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the judiciary, and the Treasury. “The middle & Southern states will murmur” he wrote, “but may
not be able to obtain redress.”
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The Policy Strategies of Madison and Hamilton Diverge
On January 9, 1790, Treasury Secretary Hamilton issued his Report Relative to a
Provision for the Support of Public Credit. The nation’s economic picture had brightened in the
nine months since the opening of Congress. Between April and December, 1789, public
securities doubled in value, and the dollar strengthened to unprecedented levels against
European currencies. These developments fostered great optimism in American cities.
Meanwhile, in agricultural areas like Virginia, where commodity prices remained low, land
values had fallen, and the cost of imports had climbed, the relative gains of the nation’s urban
creditors and merchants did not go unnoticed.
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In this context, Hamilton’s plan for public credit seemed to reinforce these trends and
encourage the economic growth of the urban north relative to the agricultural south and west.
Hamilton stated frankly that he sought to rectify the problem of a nation that “possessed of little
monied capital” but desperately needed to strengthen investor confidence. By proposing to pay
the public debt to current owners at four percent, in hard money, Hamilton aimed to reduce the
government’s reliance on western lands to pay its debts, a goal that jeopardized the value of
these western lands. Payments would go to current holders of the debt, not those to whom the
notes originally had been distributed, such as soldiers and officers (most of whom had sold the
notes at a fraction of face value to investors). Hamilton, who anticipated political pressure to
discriminate between current and original holders of public securities and to channel some
payments to these original holders, argued that such discrimination would be a breach of faith
and would undermine the credibility of the nation’s commitment to the secure of transfer of
property. He also proposed that the national government would assume responsibility for paying
Convention