Problems Facing Problems Facing New GovernmentNew Government

I. Economic questionsI. Economic questions

Continental Currency

A. Adam Smith and CapitalismA. Adam Smith and Capitalism

1. Private ownership1. Private ownership2. Little gov’t control2. Little gov’t control3. Money should be 3. Money should be invested (capital) invested (capital)

4. The market will 4. The market will determine product and pricedetermine product and price

iPad 2 Sold Out: Newbies Go on Buying Spree

B. Hamilton’s PlanB. Hamilton’s Plan

1. Pay all war debts1. Pay all war debts

a. south has paid most of a. south has paid most of their debts, their debts, does not want to does not want to pay morepay more

b. Hamilton gets help from b. Hamilton gets help from JeffersonJefferson

c. In return Capitol is c. In return Capitol is placed in the southplaced in the south

2. Tariffs2. Tariffs

3. National Bank3. National Bank

One of the more mysterious areas of the One of the more mysterious areas of the economy is the role of the Fed. Formally economy is the role of the Fed. Formally known as the Federal Reserve, the Fed is known as the Federal Reserve, the Fed is the gatekeeper of the U.S. economy. It is the gatekeeper of the U.S. economy. It is the central the central bank of the of the United States -- it is -- it is the bank of banks and the bank of the U.S. the bank of banks and the bank of the U.S. government. The Fed regulates financial . The Fed regulates financial institutions, manages the nation's money institutions, manages the nation's money and influences the economy. By raising and and influences the economy. By raising and lowering interest rates, creating money and lowering interest rates, creating money and using a few other tricks, the Fed can either using a few other tricks, the Fed can either stimulate or slow down the economy. This stimulate or slow down the economy. This manipulation helps maintain low inflation, manipulation helps maintain low inflation, high employment rates, and manufacturing high employment rates, and manufacturing output.output.

A. issue paper moneyA. issue paper money

B. make loansB. make loans

C. Loose Constructionist = C. Loose Constructionist = for the for the bankbank

1. Alexander Hamilton1. Alexander Hamilton

2. Powers not expressly 2. Powers not expressly forbidden by the forbidden by the

Constitution are Constitution are granted to granted to the government.the government.

3. Will become the 3. Will become the Federalist Federalist PartyParty

D. Strict Constructionist = D. Strict Constructionist = against the against the bankbank

1. Madison & Jefferson1. Madison & Jefferson2. Believe powers not 2. Believe powers not

expressly expressly granted to the granted to the federal federal government government by the Constitution by the Constitution cannot cannot be exercised by the be exercised by the government.government.

3. Will become the 3. Will become the Democratic-Democratic- Republican Republican Party (confusing ain’t Party (confusing ain’t it?)it?)

E. Bank of the United States E. Bank of the United States opens in opens in Philadelphia 1791Philadelphia 1791

II. War and RebellionII. War and Rebellion

A. Fallen TimbersA. Fallen Timbers

1. Miami Indians are 1. Miami Indians are encouraged by the encouraged by the British to British to attack Americans attack Americans

2. They are defeated partly 2. They are defeated partly because the because the British do not give the British do not give the support they promisedsupport they promised

B. Whiskey RebellionB. Whiskey Rebellion

1. Taxes on whiskey 1. Taxes on whiskey

2. Farmers from western PA. 2. Farmers from western PA. Convert crops Convert crops to whiskey for to whiskey for easier transportation and sale.easier transportation and sale.

3. Farmers use violence to 3. Farmers use violence to prevent collection prevent collection of the taxof the tax

4. President Washington (and 4. President Washington (and General Hamilton) lead a militia of General Hamilton) lead a militia of 13,000 to end the rebellion13,000 to end the rebellion