What was an economic issue after the Revolutionary War?
There was large economic disruption, because of disruptions with commerce and debt.
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Why was paper money rendered worthless after the Revolutionary War?
Rampant inflation, which caused people to be bankrupt and without basic needs.
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What were the goals of the leaders of America for the economy after the Revolutionary War?
Re-establishing commerce and industry, repaying war debt, restoring the value of currency, and lowering inflation.
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Who was the first Secretary of the Treasury?
Alexander Hamilton
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What did Hamilton think the government should do about the economic structure?
He believed that an economic structure that incorporated public debt could deliver a much-needed capital to speed the growth of the U.S financial system.
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Who was Jaques Necker, and who drew inspiration from him?
The French Minister of Finance, Alexander Hamilton
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Who were David Hume and Adam Smith?
Philsophers that Hamilton drew inspiration from
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Define public debt
Money (or credit) owned by the government- federal, state, or local. The government accumulates debt over time by running a deficit; it spends more than it receives in tax revenue. Governments borrow by issuing securities such as government bonds. It is the money borrowed by the government.
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How much debt was the United States in?
National debt was $5 million, states collectively was $25 million
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What did Hamilton suggest the federal government do with the state's war debts?
Take them
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What did Hamilton feel the consolidation of state and federal debt would do?
Give invenstors who held debt a reason to support the federal government
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What would combining the debt do?
Help eliminate competition between the new central government and the states for tax revenues.
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What were Hamilton's arguments for a national bank?
It could issue paper money, it was a place to keep public funds, it offered banking facilities for commercial transactions, and it could act as the government's fiscal agent.
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What did Hamilton use as base for his proposition of the national bank?
The charter of the Bank of England
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How did Hamilton's charter differ from that of England?
Each shareholder in the Bank of England had one vote, while Hamilton's would be determined by the size of each shareholder's investment.
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Define specie
Gold or silver
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How much of the U.S bank did the government own?
20%
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Who was the Secretary of State?
Thomas Jefferson
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Did Thomas Jefferson agree with Hamilton?
No- he was afraid that the national bank would create a financial monopoly that would undermine state banks.
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Thomas Jefferson believed the bank was....
...unconstitutional.
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The National Bank clashed with Jefferson's idea that the United States was an...
...agrarian (agricultural) society, not one based on banking, business, or the pursuit of profit.
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What state did James Madison represent in the House of representatives?
Virginia
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Who did James Madison agree with: Jefferson or Hamilton?
Jefferson
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What did Madison object to and why?
The bank's 20 year charter- he thought it was too long of a period for an untried entity in a country so young.
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Others argued that the bank would be a threat to the state's....
...rights and would make the states too subservient to the new federal government.
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Where did Hamilton's bill clear?
The House and the Senate
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Where did most of the support for the national bank come from?
New England and Mid-Atlantic states
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Did George Washington support Hamilton's bill?
He was undecided as to whether he should sign the bill or veto it.
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Who did Washington seek advice from?
Edmund Randolph and Thomas Jefferson
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Who was the Attorney General?
Edmund Randolph
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What did Randolph and Jefferson tell Washington to do about the bill?
Veto it
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What did Washington do about the bill?
He sent Randolph's and Jefferson's comments to Hamilton, and gave him a week to respond.
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What did Hamilton do in response to Washington's letter, and what did Washington do in response to that?
Hamilton sent him a letter refuting the points of both Jefferson and Randolph, and, as a result, Washington signed the bill.
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How is The Bank of the United States commonly referred?
The First Bank
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Define initial public offering (IPO).
When a company issues common stock or shares to the public for the first time.
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The bank's share of sales was also the largest _________ in the country to date.
IPO (initial public offering)
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Explain what a stock is.
When a shareholder buys a portion of a company they think will gain in value.
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Define subscriptions, or "scrips"
A downpayment on the purchase of new shares of stock in a company or bank. An initial payment of the full amount required to buy a stock, with the remainder being paid in installments over time.
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Are scrips tradable?
Yes! They can be purchased by others over time.
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What the demand for bank scrips like?
High- those who could not buy one initially began to buy them off from others, borrowing money to do so.
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How did buying scrips for the bank effect the country?
The constant borrowing and buying.
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Define congressmen
A member of congress (generally wealthy)
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How many members were deemed sufficient for conducting bank business, and why?
Seven- the distance to get to Philadelphia was very great for some.
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Who is Thomas Willing, and where was he from?
The president of the Bank of North America from Philadelphia
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Who was the first president of the National Bank of America?
Thomas Willing
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Define fiscal agent
Financial institutions on behalf of the states
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What the max interest rates the First Bank could accept on loans?
6 percent
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Where was the bank initially housed?
Carpenter's Hall in Philadelphia
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Who oversaw the bank?
a board of 25 directors, mostly from Philadelphia, New York, and Boston, only seven directors were needed for conducting business
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Define financial bubble.
A market condition created by excessive buying of assetss and resulting run-up in prices.
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Define sinking fund.
A cash fund established by a corporation or government to purchase debt it has issued in order to retire the outstanding debt more quickly. (Money set aside to pay off a debt, a fail-safe)
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Define credit crunch.
A situation in which banks become unwilling or unable to supply additional credit (borrowed money).
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What was the result of Hamilton's relieve of the credit crunch?
People became too optimistic, and the prices ended up being pushed to a new high.
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Who is William Deur?
Hamilton's old friend and former assistant at the treasury Department
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Who is Alexander Macomb?
A wealthy land speculator
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What was the plans of Macomb and Deur?
To corner the market on the U.S government securities, and to then sell the assets to other investors at a significant profit.
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Define banknotes.
A negotiable instrument; a promissory note that is used as money.
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What is a promissory note?
A promise to pay used as currency.
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Deur was doing what to pay for his investments?
Borrowing heavily
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Who ended up in prison due to debt?
William Deur
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Define financial contagion
When problems at one financial institution spill over to others and cause problems at other financial institutions or businesses.
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What was the Panic of 1792?
When the investors started to sell off all of their securities and default on their loans- everyone giving up, essentially, and scrambling to get rid of it.
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Define central bank.
A government institution responsible for issuing currency and monetary police, which involves the overall growth of money and credit and the level of short term interest rates. The Federal Reserve is now the central bank of the United States.
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Define custom duties.
A form of tax levied on goods traded internationally.
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What is the federalist party?
They generally advocated a strong central government.
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What is inflation?
A rise in the general level of prices over a sustained period of time.
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What is the republican party?
They opposed strong central government, and generally wanted to keep the U.S a nation of farmers.
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Who was the vice president for Washington?
John Adams
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Who is Aaron Burr?
Jefferson's Vice President
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Who is George Clinton?
An elected governor and replaced Aaron Burr as Thomas Jefferson's run for vice president.
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Who is Albert Gallatin?
He served in Congress and disagreed with Hamilton.
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Flashcard (48)