A History of the American People

Washington for president, who was elected unanimously. They did consider putting up George
Clinton for vice-president, but in the event John Adams was easily elected. Washington was
notified of his election in April and immediately set off for New York, though not before
confiding to a friend: from the moment when the necessity [of accepting the presidency] had become more apparent, and as it were inevitable, I anticipated in a heart filled with distress, the ten thousand embarrassments, perplexities and troubles to which I must again be exposed in the evening of a life already nearly consumed in public cares ... none greater [than those produced] by applications for appointments ... my apprehension has already been too well justified.' Actually the patriarch protested too much. He was quite prepared to be president and made an excellent one. His disloyal and acerbic vice-president, Adams, might call him Old Muttonhead, but Washington knew very well what he was doing. And the first thing he had to do was to get the national finances in order. That meant appointing Hamilton the first Secretary of the Treasury, and giving him a free hand to get on with the job. The financial mess into which the new nation had got itself as a result of the Revolutionary War and the subsequent failure to create a strong federal executive can be briefly summarized. In 1775 Congress authorized an issue of $2 million of bills of credit called Continentals to finance the war. By 1779 (December) $241.6 million of Continentals had been authorized. This was only part of the borrowing, which also included US Loan Certificates, foreign loans, bills of credit issued by the states, and other paper debts. Together they produced the worst inflation in United States history. By 1780 the Continentals were virtually valueless. When the war died down in 1782, Congress sent commissioners round the country to investigate claims against Congress and the army, and revalue them in terms of hard money. This produced a figure of $27 million. Under the Articles of Confederation Congress had no power to raise revenue. The states did, but were reluctant to come to Congress's aid. So throughout the 1780s interest payments on the debt were met only by issuing more paper. The new Constitution of 1787 of course gave Congress the power to tax, but by the beginning of 1790 the federal government's debt had risen to $40.7 million domestic and $13.2 million foreign. The market price of government paper (that is, proof of debt) had fallen to from 15 to 30 cents in the dollar, depending on the relative worthlessness of the paper. This consequence of inflation and improvidence was precisely the kind of disaster which was to hit all the Latin American republics when they came into being in the next generation, and from which some of them have never recovered to this day. Somehow, the United States, which sprang from the stock of England, whose credit rating was the model for all the world, had to pull itself out of the pit of bankruptcy. That was Hamilton's contribution to the founding of the nation. It was of such importance that it ranks him alongside Washington himself, Franklin, Jefferson, Madison, and Adams as a member of the tiny elite who created the country. All these men derived from John Locke the notion that security of one's property was intimately linked to one's freedom. Inflation, by making federal and state paper money valueless, was a direct assault on property and therefore a threat to liberty. John Adams wrote:Property must be secured, or liberty cannot exist.' Hamilton
made the same point: Adieu to the security of property, adieu to the security of liberty.' Believing this, Hamilton acted quickly. In January I790 he submitted hisReport on the Public
Credit' to Congress. This was accepted after a lot of debate and one curious by-product of the
negotiations was that the government accepted the proposal of Jefferson and his followers that
the new national capital should be on the banks of the Potomac, in return for their support of
Hamilton's proposals. Hamilton solved the problem of the Continentals, now valueless, by giving
one dollar for every hundred, the embittered people who held them counting themselves lucky to