Presidents Washington ($1), Lincoln ($5), Jackson ($20), and Grant ($50) all appear on money. But what about this guy Alexander Hamilton on the ten-spot? How did he get there? A sawbuck says you'll know the answer after reading this piece.
A major problem facing the first federal government was how to deal with the financial chaos created by the American Revolution. States had huge war debts. Almost all areas of the economy looked dismal throughout the 1780s. Economic hard times were a major factor creating the sense of crisis that produced the stronger central government under the new Constitution.
George Washington chose the talented Alexander Hamilton, who had served him throughout the Revolution, to take on the challenge of saving the economy. Born in the West Indies to a single mother, Hamilton learned his first economic principles from her and went on to apprentice for a large mercantile firm before being awarded a scholarship to Columbia University. From these humble origins, Hamilton would become the strongest supporter for a modern economy in the early United States.
Assumption of Debt
The first issue that Hamilton tackled as Washington's Secretary of the Treasury concerned the problem of credit. Governments at all levels had taken on so much debt during the Revolution. The commitment to pay them back was not taken very seriously. In other words, state and national IOU's — the money borrowed to finance the Revolution — were viewed as nearly worthless.
Hamilton issued a bold proposal. The federal government should pay off all state debts at full value. Such action would dramatically enhance the legitimacy of the new central government. By showing that the new federal government was willing to pay back its debts (plus interest), it insured that people would continue to trust the United States and encourage them to purchase bonds in the future.
Bank of the United States
Governments issue bonds (IOUS) to raise funds. Hamilton's vision for reshaping the American economy included a new national financial institution. He proposed a Bank of the United States. Modeled along the lines of the Bank of England, a central bank would help make the new nation's economy dynamic through a more stable paper currency.
The central bank faced significant opposition. Many feared it would fall under the influence of wealthy, urban northeasterners and speculators from overseas. Many southerners, including Thomas Jefferson and James Madison, were worried that a National Bank would benefit the northern states at the expense of the primarily agricultural south. Remember that farmers consistently have to borrow money from banks yearly during planting season. In the end, with the support of George Washington and the compromise that the new national government would be located in the south, the bank was chartered with its first headquarters in Philadelphia.
The third major area of Hamilton's economic plan aimed to make American manufacturers self-sufficient. The American economy had traditionally rested upon agricultural exports pay for the import of British manufactured goods. Hamilton rightly thought that this dependence on expensive foreign goods kept the American economy weak, especially when compared to the rapid growth of Great Britain.
Rather than accept this condition, Hamilton wanted the United States to adopt a new economic policy. Hamilton wanted to protect American manufacturers through tariffs (taxes on imported goods). This policy would help fledgling American producers to compete with inexpensive European imports.
American factories benefited from high tariffs. Hamilton possessed remarkable economic vision. His aggressive support for manufacturing, banks, and strong public credit all became central aspects of the modern economy that would develop in the United States in the century after his death. Bet you $10 you now see why he’s on the $10 bill.