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Alexander Hamilton's Market Based Debt Reduction Plan

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  • Peter M. Garber

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

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 3597.

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Date of creation: Jan 1991
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Publication status: published as Garber, Peter M., 1991. "Alexander Hamilton's market-based debt reduction plan," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 35(1), pages 79-104, January.
Handle: RePEc:nbr:nberwo:3597

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  1. 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.
  2. Jeremy Bulow & Kenneth Rogoff, 1989. "Sovereign Debt Repurchases: No Cure for Overhang," NBER Working Papers 2850, National Bureau of Economic Research, Inc.
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Cited by:
  1. Farley Grubb, 2008. "The Continental Dollar: What Happened to It after 1779?," Working Papers 08-09, University of Delaware, Department of Economics.
  2. George J. Hall & Thomas J. Sargent, 2013. "Fiscal Discriminations in Three Wars," NBER Working Papers 19008, National Bureau of Economic Research, Inc.
  3. Herschel I. Grossman & Taejoon Han, 1991. "A Theory of War Finance," NBER Working Papers 3799, National Bureau of Economic Research, Inc.
  4. 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.
  5. Grubb, Farley, 2008. "The Continental Dollar: How Much Was Really Issued?," The Journal of Economic History, Cambridge University Press, vol. 68(01), pages 283-291, March.
  6. Cole, Harold L & Dow, James & English, William B, 1995. "Default, Settlement, and Signalling: Lending Resumption in a Reputational Model of Sovereign Debt," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 36(2), pages 365-85, May.

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