Keynote Luncheon Presentation: Gallatin’s Revenge: Sovereign Debt Sustainability and Valuation in the Modern Era
Albert Gallatin was the longest-serving U.S. Secretary of the Treasury (1801-1814) and came into office as a professed anti-Federalist, ardent proponent of fiscal responsibility, and vocal opponent of Alexander Hamilton’s financial policies. However, Gallatin failed to accomplish the Jeffersonian objectives of shrinking the national debt and eliminating taxes, as he was forced to finance a war with Great Britain and the purchase of the Louisiana territory. Gallatin also supported the First Bank of the United States and proposed federally financed infrastructure projects. Consolidation, it seems, is complicated. A discussion of the early history of sovereign debt in the U.S., in particular the roll-up of the obligations of the colonies into the newly constituted federal government, the role of the First Bank of the United States, and the political challenges of managing the debt. Sovereign debt sustainability and valuation in the modern era, focusing on governments’ ability and willingness to pay, the role of central banks, and a potential resolution to the euro area crisis, will be addressed.