Question

“If the maintenance of public credit, then, be truly so important, the next enquiry which suggests itself is, by what means it is to be effected? The ready answer to which question is, by good faith, by a punctual performance of contracts. States, like individuals, who observe their engagements, are respected and trusted: while the reverse is the fate of those, who pursue an opposite conduct.”

What the quotation above tells about why contracts are valuable.

Answer 1

What the quotation above tells about why contracts are valuable

Alexander Hamilton was a remarkable figure in his own time and continues to

puzzle today. He was a Federalist and his economic views did not go in hand with many of his peers.

Hamilton played an important role in the formation of the economy of the new republic long before he became the first treasury secretary of the United States. His ideology for the economy represented in “Report on the Public Credit” and the “Report on a National Bank.” Many of his views were at odds with that of other founders, and even some are based on unsound economic ideas.

In his report on public credit, Alexander Hamilton explains the importance of contracts in the society and how important is to the state to follow the contract.

During the American War for Independence, the country accumulated huge sums in war debt, both on the national and state levels. That was the main focus of formation of economic policy. The general idea was that all the Americans benefited from the debt after freedom from the persecution of Britain. So the new government can refuse to pay a complete return on the debts. Some believed that doing so will put the economy at great risk.

Hamilton stated his views on the importance of a system of public credit in the new country.His points of views were, the government would need to borrow money at some time in the future. So there should be a public fund and it should be possible to take the loan from it.

Maintaining a good credit was important for taking loan from public funds, because poor credit leads to high interest and hence worsens the expenses according to him, a good credit reputation was important for the prosperity of citizens and for the nation as a whole, to avoid embarrassment to citizens, to protect their character and that of the country, and to promote the functioning of good government in the country.

Good public credit can be achieved by the government’s dedication to keep genuine contracts, improve investor confidence and public trust. Any violation of promise must have an ill effect on the nation’s credit. There should be basic moral principles that a government keeps its responsibilities.