‘Lessons of the past’
What were these ’lessons of the past’ that may suggest significantly less than rigid compliance to previous promises? Before the Civil War, the united states had fought three major wars. Two of the wars, the brand new War and The War of 1812, had also resulted in fiscal crises.
In 1790, through the US’ first fiscal crisis, then Secretary of the Treasury Alexander Hamilton crafted an idea to restructure the Continental and state debts incurred throughout the brand new War. Under this course of action, Hamilton gave first priority to foreign creditors, paying down Dutch creditors completely (see Table 9 of Garber 1991). Hamilton then reduced the promised interest payments to domestic bondholders while preserving their promised principal payments. This decrease in the interest was a kind of repudiation, though perhaps Hamilton repudiated significantly less than had been expected through the 1780s, earning him substantial gratitude from 1780s speculators. However, not all government creditors fared so well. Holders of Continental Dollars received only 1% of their face value.