Continued . . . While at the Treasury, Hamilton demonstrated acute political acumen by organizing his goals almost as though they were a set of Russian nesting dolls. Any single goal was only possible if the entire list was approved: a state may not pick and choose. There was some back-and-forth on this, as one would expect, but eventually, agreement was achieved. The various matryoshka were:
First – Federal assumption of the war debts of the individual states. This was perhaps Hamilton’s biggest lever. States were desperate for relief from the immense burden of their wartime obligations.
Second – But debt relief could only be accomplished if the Federal government held seigniorage. Seigniorage comes in two forms: (1) the exclusive right to issue money, and the corollary (2) to keep the profit. Example: If it takes $0.02 to make a $1.00 bill, the seigniorage profit is $0.98. More if it’s a $50 bill. Under Definition One, this meant that all states were required to link to a common currency. If this were not so, a state incentivized by Definition Two could continue cranking out money in competition with the Feds, then we’d have a situation of bad money (the counterfeit) driving good money out of circulation, and Aristophanes taught us that nothing good happens there.
Third – Seigniorage could be robust only if there were a federalized judicial branch superior to state-level courts. Without federal supremacy, how could the conflicting claims of state mints be adjudicated?
Fourth – Among other things, a federalized judicial system made national import tariffs possible, and . . .
Fifth – . . . thus the national government became self-funding.
Three basic deficiencies of the Articles of Confederation noted earlier were (i) the lack of Federal taxing power; (ii) no judiciary superior to state courts, and (iii) the lack of a common currency. Hamilton, through a trifecta of acute negotiation skills, overwhelming leverage, and applied banking experience corrected these three shortcomings and another two besides: (iv) state relief from war debts (this was the main lever), and (v) seigniorage.
BoNY – Washington was aware that Hamilton had joined with Aaron Burr in 1784 to establish the Bank of New York (now one of the largest investment banks in the world: BNY Mellon). This banking experience was central to Hamilton’s assumption of the Treasury in 1789.
Twenty years after Hamilton and Burr founded the Bank of New York, Burr killed him.
Hamilton and Burr
The parallel lives of Alexander Hamilton and Aaron Burr have been referenced many times. They were both orphans. They were both gifted students at prestigious schools (Hamilton at Princeton, Burr at Columbia). Both rose to the colonelcy during the Revolutionary War, both under General George Washington. Both read law following the revolution, and afterwards both sought political office. And they were both present at Weehawken, New Jersey, when they dueled on a ledge twenty feet above the Hudson River, on July 11, 1804. Hamilton was mortally wounded and died the next day. Burr might as well have.
Notwithstanding their similarities, there was a major difference separating the men: Hamilton had a working man’s concept of honor – it had to be earned. Burr’s was the aristocratic version – he demanded that honor be shown him because of who he was, not what he had done.
Hamilton, for all his intellectual brilliance and his adamantine will, was deeply modest. He was not one who thought he deserved a position before he earned it, even if the earning came second hand. More than once Hamilton prepared for his next career position by studying the most relevant works he could find. General George Patton, if we can believe the movie, did the same. Towards the end of the Battle of El Guetter, (Tunisia, Mar-Apr, 1943), when it became clear that the relatively unseasoned American tank force would defeat the hardened Germans, General Patton turned towards the retreating German line and snarled, “Rommel, you magnificent bastard, I read your book!”
As Patton did almost a century-and-a-half later, whether preparing for career advancement or battle, Hamilton read the proper books. It served him well. The study of infantry tactics brought him victory in his only battle command. The story of Hamilton’s audacious triumph caught fire and was repeated in taverns and at picnics long after his death.
This is the story of that engagement. Like all good things, it begins at the beginning.
Looking forward, Hamilton hoped for elective office after the war, but his options were limited. He was unsuitable for private industry due, in large part, to his deficient diplomatic skills. As noted by the way he negotiated with the states while Secretary of Treasury, Hamilton was manipulative but not diplomatic. He probably knew, because he was nearly always both smarter than his boss and unused to submit to authority, that if employed in the private sector he would quickly be recognized as a difficult employee and soon shown the door. Tenure in the private sector was not in his future. A feasible alternative was public office, where one’s deficiencies would be obscured by favorable marketing.
A facilitative preliminary to public office, something people would note, perhaps a very public war victory, was necessary. Just having been in the Continental Army would not be enough. Once combat ceased and the army demobilized, there would be so many Revolutionary War veterans flooding the voter rolls that simply being a vet wouldn’t be much cause to vote for a particular candidate. They would all be veterans. Hamilton knew that. He must somehow distinguish himself. People had to talk about him. The best marketing has to base itself on something.
Ideally, what was needed would be a compelling story of him leading men in wartime victory. Hamilton could then rise, he hoped, from simply being a war veteran who used to be on Washington’s staff to becoming a victorious commander who was indispensible to the ultimate patriotic victory.
In keeping with his personality, it was time to hit the books: Hamilton turned to texts on military tactics. When he received his command, he would be as prepared as any unseasoned staff officer could be at his first battle.
Hamilton’s command did not come easy. He had frequent access to General Washington and availed himself of the opportunities it offered. He used the privilege to petition multiple times for a wartime command, but Washington was having none of it: Hamilton was simply too valuable in his current station as Washington’s spokesman to be put into a position that could well result in his death or disability.
In the meantime, the pivotal Battle of Yorktown was approaching. It might be the last major battle of the Revolution, and Hamilton desperately needed a command. It could be his last chance to achieve the compelling war victory his political future required.
There was a body of men available to be led in what was expected to be a minor skirmish preliminary to the Yorktown battle, but Washington gave the command to a junior officer who Hamilton knew. Hamilton objected furiously, but to no avail. Washington could be as adamant as himself when the occasion arrived. But at the end, when all previous arguments were exhausted, the despairing Hamilton accused Washington of ignoring the chain of command. That was a serious military infraction: Washington was gobsmacked, and for once Hamilton knew enough to shut up. The man Washington had selected to lead the attack on the Redoubt worked for Hamilton. Decorum required that Washington, even as the Commanding General, was required to pass orders through the various unit leaders until finally reaching the man for which the orders were destined. Hamilton announced his refusal to pass Washington’s orders along, and demanded that he be assigned to lead the soldiers himself. Washington relented. He had been rule-oriented all his adult life and it was too late to change now. Hamilton was appointed to command the Continental effort to reduce Redoubt 10 while the French were ordered to simultaneously take Redoubt 9.
Redoubt: A small, usually semi-permanent fortress located between two warring groups. It is typically used for observation and reporting of enemy movements.
On that moonless night, when the French were assigned to seize Redoubt 9, Hamilton was to simultaneously take Redoubt 10.
While moving towards his assignment on that moonless night, Hamilton ordered his men to not fire their rifles. They were told to take their objective silently, using only their bayonets. The hardened troops penetrated the Redoubt in silence and without being observed, capturing their objective in about the time it takes a cup of coffee to reach drinking temperature. It was the victory Hamilton needed.
Hamilton’s only combat command was an outstanding success. This story was told and repeated in the taverns of New York innumerable times. The fame Hamilton achieved through this audacious victory benefited him after the war and was instrumental in him being elected to the Continental Congress, where he was thrown together with Aaron Burr. Hamilton knew Burr before the election, from even before the war, and thought he knew him well. But it was only when both were in Congress that he understood Burr for what he was. More, later.
This article is for informational purposes only and is not intended as professional advice. Klarise Yahya is not a financial planner. Nothing in this article is presented as investment guidance. For specific circumstances, please contact an appropriately licensed professional. Klarise Yahya is a Commercial Mortgage Broker specializing in difficult-to-place mortgages for any kind of property. If you are thinking of refinancing or purchasing real estate, perhaps Klarise Yahya can help. For a complimentary mortgage analysis, please call her at (818) 414-7830 or email [email protected].