Question

Secretary of the Treasury Alexander Hamilton proposed his first Report on Public Credit in 1790. He suggested the federal government redeem at face value the millions of dollars in securities issued by the Confederation. Hamilton's plan called for the government to pay off the noteholders with newly issued government securities covering both principal and accumulated unpaid interest. This would then create a permanent national debt.

Why did Alexander Hamilton want to create a permanent national debt?
A.
to create a national bank
B.
to help out struggling state governments
C.
to assist the French and British
D.
to enhance the government's credit

Answer 1

D. to enhance the government's credit.

Hamilton wanted the new federal government to be seen as reliable by domestic and foreign lenders. Redeeming debts at full value and creating a permanent debt would build trust, encourage investment, bind wealthy creditors to the national government, and make it easier to borrow in the future (and to support institutions like a national bank).