Faisal Sheikh (Letters, December 4) recalls the attempt of Alexander Hamilton, the first secretary of the United States Treasury, to deal with debt at the start of the American republic.
The issuance of paper money in 1775 and 1776 alleviated the “money famine” which had plagued the economy even during the colonial period and which Hamilton and John Adams approved of.
The finances of individual states and thus of the original “Confederation” were in chaos when Hamilton took over. The overdrafts and depreciation of Continental Notes – the paper money issued by the Continental Congress in 1775 to help finance the American War of Independence – were huge in 1789.
In his “First Report on Public Credit” debt plan, Hamilton argued that the government should take on all elements of mainland debt, both foreign and domestic, as its own obligation. By issuing its own bonds in place of individual debt, and providing for its own interest thereon, it guaranteed no depreciation. With the stroke of a pen he created vast wealth and a useful basis for commerce. You could say that Hamilton was the first Keynesian.
Department of Anthropology, San Francisco State University, California, USA