The Making of a Continental Financial System: Lessons for Europe from Early American History

Vitor Gaspar

No 2014/183, IMF Working Papers from International Monetary Fund

Abstract: Alexander Hamilton was the first U.S. Treasury Secretary from 1789 to 1795. When he started, the Federal Government was in default. During his tenure, U.S. Treasuries became the ultimate safe asset. He successfully managed expectations, achieved debt service reduction, and stabilized financial panics. He delivered sound public finances and financial stability. In the end, the U.S. possessed a modern financial system able to finance innovation and growth. At a time when Europe is working its way out of the sovereign debt crisis and implementing Banking Union and Financial Union, it is worthwhile to search for lessons from early U.S. history.

Keywords: WP; public finance; financial system; economic activity; fiscal policy; debt service; Crisis management; sovereign debt; financial markets; States; budget constraint; State administration; government intervention; present discounted value; government bankruptcy; optimizing government; credit standing; government budget constraint; State debt crisis; government's budget constraint; power to tax; constrained government; Credit; Lender of last resort; Financial sector development; Europe; Global (search for similar items in EconPapers)
Pages: 35
Date: 2014-10-15
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