Ive got a question. This . Me we live like and it wasnt always that way. For instance, at a stage of history with the socalled. Pure whites of Northern Europe were little better than savages, Eastern Africa had flourishing cultures, and the great civilization of northern china had begun to develop. All people contributed to civilization, reaching high levels at different times, each learning from the experience of the other. But there were certain basic ideas that were common to all branches of the human race, a belief in a supreme being, the home and the family. , how civilized a person is depends on the surroundings in which he grows up. The differences in the ways people behave are not inherited from their ancestors. They come from something called cultural experience or environment. You can watch this and other American History programs on our website where all of our video is archived. That is cspan. Org history. Next on American History tv, political economy professor and author Robert Wright discusses Alexander Hamiltons views on debts and imagines how he would have addressed the current debt which is now over 19 trillion. This event is a little over one hour. The Alexander HamiltonAwareness Society and the museum of American Finance cohosted this event. Welcome, everyone. Im david cowan president of the , museum of American Finance. Our partner is the Alexander HamiltonAwareness Society and that is an organization that you turn to for all things hamiltonian. We welcome their leadership. As well as friends of the museum. Seth has brought some amazing documents you should check out afterwards. And of course the cspan , audience. 20 years ago, our board chair wrote me a note that started with the words, a stroke of luck. What he was referring to was he had been introduced to a buffalo phd candidate interested in Alexander Hamilton and early American Financial history. This was before the show. Very few people were interested in hamilton. Very few of us were doing a deeper dive on the financial aspects of his vision. His phd thesis, 1300 pages. That is staggering. To put that in perspective, mine was a paltry 300 and his was 1000 more. It led to the first quip about bob from him which was he cant hold his ink. Fastforward 20 years, he has 20 more books he has authored or coauthored. And that led to a second quip about bob which is he writes books faster than we can read them. To add to that, five edited volumes, 65 scholarly articles, many of which have received awards. I am only at page 10 of his 47 page cv. Its an incredible document you should check out at his University Webpage where he says he teaches, but i often see pictures of him with fishing gear. In case you did not realize, we have been very good friends since we met two decades ago. He loves satire. He listed that on his webpage as his favorite type of humor. I know his family. And he has named one of his alexander, middle name together and it means Alexander Hamilton was right. We have collaborated on many projects together. When i am stumped on something that has to do with early American Financial history, i turn to bob. He has combed so many archives he often answers in a new york minute. He is never one to shy away from full opinion or works thousand or espousing the hamiltonian way. He likes to tell it like it is, especially to jeffersonians. I have been able to have a front row seat from the sidelines watching them. His latest project is historians against slavery, where he is a board member. His latest book is the poverty of slavery. When you look at his incredible outpouring of writing it reminds , you of someone else who could not hold his ink, Alexander Hamilton. Today, bob will adjust a fourletter word that hamilton created debt. At 20 trillion today, you may think its a different four letter word. Lets hear from bob about the man who created it and its origins. It is my pleasure to introduce professor Robert Wright. [applause] Robert Wright thank you so much for coming today. Thank you to the museum. I know it has absolutely nothing to do with the heat outside and the airconditioning in here. Can you hear me in back . Im getting the thumbs up. Mosto brag too much, but of the coauthored ones, i did do the bulk of the writing. But one area in my career that was kind of a downer was when i wrote a book with david. Financial founding fathers. Davids name was supposed to be first on the cover. They came out and my name was first. And that was a shame. I regret it. Although i had nothing to do with it. It was a little legal thing. A case you ever coauthore book just because your name is , second on the contract doesnt mean it will be second on the cover. According to Duke University salzmancientist richard and his new book people hold one , of three views on Government Debt. If they hold any at all. Holders of the optimistic view believe debt is an unadulterated good, the closest thing to a prelaunch possible in a world of scarcity. To fund their activities, optimists believe governments need only sell bonds, preferably in their own currency, or if debt issuance is too pricey or too dicey, governments need only print money. Inflation will occur, but especially unexpected inflation is a good thing, because it redistributes wealth from creditors who are just evil rich people to debtors, the poor salt of the earth. Holders of the pessimistic view by contrast think any government especially longterm borrowing, is an abomination. Borrowing simply imposes the tax burden on generations not yet born. Every dollar the government borrows, moreover, takes a dollar away from entrepreneurs and businesses. In a process called crowding out. Governments that borrow in another currency will find the burden too great and will hard default, like russia did in the 1990s. Governments that are able to borrow their own currency will soon print money to cover payments and stop default by causing unexpected inflation. That will hurt creditors in other words, the salt of the earth, savers, and help debtors, a species of profligate swine. Holders of the third view, he calls realists. For them context is everything. ,borrowing is simply a tool that can be used responsibly to improve the nations Economic Situation or irresponsibly to destroy it. In some situations, Government Debt is good policy. But in others, it is unwarranted. Neither optimists nor pessimists are always wrong. It depends on the situation. Moreover, savers and debtors simply represent economic decisions that can and do change over a lifecycle or business cycle. Neither group is inherently morally good or bad. Alexander hamiltons view of the National Debt can be summed up in a single quotation from his letter to a philadelphia april 1780 merchant and financier of the revolution. The line is often given as, a National Debt will be to us a national blessing. That rendition though was designed by hamiltons enemies to paint him as a debt optimist in a country that was solidly pessimistic about sovereign debt. The part left out of the quotation, the part, showed that hamilton was a debt realist. It consisted of just five words. If it is not excessive. So, hamilton believed the National Debt would be a blessing if it was kept within reasonable bounds. A concept to which we will return in due time. But first, it is important to understand the context of the debt as hamilton understood it. He was not advocating the government should always borrow money to stimulate the economy or to transfer wealth to the poor. Rather hamilton was arguing for , the eventual repayment of debt already incurred by the state same government to win the american revolution. Some of the burden would fall on the unborn, as pessimists complained, but the unborn would receive something of value in return. Political liberty. The failure to repay the debt to foreigners would ruin the nations sacred honor and prevent the United States from borrowing abroad to finance future wars or territorial expansions. Servicing the foreign debt would be costly in the short run, but in the Bigger Picture it would allow america to continue to borrow abroad when it needed to. Pessimists were willing to repudiate the domestic debt or the sums owed by u. S. Governments to u. S. Citizens. Such a move would simply be a onetime capital levy that would keep taxes down for a time. For everyone in the future, the debt pessimists argued most , holders of the Government Debt instruments were speculators who had purchased them for pennies on the dollar. They were rich, in other words, and could well suffer the loss. In fact the low price they were , willing to pay proved they expected a default. Hamilton countered that the low prices reflected only the time value or opportunity cost of money which was quite high in the 1780s, and the possibility, not the certainty, of repudiation. Again, context is critical as most of the ious were in default with the issuing governments paying neither interest nor principle as promised, or resorting to paying interest on ious with more ious. Late in the 20th century, a financial historian showed hamilton was right and early speculators in revolutionary war debt did not earn windfall returns, especially when the risk they undertook were considered. In any event, hamilton also argued that repudiation would be immoral and make it difficult if not impossible for the federal government to borrow from americans and maybe even foreigners when necessary in the future. That would mean the next war would have to be financed by and or the sale of state assets at room this ruinous assets. To ensure the government would not try to repudiate its debt by changing the value of money, hamilton passed an act that provided you coinage. It defined dollars in terms of range of silver and gold. Hat anchored the real value of all debt denominated in dollars and increased the numbers of americans to give up reckoning value in the old colonial units of account like york shillings, in favor of the decimal eyes to dollar. Alized hamilton then went a step further and argued that the federal government ought to assume or take responsibility for the war related debt of the several states. Boy, did that ever make the debt pessimists howl. They feared that hamilton was trying to create a huge permanent National Debt that would be used to cow the population into submission to federal authority. Hamilton argued from principles noting the state should not have been obliged to incur a wartime debt in the first place, only the want of an effective federal government had necessitated the practice. Moreover, only the new federal government received the right to tax trade so that it could generate the revenue to repay the debt much more cheaply and easily than the state governments could. The debt pessimists led by James Madison and Thomas Jefferson also pushed for what was called discrimination. They proposed that the government pay the original holders of government ious which were mostly soldiers and sailors in combination with subsequent holders of the debt, who they depicted as wealthy speculators who defrauded the original holders. Hamilton put the kibosh on this as well. Hamilton noted the administrative difficulty of tracking the chain of ownership for each of hundreds of thousands of ious. Moreover, the original holders had not been defrauded in most cases. They simply valued the Cash Payments they received over ious until the bankrupt government could issue repay them. They knew when they sold that they were relinquishing all rights to the principal and were fine with it. To give them some of the cut would be a windfall for them but ruin the nations reputation home and abroad. With the aid of some bargaining, hamilton managed to implement most of his plan for the revolutionary war debt, including assumption of state debt and nondiscrimination against holders. Here is where most history books stop, though it is far from the whole story. Details of hamiltons Funding Program were brilliant. And what ultimately established American Public credit was the ability to borrow again in the future from sources foreign and domestic, to do nice things, like double the size of the country, fight and win a second war for independence, defeat mexicans angry over the annexation of texas, and win a long, bloody war between the states that ended slavery. Kind of sort of ended slavery, but thats another story. With the possible exception of texas, all of those sound like blessings to me. Just kidding. Just kidding. Dont mess with texas. As previously noted, markets for government ious existed throughout the 1780s, but most were rather thin and inefficient, meaning costly and timeconsuming. Literally scores of different ensconcedous were and not even brokers knew the details of each, not even brokers. Under hamiltons plan, holders of the ious traded them in for three types of government bonds. Registered meant the government tracked each owner of the bond by name and location, a fact that will help me make another point later. Becauseere socalled the government paid on them 3 interest annually. Threes were socalled because the government paid 3 interest on them annually. Or 0. 7 5 quarterly, to be precise. Redeemable at the pleasure of the government, which meant after the other bonds were paid off, because who in their right mind is going to pay off a 3 debt when they have a 6 debt that is still outstanding . The government paid 6 annually, or 1. 5 quarterly on sixes and retained the option to redeem up to 2 of the principal annually. This is a brilliant feature that allow the federal government to slowly repay the principal due on the bond when it had adequate resources to do so. It was an option, not an obligation. Were socalled because the government deferred paying interest on them until 1800, when they converted into sixes. They were zero coupon bonds but not toible on maturity, cash, but to 6 bonds. The marketplace slowly rose to sixes as maturity came closer. When a holder of revolutionary war debt redeemed ious, most of which promised 6 interest, they voluntarily received a combination of sixes, deferreds, and threes that yielded about 4 total. A few of the holders thought that was a bad deal. They held off. But most preferred the more or less certain 4 over the possibility of one day receiving 6 . Hamiltons bonds were fully funded and backed by taxes. While the wartime ious were not. In addition, a liquid market in for hamiltons bonds formed immediately. Holders could sell their bonds to other investors at fair market prices quickly and at minimal brokerage expense. Holders of revolutionary war ious might not be able to find a buyer at all. Or they mightve been offered a lowball price. A holder of a three, by a holder of a three, by contrast, could see the going rate published in the local newspaper. And contract with a broker to sell it in a day or two for a. 5 commission or less. Or a holder could sell it immediately to a dealer for a dollar or less than the price listed in the paper. Debt pessimists complained that hamiltons debt would be perpetual because threes were payable at pleasure and sixes had no definitive repayment schedule. They were simply wrong about that as the National Debt was entirely repaid during Andrew Jacksons presidency. There was no way hamilton or anyone else could know that in the 1790s, but clearly what hamilton wanted was repayment flexibility. He wanted the government to repay its obligation when it was best able to do so, not according to a rigid schedule that might coincide with a war, a natural disaster, or an opportunity to buy additional territory. The opportunity cost of the National Debt, hamilton argued, was low because the bond did not lay idle. They did not stay in vaults and chests like coins did. Federal bonds were often used to collateralize bank loans and make large payments. Millions of dollars changed hands each year at a time when 1 million was 1 million. In thousands of separate transactions, hamiltons bonds were near money instruments that did not crowd out private investment and served the role were near money instruments that a unique role in the portfolio of other banks. As a secondary reserve or a reserve, it paid interest that could be turned into cash when needed. After federal bonds had been extinguished in the 1830s, state bonds filled the same roles, but they never did quite as well as hamiltons threes, sixes, and deferreds had. The next line in his letter on the National Debt explained the debt will be powerful cement of our union. By that, hamilton meant one of the debts blessings would be political rather than economic. By making the federal government the creditor of people throughout the nation, the federal debt would create Political Sentiment in favor of the union as bondholders protected their vested interest in the health of the national government. Debt pessimists, including many historians with antihamiltonian views, assumed and claimed that hamiltons bonds were owned by a small number of rich urban elite. I showed otherwise in one nation under debt by using bond registers to show tens of thousands of americans throughout the union owned federal bonds at some point. I devoted an entire chapter to bondholders in virginia, the home state of great debt pessimists like Thomas Jefferson. Many federal bondholders in virginia owned plantations and slaves. Others were professional doctors and lawyers, others were artisans and retailers. And some were women. Abigail adams wasnt the only female trading government securities. Some bondholders lived in nova. What would become the nations capital. Others lived south side. Others in the blue ridge. Others in the valley. And others along the james in richmond and beyond. We will never know with certainty what influence those bondholders had on Public Opinion in virginia. But the fact that federal bondholders were spread across the state geographically and occupationally suggest that they could well have cemented the union. One federal bondholder was a bona fide revolutionary war hero who had raised his own legion in defiance of the kings tyranny. He owned a huge musket called dabney. He was considered what we would today call a bad ass. I doubt not dabney would have rode out of richmond charged and primed, if the government threatened secession in his lifetime. In addition to establishing public credit, keeping the union intact, and providing liquid assets hamiltons funding system , cut taxes to reasonable levels. State taxes all but disappeared for over a decade. Federal taxes came mostly in the form of tariffs and tonnage duties, both of which were relatively cheaply collected. Of course, all taxes create some distortions. Tax on whiskey was needed to offset the effects of the tariffs on imported liquors, which were about 15 or so. They offered some protection to liquor producers. Hamilton had to offset it. So that he wasnt encouraging the production of whiskey in the u. S. If this sounds odd to you that Alexander Hamilton counteracted a protective tariff, that is probably because you have probably the wrong idea about hamiltons view on protection. Illustrated biography of hamilton will set you straight on that notion. Hamilton needed those revenues in order to service the National Debt. He did not want to raise for solid economic reasons the tariff structure. I would like to spend the rest of my time with you reviewing some of the salutary secondary effects of hamiltons debt. Foremost among those was the bank of the United States, chartered in 1791. The bank, the first bank, the bus as it was sometimes called, was a commercial bank owned in part by private investors and in part by the federal government. At least, until it sold off its shares at an immense profit. The institution established branches in eight seaport cities and primarily made shortterm loans to businesses and merchants and manufacturers. It was also the federal government cost bank. It was responsible for paying interest on the National Debt when due, four times a year, transferred money from where the government earned it, which was mostly in major port cities, to where the government spent it, which was mostly along the frontier and in military forts. And wherever bondholders lived, which as i explained couple of minutes ago, was throughout the country. Perhaps most importantly, the bus stood ready to lend the government money if debts outstretched its current revenue. The bank of the United States also acted as a lender of last resort during the financial panics that hit the Financial System in 1791 and in 1792. Under hamiltons guidance, it implemented what would later be called badgetts rule. He described the rule in his 1873 book. Ive taken to calling it hamiltons nee badgetts rule. Term thatnealogical means originally called. Hamilton did not spell the rule out in a book, but he implemented it perfectly, especially during the 1792 panic when he persuaded bankers to lend freely at a penalty rate to all who could post sufficient the market sin steady and the Young American economy continued to grow robustly after hamilton announced a spending program. The bubbles the first included the bubbles that burst included government wants and stocks in the bank and the other commercial banks, including the bank of new york, which Hamilton Health found after the british pulled out of manhattan after the american revolution. Before his untimely demise, hamilton also founded two other corporations in new york. All three had problems soaining charters at first, hamilton helped them establish workarounds that have the effect of interest into the corporate sector with state governments. Thanks to hamiltons loopholes, which established perpetual succession and limited liability by contract rather than statute, state governments realized that they had to ease their charter requirements or face the formation of numerous unchartered and unregulated joint stock companies. Due to the ease of entry forced by hamiltons genius, 23,000 forprofit corporations received special act of incorporation in the United States before the civil war and 10,000 were chartered under act of incorporation. There were far more corporations per capita than any other nation on earth, including britain. Earliest corporations were engaged in transportation, including bridges, canals, roads, railroads did finance is pretty common. Some of you know leslie hannah. Building and loan societies, manufacturing, including everything from cotton and textiles, utilities including water and gas light and Services Like cemeteries in hotels. Shares in all those endeavors traded in the same market to exchange hamiltons bonds. Eventually many businesses in , state governments began selling bonds to finance their operations as well. Hamiltons spending plan amounted to nothing short of a financial revolution. In just five years, america went from being backwards in bankrupt without public credit or a unit of accounts to a nation with taxes sufficient to play the interest of a large debt and a small but growing commercial banking and insurance system. Hamiltons financial revolution in turn made possible the agricultural revolution described by rothenberg and others whereby pharmacy efficiency increased as crop yields jumped and local transportation revolutions made it less expensive to bring goods to market. The agricultural revolution freed laborers from farm work, making them to work on regional transportation connections like railroads and steamship lines and improve transportation on a much lower cost. This rendered feasible the growth of cities and factories. Thanks to hamilton, the north and parts of the south industrialized before the civil war. If you did not know that already, thats because other businesses stories did not have good archival skills. They assumed the antebellum economy away. White male citizens enjoy the government the productive life, liberty, and businesses from predators. There was constant affirmation of the governments willingness and ability to fill its promises. The new government created by the constitution was key while places like western new york six experienced agricultural and industrial revolutions. As they thrived economically, adjacent areas in canada with identical cultures and climate remained backward. It was subject to the whims of the distant monarch and his or her placement in the new world. They were bent on rent seeking. Unrelated to marco rubio, by the way. Only after canadians declared their independence from the british in the 1830s, 150 years ago. Only after they got rid of the crown in canada start to catch up to america economically. By the time i begin making beer runs to ontario, western new york and canada were virtually indistinguishable, except for the drinking age and the metric system. Virtual economic parity could have arrived several decades earlier. The toronto half, that stretch that goes from eastern part of lake erie down both sides of the river to Niagara Falls on the shore of ontario, the canadian half looks much better than western new york. Thats where i went to school. The reason for the present disparity may be the u. S. National that has become excessive. It is now larger than the nations annual gdp. The nominal national that stayed about the same during hamiltons tenure as treasury secretary. Growth meant that debt as a percentage of gdp dropped dramatically. Thanks to the constitutions rules about borrowing and taxation, thanks dont borrow without having a path to repay the debt, the national that increased as a percent of gdp only during war and after territorial acquisitions like the louisiana purchase. After each of those borrowing binges, Economic Growth and budget surpluses reversed the trend. As recently as the end of the world war, the u. S. Debt to gdp ratio improved so much so that at the end of bill clintons second term, there was concern that government bonds would the complete lyrics and for the completely extinct for the second time in u. S. History. Traders those bond going to do . What is the fed going to do . When you that was not to be. Debt optimists swept into power and there were punitive wars on terror and drugs. They borrowed and spent in order to win votes, taxing and spending is to risky because people immediately feel that. Taxing and spending, most people pay little attention to borrowing. The debt optimists are there now, telling them they dont need to worry, you dont need to worry about the National Debt. Everything is going to be just fine. Which is true if you are one of those 12 people who own more than they owe. Everything will be fine. I am talking about the part of the national that, the entitlement programs added many trillions to the burden. Interest on the national that in 2016 amounted to 241 billion or 1. 3 of gdp. Spending on Social Security and medicare was 2 trillion. We spent even more in 2017. The spending is formulaic and has largely capped. Interest on the national that has skyrocketed. It must be refinanced every five years or so. Essentially it is a floating rate debt. Interest rates are low now. They are heading higher. As i mentioned, they reached into the upper teens in the late 1970s and could go there again if Inflation Expectations rise. By 2023, we could be spending 20 on debt service alone. That would put tremendous pressure on other expenditures. That would put tremendous upward pressure on tax rates and fourth places. 20 is a nightmare scenario. Its on to burners crowded out by massive funding from the federal government. But sometimes, nightmares come true. They did multiple times when i was growing up in the 1970s. Please forgive my hamiltonian realism. Is it we can do to get out of this mess . Yes, thanks for asking. [laughter] hamilton advised the creation of an Efficient Government that did one thing well for as little money as possible. That one thing was to protect americans lives, liberty, and property from tyrants foreign and domestic. I think hamilton would the military budget without creating a debility to ward off foreign entities. Terrorists might be stopped at the borders and not the mountains of asia. The government subsidizes one group at the expense of another. Not only do we scale back, it should be slowly so people can adjust and the markets can grow again. Phasing out the department of education would not end education in the United States. It would force parents to run their childrens education, which most of them could do if their taxes werent so high. Government would raise out those programs and render the poor better off. A study by bureau of Economic Research shows that Social Security redistributes wealth from poor black men and hispanics to white middleclass widows. They live a long time. Phasing out some security would not relegate the nations elderly to eating pet food. It would give people incentives to save or retirement as they did before so scary was before Social Security was implemented in the 1930s. It was a temporary problem. There is a euphemism for the great depression. Amber riley temporary macroeconomic problem. Hamilton would stop war on drugs, which is really just a war on brown people, against whom he had no prejudice. He would improve the services to immigrants and africanamericans. That mostly means doing expensive things to people and allow them to live like other americans, without their of the police, ice, atf, so on so forth. If you dont believe me, you shouldve come to my talk on monday night when i explained that hamilton thought lacks equal to whites in every way. Look into the history of Hamilton College in new york. The most important thing hamilton would do today is restore americas fiscal constitution. A set of rules established by realists. Americas constitution healthy held that the federal government should borrow only when absolutely necessary during declared wars or to finance a territorial acquisition, and only when the taxes are sufficient to offset the borrowing. That way the ability of the , government to repay the debt was demonstrated and the future cost of borrowing are laid bare. Bush and obama replaced this with more nonsense about the debt. The first step is to run the debt optimists out of power and replace them with that realists so we can restore our physical constitution. Then we need to let the economy grow into the debt, shrinking the burden in the process. That does not mean austerity or running surpluses, it means keeping government deficits small. If america can state out of war for a decade or so, the National Debt will become acceptable once again and buffalo will prosper once more. If america treated citizens equally and phase out part of the government not needed in the first place, the National Belt the National Debt will become a blessing in places like buffalo. Thank you. [applause] questions . Remember to wait for the microphone. Thank you. Thank you for your talk. I have one question regarding the idea of hamiltonian versus the Citizens United ruling and the plutocracy going on right now. How do you think he wouldve approached that situation . Bob wright i want to make sure i am answering the right question. What and so far as the first duty of society. Bob wright the ruling from five years ago . It said in short that corporations are people. Hamilton made very clear corporations are corporations. They are not people. If they were people we would not need to form corporations. The corporation is a entity has certain qualities, the most important of which is perpetual succession. Is does that mean a corporation lives forever . He helped to establish operations that did not live forever. The jeffersonians are wrong about that as they were about so many other things. It simply means the Ownership Structure can change without having to dissolve the Business Firm and we started. Its the commonlaw rule for general partnership a corporation can have stockholders change every day. It doesnt matter, the corporation continues economically. They are distinct. They dont need to have liability. We dont need to have situations where a voting chair, a case where there is different class. Hamilton in the charter for the bank of the United States felt a opposite way and said you only get one vote per share. You get less than one vote per share, based on a formula that was in the charter. This was to help balance the rights of minority shareholders. In no way is a corporation a person. I have written a book about this called Corporation Nation that nobody read it. You can probably pick up a two dollar copy of it. I will forward to finding that two dollar book. You mentioned your talk point about hamiltons colleague James Madison. You should he was a debt pessimist. That had me thinking as im doing my own reading on the constitution. Is it possible for a debt pessimist part of the federalist pitch was have a structured society and rescue the states and create a Strong National government. That would imply debt realism. Bob wright could he a been a debt pessimist and also a federalist . Its been a while since i studied this. I do seem to recall that he was in a federalist all that long. He was not pushed on the issue of repayments of the debt. What is in the constitution, the federal government has the right to borrow. A debt pessimist and let that slide. Maybe not a superduper hardcore debt pessimist, but you can certainly let that go and be pushed on it. Thank you for your edifying talk. You indicated that some valid reasons for federal deficits, given hamiltons views like declared wars or purchases of territory. One thing that occurs to me is in 2008 when the Financial System came crashing down and United States, that is partly due to significant deficits at the time. We had to bail out a lot of institutions. How would hamilton deal with that . Thats an excellent question. Handledd hamilton have 2008 . Would it be right to borrow money to recapitalize jpmorgan or wells fargo or some of these other big banks . I wrote about this that no one read. Its even smaller than the other one. The basic argument is hamilton would have applied his rule and would have let to all firms that could prove solvency. At a penalty rate, not a lower rate. Today, the fed drops Interest Rates when things go down. If you bring me security enough in the amount of cash you want to are a, the lender of last resort will lend it to you. Its not market rate, its above that so we know youre not just borrowing willynilly. You are not borrowing just to borrow. I think he wouldve used his rule. The fed should have used his rule. We would have been much better off. We would not be in a longterm economic funk afterwards. We havent been in a recession since then, but the road economy has not been growing robustly. We created a massive hazard problem. You can make any law you want saying there will be no more will out. There will be another bailout. But the people on wall street believe there will be another bailout. Why not take a little more risk . Not to mention the risk that is inherent in the feds Balance Sheet right now. Janet yellen was just on tv this afternoon. She said that is going to shrink its Balance Sheet and they and talking about that for five years. How theyre going to do it is still unclear. There is quite a bit of risk there. Its not at all clear that what we did in 2008 was optimal and it doesnt seem to be hamiltonian. I have a question about the bank of the United States. What percent of it was private and what percent was public . It was gold backed . You could not print money like todays central banks. Bob wright did the bank of the United States lead to the fed . Kind of sort of. There is a short gap between the first rank and the second bank here in we discovered it would be nice to have a central bank and there are many decades the past after the second bank shuts down in 1836. By the time of the Federal Reserve fired up before world war i, the founders of the fed knew about the first and second banks of the United States. It was a somewhat different thing that they came up with. Its hardly direct. The other question was about the backing . What percentage was owned by the government . It has declined over time because the shares were not restricted shares. The fed today, the member banks owed shares. But they are restricted. It will not see them on stock tickers. The shares of the u. S. For negotiable. They sold them in the market. That changed over time. Then there was another part of that. Anyone with a bank note was supposed to be able to take it to the bank of issue and receive the equivalent in gold or silver or in it tethered u. S. To the gold standard. The length of the tether could be influenced by the bank of the United States. And return them to the state a per gold and silver. The first bank was on a rampage returning these things promptly. There were multiple deposit creations. There was some flex in it. It was not the flex the federal government had during the revolution when it rented obscene amounts of currency and the confederacy did during the civil war and so forth. I wanted to thank you for your scholarship and push back a little bit. The question has to do with Social Security and Congress Passed the first tension in 1790 24 military veterans. Maybe this is a future book. If hamilton supported it, potentially that is support for hamilton being more open ended on an interpretation of debt and Social Security. Is maybek the question hamilton would have been cool with Social Security because he mightve supported veterans pensions. It seems to me like they are vastly different things. The veterans are for the most part is young people who didnt know the revolution was coming and did not know they were going to be disabled during it. So they had no chance of creating any sort of savings program. Unlike retirees, who know theyre going to retire at some point, and who are not disabled, and have the ability to earn income and invest and save. So, i think he would make that distinction right off the bat. But we have some more questions. But i appreciate the pushback. Just because im wearing a suit and no tie does not mean i know everything. Ok. Try not to plant debt realism, thank you so much for reminding us that considering debt is a percentage of gdp. We are very much a country at 100 of gdp. I realize this has to be subjective, and situational, but my observation of nations that have hit the wall and have gone down, whether it be greece, ireland, portugal, or spain, and i know there is no false precision to this, but i would like to hear your comments. Many people have said we have gone over the cliff, and we have not yet. I dont know if you want to make comments on where the end of the road would be for this country . This is debatable. So the question is how big can the u. S. National debt get . Yeah. Of course, nobody knows. And debt optimists will point to places like great britain, which hit 250 of its gdp. The british had something akin to our fiscal constitution. They held the line on deficits and the debt to gdp ratio came down considerably during that 100 years