Wall Street

Nations Must Study Alexander Hamilton’s Principles of Political Economy

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Hamilton Versus Wall Street: The Core Principles of the American System of Economics
Nancy Bradeen Spannaus iUniverse, Bloomington, Indiana, 2019, 222 pp. $13.99 soft cover, $5.99 e-book.

Hamilton Versus Wall Street: The Core Principles Of the American System of Economics      By Nancy Bradeen Spannaus

A Review by Lawrence Freeman-March 28 2019

For those followers of our beloved Alexander Hamilton and for those new to his writings, this book is for you. Nancy Spannaus, in her just-released book Hamilton Versus Wall Street, makes a unique contribution to the existing volumes written on Hamilton’s political and economic thoughts.  In her relatively short easy-to-read book, she weaves together Hamilton’s revolutionary ideas on political economy that served as the pillars for the creation of the United States, their legacy in the next two centuries of America, and their influence internationally. Throughout her treatise, Spannaus also provides constructive historical analysis of the battle inside the United States to adopt Hamilton’s concepts. This book is a valuable complement to Hamilton’s economic reports and will aid those unfamiliar with his seminal texts. *

Spannaus polemically begins by countering the popular myth that Hamilton was an agent for the banks (Wall Street) against the interests of the “little man,” agrarian society and the states, as espoused by Thomas Jefferson and others.  She later devotes entire chapters to Hamilton’s opposition to the British central banking system and Adam Smith, exposing another slander which alleged Hamilton was a supporter of the British aristocracy.

Principles of Political Economy

            Unlike like other publications on Hamilton that gloss over or give insufficient attention to Hamilton’s ground-breaking concepts of banking, credit, and manufactures, Spannaus makes a great effort to elaborate Hamilton’s contributions to: “The Core Principles of the American System of Economics.”  **

All nations would benefit greatly, if their leaders and citizens studied Hamilton writings. American culture would not be at the low level it is today, if my fellow citizens had been taught Hamilton’s economic theories, which in fact were crucial to the creation of our nation from thirteen indebted, agriculturally-based colonies. Advanced sector countries that are dominated by financial systems dictated by Wall Street and the City of London, and underdeveloped nations that rely on resource extraction and farming, because they lack a manufacturing sector, could learn a great deal from Hamilton.

However, Hamilton’s thinking about economic growth was not limited to the mere production of goods. He understood for society to continually increase the productive powers of the economy, the development of the human mind was essential. Spannaus quotes Hamilton: “To cherish and stimulate the activity of the human mind, by multiplying objects of enterprise, is not among the least considerable of the expedients, by which the wealth of the nations may be promoted.” (p. 28).

Friederich List, a student of Hamilton’s philosophy in the nineteenth century, wrote that “capital of mind, capital of nature, and capital of productive matter” are all essential components to achieve economic progress. (p. 29)

Hamilton’s First National Bank (courtesy ushistory.org)

The Constitution and Public Debt-Credit

Hamilton knew that for a nation to be truly sovereign, it must possess the means to produce the physical wealth necessary to maintain the existence of its citizens and their posterity. It is no coincidence that the Founding Fathers embedded this concept in the profound Preamble to the US Constitution. As Spannaus emphasizes, for Hamilton, the importance of establishing federal credit through the creation of the National Bank, stabilizing the currency, developing the manufacturing capability of the young United Sates, and increasing the wealth of the nation through internal improvements, was coherent with the intent of the Preamble “to form a more perfect Union.”

Hamilton used the “general welfare” clause of the Preamble to justify his revolutionary idea to create a public-private National Bank to consolidate the separate states and establish a unified currency to promote national economic growth. Generations later, in the footsteps of Hamilton, Franklin Roosevelt, who studied Hamilton’s writings, would also rely on the “general welfare” clause to garner support for his New Deal and other programs he initiated to revive the U.S. economy wracked by the Great Depression.  

Public Credit, anathema today to virtually all Democratic and Republican leaders, was another key concept Hamilton fought for, knowing that private sector funds and privately-owned banks would never adequately fund a nation’s economic growth, especially for large-scale internal improvements, i.e. infrastructure.

To emphasize the unique role of public credit, Spannaus lists four exceptional periods in U.S. history when the efficacious application of government-issued credit led to a pronounced expansion of the American economy. These are administrations of Presidents George Washington, John Quincy Adams, Abraham Lincoln, and Franklin Roosevelt. (p. 55-56)

In chapter 7, the author concisely summarizes Hamilton’s outlook: “…it is the deliberate increasing of the productive powers of labor through technology, improvements in infrastructure, and the use of government power to create credit that will produce value in the economy.” (p.128) This is more than good advice that all public officials. government leaders, and informed citizens should follow to secure a joyful future for their nation.

In Africa and other underdeveloped regions of the world where nations have suffered from hundreds of years of exploitation of their natural resources, Alexander Hamilton’s wise words should be fully grasped: “The intrinsic wealth of a nation is be measured, not by the abundance of the precious metals contained in it, but by the quantity of the productions of its labor and industry.” (emphasis added p. 1)

*Hamilton wrote four major economic reports for Congress and President George Washington between January 1790 and December 1791: Report on Public Credit; Report on a National Bank; Report on Manufactures; and Opinion as to the Constitutionality of the National Bank.

**This is the subtitle of Hamilton Versus Wall Street.

Western Institutions Need to be Reformed

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Major western political and financial institutions are in serious trouble. The Group of Seven and Wall Street are part of the old geo-political order that should be replaced by institutions that represent the “common interest” of all nations and all people. China’s Belt and Road Initiative is providing a new framework for strategic relations among nations

The steady demise of the Group of Seven

OPINIONS
By William Jones
2018-06-07

Editor’s note: William Jones is the Washington Bureau Chief for the Executive Intelligence Review, and Non-resident Senior Fellow of Chongyang Institute for Financial Studies, Renmin University of China. The article reflects the author’s opinion, and not necessarily the views of CGTN.

The failure of the G7 to resolve the 2008 financial blowout has given the lie to the “acumen” of these seven countries in keeping the economy on an even keel. With the trillions of dollars that were spent to bail out those “too big to fail” investment bank, the “bubble” has simply gotten bigger – and more dangerous.

And for most of the world, the G7 has simply been considered something of an “old boys’ club”, kept intact for the sole purpose of maintaining their positions – and that of the “moneyed interests” in power.

The lame attempt at integrating Russia into the G7 “club”, at least into their political discussions, lasted only a short amount of time before it was rescinded.

But the G7 no longer has the same weight it once had. The growing weight of the Asia-Pacific region, and particularly, China, has significantly reduced the clout of the G7 nations in world markets, and in world affairs. And the sorry state of the European economy, with the Brexit and the crisis in Italy, has critically undermined the “European factor” in the G7.

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WaPo Warns of “Mother of All Credit Bubbles:” Who’s Listening?

by  — June 12, 2018
June 12, 2018—An extraordinary article by regular financial columnist Steven Pearlstein in the June 10 Washington Post warned that a surge in corporate debt has created “the mother of all credit bubbles,” and put the U.S. (and world) financial systems on the road to a new crash worse than that of 2007-8. The full-page spread featured charts showing that corporate debt, much of which is being used for stock buybacks, is increasingly risky, and that it is at record highs. Pearlstein adds that one in five companies have debt obligations exceeding their cash flow—i.e., they are zombies just waiting to die.

WaPo Warns of "Mother of All Credit Bubbles:" Who's Listening?

Washington Post on June 10, 2018

Much of what Pearlstein reports is not new to readers of more reliable financial reporters, such as Nomi Prins, Pam and Russ Martens, and others. This blog has reported on previous warnings by the U.S. Treasury’s Office of Financial Research, which Pearlstein mentions, and by former FDIC officials Thomas Hoenig and Sheila Bair. Pearlstein also does not stress, for example, the link between the new shaky mountain of debt, and the major banks, which are intimately connected to the so-called “non-bank lenders” involved in the current bubbles.

But Pearlstein’s summary of the current problem is sharp, and ironically, points implicitly at the solution. He writes: “Today’s economic boom is driven not by any great burst of innovation or growth in productivity. Rather, it is driven by another round of financial engineering that converts equity into debt… Rather than using record profits, and record amounts of borrowed money, to invest in new plants and equipment, develop new products, improve service, lower prices or raise the wages and skills of their employees, they are `returning’ that money to shareholders. Corporate America, in effect, has transformed itself into one giant leveraged buyout.”

How to reverse this process? We need the policies that do the opposite: that promote growth in productivity (credit for a revolutionized infrastructure and scientific frontiers), and convert debt into equity—specifically in the way that Alexander Hamilton transformed the debt of the fledgling United States into capital for the First National Bank. After taking away the rewards and incentives for speculative borrowing (by re-imposing Glass-Steagall), we need a new National Bank for Infrastructure into which certain categories of solid debt (such as Treasury and municipal bonds) can be traded in for capital stock, which will serve as the foundation for an investment boom in the real economy.

Is anyone in Congress or the Administration listening? When the mainstream media puts out a signal like this, continued inaction on the measures before them is foolish, if not insane