Jim Grant argues in the latest Barron’s that the nation’s first Treasury secretary would object to the current state of federal government debt.
Nobody cares about the deteriorating federal finances, but who doesn’t adore Hamilton? Logically, you can hardly ignore the deficit, while paying as much as $1,691 for a rush ticket to see the hit musical, but people make the leap without thinking twice.
More than two centuries before his name went up in lights on Broadway, Alexander Hamilton famously wrote that “the proper funding of the present debt, will render it a national blessing.” But he less famously added that “the creation of debt should always be accompanied with the means of extinguishment [of that debt].”
Bond buyers long ago trained themselves to stop reading after the word “blessing.” In the past 20 years, the gross federal debt has leapt to $22 trillion from $5 trillion. …
… It can’t be said that Hamilton creator Lin-Manuel Miranda’s favorite Secretary of the Treasury anticipated these remarkable developments. Writing in the wake of the fiscal and monetary breakdown after the American Revolution, Alexander Hamilton was determined to put America’s wayward fiscal and monetary ways behind it.
For example, in the first of two works on the “Public Credit” that he produced in 1790, the great man writes: “For when the credit of a country is in any degree questionable, it never fails to give an extravagant premium, in one shape or another, upon all the loans it has occasion to make.” True in the time of orthodox finance, but wide of the mark today. …
… Hamilton was as strait-laced about commercial banking as he was about the public debt. A solvent institution, to his mind, was one that was able to exchange its notes in lawful money on demand—that money, in Hamilton’s day and for many a day thereafter, being gold and silver.
