Posted on 01/26/2009 6:11:35 PM PST by SeekAndFind
As the bailouts in the current bust inexorably mount, financed in rapidly increasing U.S. government debt, one might wonder whether a default on Treasury debt is imaginable. In the course of history, did the U.S. ever default on its debt?
Well, yes: The United States quite clearly and overtly defaulted on its debt as an expediency in 1933, the first year of Franklin Roosevelt's presidency. This was an intentional repudiation of its obligations, supported by a resolution of Congress and later upheld by the Supreme Court.
Granted, the circumstances were somewhat different in those days, since government finance still had a real tie to gold. In particular, U.S. bonds, including those issued to finance the American participation in the First World War, provided the holders of the bonds with an unambiguous promise that the U.S. government would give them the option to be repaid in gold coin.
Nobody doubted the clarity of this "gold clause" provision or the intent of both the debtor, the U.S. Treasury, and the creditors, the bond buyers, that the bondholders be protected against the depreciation of paper currency by the government.
Unfortunately for the bondholders, when President Roosevelt and the Congress decided that it was a good idea to depreciate the currency in the economic crisis of the time, they also decided not to honor their unambiguous obligation to pay in gold. On June 5, 1933, Congress passed a "Joint Resolution to Assure Uniform Value to the Coins and Currencies of the United States," of which two key points were as follows:
* "Provisions of obligations which purport to give the obligee a right to require payment in gold obstruct the power of the Congress."
(Excerpt) Read more at spectator.org ...
Interesting article.
Since the US defaulted on its debt, and it was thus put into receivership, who ended up the owners of the country?
depreciate is not the same as default. Thats like saying someone died when they’re dying
No it isn't. It's like saying I owe a hundred but I'm only going to pay ten. That is a default.
You are correct. There is a default every time the printing presses are turned on.
bfl
Great quote
About 250 years ago, in a celebrated essay, “Of Public Credit,” David Hume wrote:
“Contracting debt will almost infallibly be abused in every government. It would scarcely be more imprudent to give a prodigal son a credit in every banker’s shop in London, than to empower a statesman to draw bills upon posterity.”
Okay. Then there is the scenario that the U.S. never actually repays its debt, it simply issues more debt instruments.
Burke had it right and all the ideologues since have had and still have it wrong. Power must always exist in any community, whatever you call it. You cannot remove vices from mankind by abolishing the names it took or the particular men or institutions it operated within, last year or last generation or last century.
You cannot remove vices from mankind, full stop. You can moderate them and further better conduct, that is all. Whether men are governed well is up to them, they are free, no ideology or law or other constraint can possible decide that for them.
The Romans had hyperinflation with a metallic currency.
The Kuwaitis had a stock market bubble financed entirely by post-dated checks.
Outlawing folly is Canute ordering the sea not to come in.
So has the value of all US assets.
Nothing unsustainable about a particle of it. The nominal economy has grown 7% per year compounded. Corporate profits, 7% per year compounding. It is normal. It isn't a problem.
> Since the US defaulted on its debt, and it was thus put into receivership, who ended up the owners of the country?
Communists.
There’s a line in Dickens - could be the Christmas Carol - where he uses “US Security” as a pejorative, as in ‘as solid as a US Security’
And a bond sold with the promise of repayment in the amount of 1 ounce of gold bought how much gold?
What was growth of the national economy and corporate profits in the last 3 quarters of 2008 and year-to-date?
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