Treasury Bonds and Abigail Adams

Chidem Kurdas

When Alexander Hamilton, George Washington’s Secretary of the Treasury, proposed the Bank of the United States, his plan was at least as controversial as the 2008 bank bailouts some 220 years later.

The bank, a sort of precursor to the Federal Reserve, was an essential part of Hamilton’s massive plan to create a government-sponsored financial system. It dovetailed with the issuance of federal securities.

Despite ferocious opposition Congress passed the bill to start the bank, as Abigail Adams informed Cotton Tufts, a family adviser. Though always interested in politics, Abigail paid attention to investment opportunities as well. She wanted to immediately buy some government bonds, expecting the price to go up.

But her husband John Adams, then vice president, was adamantly opposed to the idea. He believed that mere pieces of paper do not create riches, which come from land. Hence no point in buying pieces of paper.

Had they bought the government securities, they would’ve almost certainly become quite wealthy, David McCullough suggests in his biography of John Adams. It did not happen: “Mr. Adams held to his faith in land as true wealth.”

A speculative bubble developed around the system Hamilton put in place. Prices rose to extraordinary levels, with the usual result that the market collapsed in due time. Abigail was shrewd enough that she had a good chance of making money—if she could’ve ignored John’s objections.

Her observations of economic realities on the ground were remarkably accurate. Earlier on, when John became America’s emissary to Britain, Abigail had noticed at once that the carriages and horses of the London hackney cabs were “vastly superior” to those in Paris.

English equipment was well made, horses well fed. By contrast, French carriages were rickety and horses were scrawny. Abigail wrote to a friend in Paris that it looked like Britain was wealthier than France.

Her correspondent, Thomas Jefferson, responded mockingly to the comparison. Possibly he was annoyed—he admired the French and detested the English. He told her that the French were worth ten such nasty people as the British, even though their streets were somewhat dirty and cabs “rather indifferent.”

But Abigail was on to something vital in an era when national output or income statistics did not exist. Britain was indeed economically much more advanced than France, the brilliance of French culture notwithstanding. Britain pioneered new technologies and the industrial revolution.

Had Jefferson paid serious attention to Abigail’s impressions in London, he might not have made the bad mistake of assuming that revolutionary France would defeat Britain in the long war that eventually drew in the United States.

In modern America, Abigail would’ve doubtless been a formidable businesswoman and investor. With her ability to perceive the economic realities that others ignore, she might have run a hedge fund.

Instead, she managed the Adams farm and household – with seemingly easy efficiency – and acted as sounding board to John. That she and he remained in love must have softened misfortunes and the occasional disagreement, such as the one about T bonds.

Have a great Fourth of July!

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