Breaking News From 1790

Breaking News From 1790

The individual countries have widely different cultures. Labor mobility is limited. The larger states don’t want to be on the hook for their profligate smaller cousins. Does this describe the dilemma facing the modern European Union? No, it’s the situation that Alexander Hamilton grappled with while running the Treasury of the newly formed United States.

Then, as now, the union was facing credit issues, debt issues, and a lot of skepticism as to whether it could hold together. Then, as now, the main problem was political rather than economic or financial. Then, as now, outsized personalities performed on a world stage, and their solutions would have global implications.

Of course the specifics differ immensely. Hamilton addressed 18th century problems with 18th century tools. Jean-Claude Trichet of the European Central Bank faces a debt crisis brought about in part by a global interconnectedness that Hamilton, Jefferson, and Washington could hardly imagine. Still, the parallels are striking.

In 1790 Hamilton wanted the Federal Government to assume the States’ debt and establish its own credit. One proposed for today’s EU is for the ECB to assume the member countries’ debts. But assumption carries with it moral hazard and political difficulties.

In 1790, the solution came from a compromise. It’s easy to say that this will be the answer now, but it’s hard to see what the compromise might be. One thing is certain: a united Europe is in everyone’s interest. Let’s hope Europe’s leaders are up to the challenge.

Douglas R. Tengdin, CFA
Chief Investment Officer
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By | 2017-07-17T12:35:17+00:00 December 10th, 2010|Global Market Update|0 Comments

About the Author:

Mr. Tengdin is the Chief Investment Officer at Charter Trust Company and author of “The Global Market Update”. The audio version of each post can be heard on radio stations throughout New England every weekday. Mr. Tengdin graduated from Dartmouth College, Magna Cum Laude. He received his Master of Arts from Trinity Divinity School, Magna Cum Laude and received his Chartered Financial Analyst (CFA) designation in 1992. Mr. Tengdin has been managing investment portfolios for over 30 years, working for Bank of Boston, State Street Global Advisors, Citibank – Tunisia, and Banknorth Group. Throughout his career, Mr. Tengdin has emphasized helping clients manage their financial risks in difficult environments where they can profit from investing in diverse assets in diverse settings. - Leave a comment if you have any questions—I read them all! - And Follow me on Twitter @GlobalMarketUpd

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