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Hamilton built U.S. dollar to last

Name two currencies that exist today that also existed in the 1790s. If you named the British pound and the U.S. dollar, you would be right.

Name a third? I can’t.

What makes the two currencies so resilient?

The first Treasury secretary Alexander Hamilton modeled the dollar on the financial institutions of the British pound. He was reviled in certain quarters as a monarchist and his personal arrogance certainly didn’t help dispel the sense of unease that he caused.

George Washington trusted Hamilton completely. As a result, the durable qualities of our financial system, which are being sorely tested, were built into it from the beginning.

What made the pound the model? Well, it was successful at the time the dollar was born. Founders of any institution like the U.S. Treasury do not look for failures to copy.

Hamilton picked the dollar as the unit based on the Spanish Empire’s 8-reales silver coin. The silver dollar size coin was in circulation worldwide and most American merchants used it.

From there he wanted a national bank, the Bank of the United States. This was based on the Bank of England, which was founded in 1694 and it made Britain a huge financial power.

How did it do so? Well, it borrowed money and unlike many dynasties in Europe, it actually paid the money back. So confident were people in it that Bank of England securities, debts in other words, were used by the holders as collateral for other loans. Modern banking was born.

Even today we see many financial institutions buying up U.S. Treasury bills, notes and bonds and fleeing other securities. Why? They know they will get their money back, a trust that goes back to Hamilton who learned it from studying the Bank of England.

Both currencies of his time continue to survive. The world looks to the United States and Great Britain to solve the present crisis.

What happens between now and that point I do not know, but I do know that at the end of the period the pound and the dollar will still exist while certain other currencies will not. It is all a matter of trust established by Alexander Hamilton and not ever lost since.

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