Alexander Hamilton's First Report on the Public Credit, delivered to Congress on January 9, 1790, called for payment in full on all government debts as the foundation for establishing government credit.
This, argued Hamilton, was required to create a favorable climate for investment in government securities, and to transform the public debt into a source of capital.
His model was the British financial system, the sine qua non of which was fidelity to creditors.

Before the government could resume borrowing, Hamilton insisted that the $13 million in arrears of interest be converted into principal, with payments at 4% on reissued securities.
The plan would be funded by pledging a portion of the government tariff and tonnage revenue irrevocably to the payment schedule.
 Additionally, contracted debt would be serviced by sinking funds, derived from postal service revenue earmarked for that purpose.

Rather than seek to liquidate the national debt, Hamilton recommended that government securities trade at par so as to promote their exchange as legal tender, equivalent in value to hard currency.
Regular payments of the public debt would allow the Congress to safely increase federal money supply, stimulating capital investments in agriculture and manufacturing.
With economic prosperity, these enterprises would more easily carry their tax burdens and provide the revenue to service the national debt.

Monied speculators, alerted that Congress, under the new Constitution, might provide for payment at face value for certificates, sought to buy up devalued securities for profit and investment.
Concerns arose over the fact that many certificates – almost three-quarters of them - had been exchanged for well below par during periods of inflation, some as low as 10 cents on the dollar, but selling at 20-25% at the time the Report was debated.

When Hamilton's Report was made public in January 1790, speculators in Philadelphia and New York sent buyers by ship to southern states to buy up securities before that section of the country became aware of the plan.
The fact that devalued certificates were relinquished by holders at low rates even after the news was received reflected the widely held conviction in the South that the credit and assumption measures would be defeated in Congress.
The value of government certificates continued to fall months after Hamilton's scheme was published, and "the sellers speculated upon the purchasers."

Representative James Madison vigorously led the opposition to Hamilton's "redemption", though he fully supported the development of good credit.
In his address to the House on February 11, 1790, he characterized Secretary Hamilton's "redemption" as a formula to defraud "battle-worn veterans of the war for independence"  and a handout to well-to-do speculators, mostly rich northerners, including some members of Congress.
Madison's "discrimination" promised to correct these abuses in the names of financial rectitude and natural justice.

Introducing political rhetoric into the debate that resonated with his constituency in Virginia, Madison laid the groundwork for a national party among democrats.
His principled opposition to "redemption" was consistent with his view of a national government designed to shield the less powerful from a majority interest, in this case, his agrarian constituency from Federalist-sponsored economic nationalism.

The essence of Hamilton's economic position on "redemption" was: (1) that  any compromise on the sanctity of promissory notes would undermine confidence in credit; and (2) that concentrating capital into fewer hands would strengthen commercial investment and encourage constructive economic growth, enlarging government credit available to business enterprises.
As his plan would greatly simplify and streamline finances, Alexander Hamilton found Madison's concern over the question of honoring both original and present holders of government securities naïve and counterproductive.

Adopting a much broader view of the effects of speculation, Hamilton acknowledged that a good deal of ce
Alexander Hamilton's First Report on the Public Credit, delivered to Congress on January 9, 1790, called for payment in full on all government debts as the foundation for establishing government credit. This, argued Hamilton, was required to create a favorable climate for investment in government securities, and to transform the public debt into a source of capital. His model was the British financial system, the sine qua non of which was fidelity to creditors.
Before the government could resume borrowing, Hamilton insisted that the $13 million in arrears of interest be converted into principal, with payments at 4% on reissued securities. The plan would be funded by pledging a portion of the government tariff and tonnage revenue irrevocably to the payment schedule.  Additionally, contracted debt would be serviced by sinking funds, derived from postal service revenue earmarked for that purpose.
Rather than seek to liquidate the national debt, Hamilton recommended that government securities trade at par so as to promote their exchange as legal tender, equivalent in value to hard currency. Regular payments of the public debt would allow the Congress to safely increase federal money supply, stimulating capital investments in agriculture and manufacturing. With economic prosperity, these enterprises would more easily carry their tax burdens and provide the revenue to service the national debt.
Monied speculators, alerted that Congress, under the new Constitution, might provide for payment at face value for certificates, sought to buy up devalued securities for profit and investment. Concerns arose over the fact that many certificates – almost three-quarters of them - had been exchanged for well below par during periods of inflation, some as low as 10 cents on the dollar, but selling at 20-25% at the time the Report was debated.
When Hamilton's Report was made public in January 1790, speculators in Philadelphia and New York sent buyers by ship to southern states to buy up securities before that section of the country became aware of the plan. The fact that devalued certificates were relinquished by holders at low rates even after the news was received reflected the widely held conviction in the South that the credit and assumption measures would be defeated in Congress. The value of government certificates continued to fall months after Hamilton's scheme was published, and "the sellers speculated upon the purchasers." 
Representative James Madison vigorously led the opposition to Hamilton's "redemption", though he fully supported the development of good credit. In his address to the House on February 11, 1790, he characterized Secretary Hamilton's "redemption" as a formula to defraud "battle-worn veterans of the war for independence"  and a handout to well-to-do speculators, mostly rich northerners, including some members of Congress. Madison's "discrimination" promised to correct these abuses in the names of financial rectitude and natural justice. 
Introducing political rhetoric into the debate that resonated with his constituency in Virginia, Madison laid the groundwork for a national party among democrats. His principled opposition to "redemption" was consistent with his view of a national government designed to shield the less powerful from a majority interest, in this case, his agrarian constituency from Federalist-sponsored economic nationalism.
The essence of Hamilton's economic position on "redemption" was: (1) that  any compromise on the sanctity of promissory notes would undermine confidence in credit; and (2) that concentrating capital into fewer hands would strengthen commercial investment and encourage constructive economic growth, enlarging government credit available to business enterprises. As his plan would greatly simplify and streamline finances, Alexander Hamilton found Madison's concern over the question of honoring both original and present holders of government securities naïve and counterproductive.
Adopting a much broader view of the effects of speculation, Hamilton acknowledged that a good deal of ce
First Report on the Public Credit