Final answer:
Hamilton paid off the old bonds at full value to ensure the new US government's creditworthiness and fiscal reliability, to foster loyalty to the national government by assuming state debts, and to build a stable base for economic growth by engaging the financial interests of the wealthy creditor class.
Step-by-step explanation:
Why Alexander Hamilton Paid Off Old Bonds at Full Value
Alexander Hamilton, as the first Secretary of the Treasury, advocated for the full payment of old bonds at face value as outlined in his Public Report on Credit to Congress on January 14, 1790. Paying the full amount to current holders of government certificates was crucial for building confidence among future creditors that the government would meet its financial obligations and was capable of honoring debts.
This was seen not only as a commitment to financial responsibility but also as essential for maintaining the nation's creditworthiness, particularly because breaching this commitment would signal unreliability and could jeopardize future borrowing.
Moreover, Hamilton's financial system was aimed at stabilizing the new country's economy by federal assumption of state debts, thus building loyalty toward the national government. It was also designed to avoid the kind of domestic turmoil experienced in the 1780s due to heavy state taxation.
The approach was based on the British model, which had successfully maintained the loyalty and investment of the wealthy creditor class. By fully paying off the bonds, Hamilton engaged the elite's self-interest, spurring economic growth and thereby benefitting all citizens.
Championed by the Washington administration and nationally-minded Congress representatives, Hamilton's plan became a foundation for the nation's economic development, despite the controversy it generated and the debate it sparked over federal power and the fairness of benefiting speculators.