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Alexander Hamilton's market-based debt reduction plan

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  • Garber, Peter M.

Abstract

In 1790, Alexander Hamilton, the first Secretary of the Treasury of the United States, initiated a program to refund the U.S. debt. Debt that had sold at 75% discount two years earlier would be refunded at par into new funded debt of the new federal government. All foreign indebtedness would be repaid. I present evidence that Hamilton's actual refunding policy did not differ in nature from that envisioned under the recent Brady plan. I will show that the bond package for which the old debt exchanged had a market value well below par. Thus, a large part of the face value of the debt was effectively written off. I compare the Hamilton restructuring package to the recent Mexican restructuring package to find points of similarity to the Brady plan.

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Bibliographic Info

Article provided by Elsevier in its journal Carnegie-Rochester Conference Series on Public Policy.

Volume (Year): 35 (1991)
Issue (Month): 1 (January)
Pages: 79-104

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Handle: RePEc:eee:crcspp:v:35:y:1991:i::p:79-104

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References

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  1. Bulow, Jeremy & Rogoff, Kenneth, 1991. "Sovereign Debt Repurchases: No Cure for Overhang," The Quarterly Journal of Economics, MIT Press, vol. 106(4), pages 1219-35, November.
  2. Michael D. Bordo & Eugene N. White, 1991. "British and French Finance During the Napoleonic Wars," NBER Working Papers 3517, National Bureau of Economic Research, Inc.
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Cited by:
  1. George J. Hall & Thomas J. Sargent, 2013. "Fiscal Discriminations in Three Wars," Working Papers 56, Brandeis University, Department of Economics and International Businesss School.
  2. Harold L. Cole & James Dow & William B. English, 1994. "Default, settlement, and signalling: lending resumption in a reputational model of sovereign debt," Staff Report 180, Federal Reserve Bank of Minneapolis.
  3. Farley Grubb, 2008. "The Continental Dollar: What Happened to It after 1779?," Working Papers 08-09, University of Delaware, Department of Economics.
  4. Farley Grubb, 2007. "The Continental Dollar: How Much Was Really Issued ?," Working Papers 07-09, University of Delaware, Department of Economics.
  5. Marc D. Weidenmier, . "The Politics of Selective Default: The Foreign Debts of the Confederate States of America," Claremont Colleges Working Papers 2000-13, Claremont Colleges.
  6. Herschel I. Grossman & Taejoon Han, 1991. "A Theory of War Finance," NBER Working Papers 3799, National Bureau of Economic Research, Inc.

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