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WHAT WAS THE NATURE OF THE UNITED STATES DEBT DURING AND AFTER THE REVOLUTIONARY WAR
Gabe, Gautam and Xander
Debt And Inflation
Monetary Debt
During the Revolutionary War, the colonial governments, both the federal and state, amassed huge amounts of debt.
Over 100 million dollars was owed to US citizens, and other countries (France) that sold supplies or bought war bonds during the war.
The Failed Solution
The United States government’s original plan to pay off the debt was to print 200 million new dollars worth of paper money (colonials)
Pay off debts with them Then slowly collect them back through
taxes levied by the states and subsequently remove them from circulation.
Inflation
However, instead of using this currency to pay of their debts, the states collectively printed 200 millions dollars worth of their own currency
This was used that to pay off the state’s debts instead.
This massive influx of relatively worthless paper currency lead to massive inflation.
The Continental dollar’s value promptly dropped to a fifth of its face value.
People who’s bonds were paid back in this currency now had few or no goods, and large amounts of worthless money.
People began to use it to stoke flames and make clothes rather than use it as currency. An expression circulating around the colonies
was, “not worth a continental,” meaning worthless.
It made the government lose almost all control over the economy, because no-one would use its currency because it was worthless.
Inflation of the Continental Dollar
Year of EmissionNominal Dollars
Emitted (000)
Annual Emission As
Share of Total
Nominal Stock
Emitted
Specie Value of
Annual Emission
(000)
Annual Emission As
Share of Total
Specie Value
Emitted
1775 $6,000 3% $6,000 15%
1776 19,000 8 15,330 37
1777 13,000 5 4,040 10
1778 63,000 26 10,380 25
1779 140,500 58 5,270 13
Total $241,500 100% $41,020 100%
Source: Bullock (1895), 135.
ROBERT MORRIS AND THE FINANCING OF THE
REVOLUTION
Robert Morris: Early Life
Born: January 20, 1734 in Lancashire, England
Family moved to Chesapeake Bay 1744 Attended school in Philadelphia
Apprenticed in a Counting Room Took control of the business This put him in a position of relative power in
society
Robert Morris: Pre-Revolution
Stamp Act of 1765 Devastated import business Morris sided with colonists Joined movement against British
Robert Morris: Revolutionary War
Elected for Continental Congress in 1775 Headed committees for raising capital and
provisions to support the revolution Commissioned to negotiate and solicit
money for war operations Lottery Loaned $10,000 of his own wealth
Funded Washington’s troops in Battle of Trenton
Operated privateers for supply
Robert Morris: National Bank
Bank of North America Morris developed a national bank
Helped finance war Established the United States credit
Appointed to be the first Secretary of the Treasury Directed operations of newly created bank
Robert Morris: Post-Revolution
Constitutional Convention 1787 Supported a new constitution to be drafted.
Positions held Pennsylvania Legislature Senator for Pennsylvania
Robert Morris: Later Life
Lost all wealth to bad land speculation Put in debtors prison
Even though he was considered to be a national hero.
Eventually released from debtors prison (1798-1801)
Died in 1806, age 73
Alexander Hamilton and Pre-1789 Debt Solutions
Post War Debt Situation
$54 million of national debt
$25 million state debt Some states have
harder time paying No good way to pay
off debts More credit
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Hamilton’s Plan
Constitution in 1787 New Federal powers
Hamilton wants to consolidate and refinance debt Fed gov’t. assumes
state debts Pays off with more
borrowed money Pay at face value
Benefits speculators
http://pdxretro.com/wp-content/uploads/2011/01/alexander-hamilton.jpg
Approving the Plan
Big southern states didn’t like plan Didn’t want to pay
other state debt Concern over
rewarding speculators
Compromise reached after 6 months Sets Capital first in
Philadelphia, then where it is today
http://www.countymapsofgeorgia.com/pics_counties/washingtondc_map.gif
Works Cited http://mises.org/daily/2340 http://www.netplaces.com/american-revolution/the-politics-of-war/financing-
the-war.htm http://eh.net/encyclopedia/article/baack.war.revolutionary.us http://en.wikipedia.org/wiki/American_Revolution#National_debt http://www.ushistory.org/declaration/signers/morris_r.htm http://www.libertystory.net/LSACTIONROBERTMORRIS.htm "Alexander Hamilton's Financial Program." Digital History. University of
Houston, 2006. Web. 25 Oct. 2011. <http://www.digitalhistory.uh.edu/ database/article_display.cfm?HHID=6>.
Hamilton, Alexander. "The First Report on Public Credit by Alexander Hamilton (1789)." WW Norton & Company, Inc. WW Norton and Company, Inc, 2011. Web. 25 Oct. 2011. <http://wwnorton.com/college/history/archive/resources/ documents/ch08_02.htm>.
Tindall, George Brown. America: A Narrative History. Vol. 1. New York: WW Norton & Company, 1984. Print.