • Brilliant economist

  • Not too good at dueling

  • As a teenager, helped manage a shipping company in the West Indies (Caribbean)

  • Sent to American colonies by his family to receive a formal education

  • Married into a wealthy NY family and became a lawyer

  • Served as an aide to George Washington and delegate to 4 _____________Congresses

National Debt

  • Biggest challenge was to pay off the _____________debt (money owed by the United States) accumulated by the Revolutionary War

  • 11.7 million to foreign countries

  • 40.4 million to United States citizens

National Debt

  • Money was raised during the war with _____________

  • Certificates of debt that promise to buy back bonds at a higher price

  • New government could not afford to keep the promise because bondholders who needed money sold their bonds for less than the original value to _____________

  • People who buy low with the expectation of selling high

National Debt

  • Alexander Hamilton wanted to pay the _____________debt immediately and gradually repay the total value of all bonds

  • The second part of his plan caused _____________because it allowed speculators to turn a profit

  • _____________disagreed because he felt that the original bondholder was cheated

States’ Debt

  • States owed 25 million for the war

  • Hamilton wanted the _____________government to pay 21.5 million of this debt

  • Believed that it would help the federal government by increasing the national economy

  • Debtor states would not have to spend so much on repayment and would be able to develop business and trade

  • Increased business would put money back into the _____________

States’ Debt

  • _____________states were opposed to Hamilton’s plan

  • Virginia and North Carolina did not have high war _____________

  • Hamilton knew that he needed the support of Southern State leaders in order to gain approval for his plan

Moving the Capital

  • Southern states wanted the capital of the new nation moved

  • Felt that New York City as the capital gave northern states too much power

  • Alexander Hamilton, Thomas Jefferson, and James Madison met in June 1790

  • Hamilton promised to convince northern Congress members to move the capital in return for southern support of his economic plan

Moving the Capital

  • Capital was moved from New York City to _____________for 10 years

  • George Washington chose a place on the Potomac River that included part of Maryland and Virginia

  • Eventually would become Washington D.C.

Jefferson Opposes Hamilton

  • Alexander Hamilton and Thomas Jefferson did not cooperate for long

  • Disagreed over how to define _____________of the central government

  • _____________: believed in a strong federal government

  • _____________: believed in states’ rights

Differing Views

  • Alexander Hamilton favored a strong central government that created a balance of power between the common man and the wealthy

  • Thomas Jefferson believed that political power rested in the hands of the __________________________

  • Admitted that not all people of the day were well informed

Economic Differences

  • Alexander Hamilton favored new forms of economic growth

  • Manufacturing and business

  • Favored higher tariffs

  • “_____________” to raise the prices of foreign products to stimulate interests in domestic goods

  • Believed farmers were the most independent voters

A National Bank

  • Hamilton’s Plan for a National Bank

  • Alexander Hamilton wanted to create a national bank where the nation could safely deposit its money

  • Hamilton also wanted a national _____________ (a place to make coins)

  • Hamilton knew that people who wanted to protect states’ rights might have a strong reaction to a national bank

  • Suggested limiting it to a 20 yr charter, after such time Congress would decide whether to extend the charter

  • Asked each state to create their own bank to prevent the national bank from becoming a monopoly

Jefferson Opposes the _____________

  • Thomas Jefferson and James Madison believed that Alexander Hamilton’s plan for the economy gave the central government too much power

  • Believed that the Constitution did not grant Congress the power to create such an institution

  • Hamilton quoted the _____________, which states that Congress can “make all laws which shall be necessary and proper” to govern the nation

Jefferson Opposes the Bank

  • Alexander Hamilton believed in _____________of the Constitution

  • Thomas Jefferson thought that the elastic clause should only be used in special cases-favored _____________of the Constitution

  • The federal government may only do what the Constitution says it may

Jefferson Opposes the Bank

  • President George Washington agreed with Alexander Hamilton

  • Hoped that the creation of a national bank would offer stability for the new United States economy

  • February 1791

  • Bank of the United States




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