Alexander Hamilton: The Creator of America's Financial System

Hidden around a gently Broadway's gently curving bend in lower Manhattan just in front of The Museum of American Finance www.moaf.org/index is a small plaque that commemorates the subscription that friends of Alexander Hamilton were forced to take up to provide for the Secretary of the Treasury's family.

Alexander Hamilton, the brilliant, but mercurial aid to General Washington, stalwart patriot and architect of America's financial system, left a family destitute when he perished on the lonely cliff-side of Weehawken New Jersey at the hands of Aaron Burr, one of America's most mysterious men.

General Washington never showed his greatness as a man and leader to any more advantage then when he rode herd on his brilliant aide, Alexander Hamilton. Although Hamilton was chomping at the bit to win honor and glory during the Revolutionary war and perhaps die a martyr's death as well, the wise General recognized a keen mind when he saw one and destined young Alexander for better things than cannon fodder.

Alexander Hamilton, unlike the rest of the founding fathers, was not a native son. Rather, he was a bastard from the West Indian island of Nevis and this rocky beginning undoubtedly plagued him with his out-sized need to win respect.

Although General Washington could keep Hamilton alive, keeping him out of trouble was a different matter. When offered a command during the Whiskey rebellion his deft mishandling and lack of diplomacy further fanned the flames.

The Whiskey Rebellion occurred when the farmers of Western Pennsylvania who had earlier revolted against taxation without representation decided that they didn't like taxation with representation much either. But the nascent government had to get money from somewhere. Income taxes would not be levied until the Civil War and even then would be dismissed as unconstitutional. It would await an amendment to the constitution occasioned by America's need to fund the ferocious costs of the First World War before our country would switch from an excise-based tax system to a progressive system based on an income tax.

For the first hundred years taxes were based on taxes on imports and production. a system that did us service when our incomes and productive capacity were low. Under this system, buying from foreigners was discouraged and money kept at home.

But whiskey was wealth to Pennsylvania farmers. Corn, bulky and costly to transport was distilled into more portable and vastly more valuable whiskey. For this reason, the trade was a tempting cash cow. The decision to pay the bills of the new republic from the pockets of the Pennsylvania farmers put them in open revolt.

Washington, a man always given to diplomacy before force, had passed Hamilton's Whiskey Tax with reluctance. When the country rose up in arms, his first instinct was negotiation. But Hamilton's more war-like view prevailed and soon both Whiskey rebels and the moderates who were trying to talk their neighbors down were jailed alike.

Although Hamilton would take pride in his first taste of combat, Washington would quietly pardon the leaders of the rebellion. Thomas Jefferson, never a strong fan of Hamilton, grew ever more convinced that Hamilton was a dangerous man. His fiery temperament would eventually cost Hamilton his life.
Jefferson and Hamilton had vastly different views of the future of America. Jefferson, a gentleman farmer was plagued with distrust of the great unwashed all his life. Although he railed passionately on about freedom and liberty, he was a natural aristocrat who ran his holdings with slave labor and had none of the mixed feelings about it that plagued Washington.

Jefferson believed that farms and the land would be the source of America's wealth. He distrusted banks and bankers and has been quoted as saying:

"I believe that banking institutions are more dangerous to our liberties than standing armies. If the American people ever allow private banks to control the issue of their currency, first by inflation, then by deflation, the banks and corporations that will grow up around [the banks] will deprive the people of all property until their children wake-up homeless on the continent their fathers conquered. The issuing power should be taken from the banks and restored to the people, to whom it properly belongs."
Thomas Jefferson, (Attributed)
3rd president of US (1743 - 1826)

Jefferson was of the passionate opinion that the vote be restricted to free, white property owners. His rationale was that since tradesmen were dependent on the custom of their social betters they could not truly vote their consciences. Only those who had independent wealth could truly honestly serve the needs of their country.

Hamilton, on the other hand believed that agriculture was too narrow an economic base and he wanted to foster industrialism for the growth and development of the nation. Hamilton, first Secretary of the Treasury and architect of America's monetary and tax systems never met a bank he didn't like until he met Aaron Burr and his bank.

Aaron Burr was a slippery character who had something to unite Hamilton and Jefferson. They both abhorred the ideas of this conniving man. And Jefferson and Hamilton, while philosophically opposed on so many issues, each granted the fundamental honesty of the other. Not so Burr, who refused to firmly commit himself to any one faction and was thus distrusted by all.

Burr twisted Jefferson's tail with his clever plot to enfranchise the common man by purchasing land and then subdividing it into postage-stamp sized lots that made his supporters "land-owners." Then there was his nifty trick of slipping a bank-charter into the bill providing for the establishment of New York City's water supply. This little Trojan horse established an ancestor of today's Chase Bank. The "Manhattan" of the former name of Chase Manhattan was derived from the "Manhattan Water Company" the bank reluctantly and secretly chartered by thirsty New Yorkers.

But Jefferson was never stupid enough to cross him. Hot tempered Hamilton did and paid with his life on the deserted cliffs of New Jersey. After a scrap with Burr, he insisted on a duel and to his family's everlasting regret, Hamilton got just what he was asking for. This brilliant man who once advocated for a half-cent coin so that the poor could take advantage of lower prices probably never dreamed that his own family would be among the poor. But after his ill-advised duel, his widow was indeed left without so much as a half-cent and his loyal friends banded together to raise money for her support.

As for Burr? The duel that he fought for his honor destroyed it. In 1806 he lost the last shreds of his reputation in an ill-advised attempt to foment rebellion against the United States. The Burr Plot of 1806 was an attempt to carve out a new nation either from America's Mississippi valley or from former Spanish territory near Florida. This poor-man's civil war went nowhere and is forgotten today except by historians, but it furnishes a key plot point Edward Everett Hale's classic short story, "The Man Without a Country." Some people believe that the unquiet ghost of Aaron Burr still haunts New York's Morris- Jumel Mansion, where Washington was headquartered in the Fall of 1776 and where Aaron Burr and his wife once lived.

Sources:

http://www.britannica.com/blogs/2009/01/10-the-whiskey-rebellion-the-10-worst-decisions-by-us-presidents/

http://www.globalsecurity.org/military/ops/whiskey_rebellion.htm

http://www.lewrockwell.com/rothbard/rothbard1.html

http://www.quotationspage.com/quote/37700.html

http://www.notablebiographies.com/Br-Ca/Burr-Aaron.html

http://www.morrisjumel.org/history/index.php?sec=hist