Although the Constitution created a stronger federal government, it did not solve the nation's economic challenges. By 1789, the United States was still recovering from a serious economic depression that began during and after the Revolutionary War. The national government and the states owed millions of dollars. Investors worried these debts might never be repaid. Because of this uncertainty, credit was scarce. Credit allows governments, merchants, and businesses to borrow money and repay it later.
Currency was another major problem. During the war, Congress printed paper money called Continental Dollars, but these bills lost much of their value. Americans used different kinds of money, including foreign coins, banknotes, and other currencies. Without a trusted national currency, trade became more difficult.
Banking was limited as well. In 1789, only three banks operated in the United States: the Bank of North America, the Bank of New York, and the Massachusetts Bank in Boston. These banks made loans, accepted deposits, and supported trade. However, most Americans had little access to banks, making it difficult for businesses to expand.
Trade offered new opportunities but also new challenges. Independence allowed American merchants to trade with new markets in Europe and Asia. However, overseas trade was expensive and risky. Merchants could invest in a voyage and still lose money. States often pursued their own economic policies, making commerce between states more difficult.
The new federal government had more power than under the Articles of Confederation, but important questions remained. How would the nation repay its debts? How could it build trust in its currency and credit? What role should the federal government play in banking, trade, and the economy? As Washington began his presidency, Treasury Secretary Alexander Hamilton proposed a plan to address these challenges and strengthen the nation's financial system.