Economic problems

The debt that was left after the war was $37 million at the national level plus $114 million by the states. This debt dragged down the economy as the government was unable to spend money. During the war the states had larger power with the federal government being very weak. Therefore the states only gave enough money to Federal Government to pay the interest on the bonds of their citizens. In addition the inability for the federal government to regulate state trade disputes led to high tariffs. Rhode Island forced all traffic from other states using its postal road, which connected the New England colonies, to pay a tariff. In addition trade between America and Britain was shut down. America was also shut out of many other world markets such as the British West Indies. This caused prices for goods in America to fall as the local markets were flooded with goods due to an inability to export. The currency in America was worthless due to the continuous printing of money to pay debts. This led to inflation. In addition all the different states had different currencies or used pound or Spanish dollars. There was no real national economy and all the states competed against each other which was not mutually beneficial.

The new Constitution allowed the Federal Government to take on all debt both state and national. With the ability to tax federally, the Federal Government could now repay the debt. The Federal Government also had economic control in terms of trade. This meant it could coerce states into united trade and commerce policy to oppose Britain. With the ability to raise funds they could back their currency. Furthermore the establishment of First Bank of the United States in 1791 allowed the consolidation of debt and allowed a universal system of currency.