Chapter 10 Section 2 Notes


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Chapter 10 Section 2 Notes

  1. 1. Chapter 10 Section 2 Notes Hamilton and National Finances
  2. 2. Chapter 10 Section 2 Terms <ul><li>National Debt </li></ul><ul><li>Bonds </li></ul><ul><li>Speculators </li></ul><ul><li>Protective Tariff </li></ul><ul><li>Strict Construction </li></ul><ul><li>Loose Construction </li></ul><ul><li>Bank of the United States </li></ul>
  3. 3. Settling the Debt <ul><li>Hamilton served as Washington’s Sec’y of the Treasury </li></ul><ul><li>Number One problem: Settling the national debt (the amount of money owed by the US to various creditors) </li></ul><ul><li>Some debt was in the form of bonds , which private citizens purchased from the government to help the Revolutionary War </li></ul>
  4. 4. Settling the Debt Continued <ul><li>The government promised to buy back the bonds at a higher price, but now couldn’t afford it. </li></ul><ul><li>People who bought the bonds were desperate to get the money back so they sold them to speculators (investors who buy things at a fraction of their value). </li></ul><ul><li>Hamilton was worried that citizens and foreign nations would think the country was not trustworthy if the debt didn’t get paid off. </li></ul><ul><li>Hamilton decided to start buying back the bonds (from speculators and those original owners who kept them) although Jefferson thought it was cheating the people who were forced to sell their bonds to speculators because they didn’t get a cent. </li></ul>
  5. 5. The States’ Debts <ul><li>The second part of Hamilton’s plan was called “debt assumption”. He thought that the federal government should take over and pay off the states’ debts. </li></ul><ul><li>Hamilton thought that it would make the states support the federal government </li></ul><ul><li>Some states like Mass. had high Revolutionary War debt and some states like Virginia had hardly any </li></ul><ul><li>The Southern states were angry that they had to help pay for the debts of other states </li></ul><ul><li>To appease the Southern states, Congress moved the National Capital from New York to Washington DC </li></ul>
  6. 6. Hamilton Versus Jefferson <ul><li>Hamilton believed in a strong central government, had little faith in the “common man” and looked to Britain as a model. He also supported manufacturing as the best direction for the nation to go. </li></ul><ul><li>He wanted to establish a protective tariff on imported goods to raise their prices, that way more people would buy good made within America than outside of it </li></ul>
  7. 7. Hamilton Versus Jefferson Continued <ul><li>Jefferson was suspicious of strong government and favored state governments. He also had a great deal of faith in the “masses” or “common” people </li></ul><ul><li>He thought that the model American was the “virtuous” independent small farmer and wanted America to stay agricultural </li></ul>
  8. 8. The Debate Over the Bank <ul><li>Hamilton wanted to create a national bank “BUS” – Bank of the United States, that would be a secure place for government funds and a reliable source for loans </li></ul><ul><li>He thought that states could make their own state banks to keep a check on the national one </li></ul>
  9. 9. The Debate Over the Bank Continued <ul><li>Jefferson and Madison thought this was a bad idea because it consolidated so much power to the national level </li></ul><ul><li>They both also thought that the Constitution did NOT give the federal government the power to create a bank </li></ul><ul><li>Hamilton argued that the Const. did allow it because of the clause in Article 1, Sec. 8 which stated that Congress has the right to make all laws which are “necessary and proper” for running the nation </li></ul>
  10. 10. Strict Versus Loose Construction <ul><li>Strict Construction means that the federal government could do ONLY what the Constitution SPECIFICALLY said it could do. (Jefferson and Madison believed this) </li></ul><ul><li>Loose Construction means that the federal government could do something reasonable that the Constitution didn’t specifically forbid. </li></ul>
  11. 11. The BUS is here <ul><li>In February of 1791, Washington approved the Bank of the United States on a 20 year charter </li></ul><ul><li>The bank helped to establish stability and helped to develop the US economy </li></ul>