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Selling Debt? A Capital Idea

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George Washington, a few years after the Battle of the Brandywine, fights sleep as Alexander Hamilton explains his plan to finance government spending.

“I just don’t get what you mean by selling the national debt,” Washington says. “How can you sell something you already owe?”

“I can go over it all again, if you wish, Your Excellency,” Hamilton replies.

“I do not wish,” Washington snaps. “And don’t call me excellency. Who will buy this debt?”

“Everybody. England, France, Spain, the Dutch,” Hamilton says. “They’ll buy because we’re selling.”

“They will?”

“Yes. It’s good debt. Actually, it’s great debt.”

Washington frowns, glances up at the ceiling. “And then what happens after we sell this debt?”

“Why, they’ll want more of it.” Hamilton beams.

“Aren’t you afraid, Alexander, that we might run out of debt to sell?”

“No way,” Hamilton says. “We have so much of it—and we’re making more all the time. Interest mainly. We’ll never run out of debt because of it.”

Washington is alarmed. “You can’t mean never. We have to stop creating it some day, Alexander.”

“Nope. No chance. We’ll just keep doing the things that will increase it, build bridges, roads, canals.”

Washington inhales deeply while glancing at his timepiece. “So let me get this straight: We’re going to keep selling our debt to countries that more or less hate us, and they’ll continue to buy this debt we keep piling up by building roads and bridges.”

“Don’t forget canals.”

“Fine. Canals. I have one question: Won’t there come a day when these countries will want to be paid back? Won’t that be a problem?”

Hamilton nods. “Oh, indeed. A big one. But who cares. We’ll all be long gone by then.”

“We will?”

“By the time these pigeons come home to roost, they’ll be scraping doo-doo off our statues.”

“Nice image,” Washington says.

“I’m just saying before the day of reckoning, we’ll be able to build a lot of roads and bridges…”

“And canals,” Washington adds cynically.

“Splendid. Now you’ve got it.”

“And when will this day of reckoning occur?” Washington asks more or less rhetorically.

“Hard to say, but I think sometime in the 21st century. The you-know-what should definitely hit the fan by then.”

“Then what, Alexander?”

“I’ll guess we’ll have to pay up, sir.”

Washington fingers a pewter mug while eyeing Hamilton’s prominent forehead. “Pay up? How?”

“I guess we’ll have to sell them back all our roads and bridges.”

“And canals, of course,” Washington adds. “And what if that’s not enough?”

“Then I guess we become the world’s slave, sir,” Hamilton says.

Hamilton was barely able to duck the pewter mug that was aimed straight at his head.

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