IMF Working Papers

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

ByVitor Gaspar

October 15, 2014

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Format: Chicago

Vitor Gaspar. "The Making of a Continental Financial System: Lessons for Europe from Early American History", IMF Working Papers 2014, 183 (2014), accessed 12/14/2025, https://doi.org/10.5089/9781498344692.001

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Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

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.

Subject: Banking, Credit, Financial crises, Financial markets, Financial sector development, Lender of last resort, Money, Public debt

Keywords: budget constraint, constrained government, Credit, credit standing, Crisis management, debt service, economic activity, Europe, financial markets, Financial sector development, financial system, fiscal policy, Global, government bankruptcy, government budget constraint, government intervention, government's budget constraint, Lender of last resort, optimizing government, power to tax, present discounted value, public finance, sovereign debt, State administration, State debt crisis, States, WP

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