U.S. debt is a looming crisis today but was once its own revolutionary masterstroke that helped launch a global financial superpower

Believe it or not, U.S. debt was once a source of national strength, before it became a sword of Damocles hanging over the federal government and the bond market.

While the nation celebrates the 250th anniversary of the Declaration of Independence, the origin of U.S. financial might can be traced back to a controversial decision in 1790 to consolidate debts from the Revolutionary War.

Alexander Hamilton, who served as the first Treasury Secretary, is considered the architect of American finance as he engineered one of the most consequential economic decisions in early U.S. history.

He recognized how debt can unlock resources that could transform the young republic. But first he had to untangle the mess created by the Revolutionary War.

To fight off the British Empire, the Continental Congress borrowed heavily domestically and internationally via various instruments, while individual states racked up their own war debts.

Under Hamilton’s plan, the nascent federal government took on state debts and consolidated everything into one national debt. At the same time, he committed the U.S. to repaying the debt in full rather than claiming that the government established by the Constitution wasn’t responsible for war-era borrowing.

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