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Alexander Hamilton's Market Based Debt Reduction Plan

  • Peter M. Garber

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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File URL: http://www.nber.org/papers/w3597.pdf
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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
Note: ME ITI IFM
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  1. Jeremy Bulow & Kenneth Rogoff, 1989. "Sovereign Debt Repurchases: No Cure for Overhang," NBER Working Papers 2850, National Bureau of Economic Research, Inc.
  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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