The National Debt was the price of independence. During the war Congress had been too poor to pay gold and silver for what it needed to carry on the war. So it had given promises to pay at some future time. These promises to pay were called by various names as bonds, certificates of indebtedness, and paper money. Taken all together they formed what was called the Domestic Debt, because it was owed to persons living in the United States. There was also a Foreign Debt. This was owed to the King of France and to other foreigners who had lent money to the United States.

Alexander Hamilton was the ablest Secretary of the Treasury the United States has ever had. To give people confidence in the new government, he proposed to redeem the old certificates and bonds, dollar for dollar, in new bonds. To this plan there was violent objection. Most of the original holders of the certificates and bonds had sold them long ago. They were now mainly held by speculators who had paid about thirty or forty cents for each dollar. Why should the speculator get one dollar for that which had cost him only thirty or forty cents? Hamilton insisted that his plan was the only way to place the public credit on a firm foundation, and it was finally adopted.