The U.S. Has REPEATEDLY Defaulted

[bananas]

I remember the default of 1979.

Note: For readability, I snipped out some parts of this without putting "<snip>" in.

http://www.washingtonsblog.com/2013/10/the-u-s-has-repeatedly-defaulted.html

The U.S. Has REPEATEDLY Defaulted

Posted on October 14, 2013 by WashingtonsBlog


It’s a Myth that the U.S. Has Never Defaulted On Its Debt

Some people argue that countries can’t default. But that’s false.

It is widely stated that the U.S. government has never defaulted. However, that is also a myth.

Catherine Rampbell reports in the New York Times:

The first time was in 1790, the only episode Professor Reinhart unearthed in which the United States defaulted on its external debt obligations. It also defaulted on its domestic debt obligations then, too.

Then in 1933, in the midst of the Great Depression, the United States had another domestic debt default related to the repayment of gold-based obligations.

Associated Press points out that the U.S. defaulted in 1814:

The young nation had a dramatic excuse: The Treasury was empty, the White House and Capitol were charred ruins, even the troops fighting the War of 1812 weren’t getting paid.

Donald Marron writes at Forbes:

The United States defaulted on some Treasury bills in 1979 (ht: Jason Zweig). And it paid a steep price for stiffing bondholders.

Many consider Nixon’s decision to refusal to redeem dollars for gold to constitute a partial default. For example, University of Massachusetts at Amherst economics professor Gerald Epstein notes:

Forty years ago this month, on August 15, 1971, President Nixon “closed the gold window”, refusing to let foreign central banks redeem their dollars for gold, facilitating the devaluation of the U.S dollar which had been fixed relative to gold for almost thirty years. While not strictly a default on a US debt obligation, ... the Nixon administration effectively “defaulted” on the United States’ long-standing obligations ending once and for all the Bretton Woods System.

James Grant says in the Washington Post:

The U.S. government defaulted after the Revolutionary War, and it defaulted at intervals thereafter.
...
But in the whirlwind of the “first hundred days” of the New Deal, the dollar came in for redefinition. The country needed a cheaper and more abundant currency, FDR said. By and by, the dollar’s value was reduced to 1/35 of an ounce of gold.
...
The “American default,” as this piece of domestic stimulus was known in foreign parts , provoked condemnation in the City of London. “One of the most egregious defaults in history,” judged the London Financial News.

John Chamberlain argues at the Mises Institute that the U.S. defaulted on its:

Continental Currency in 1779
Domestic debt between 1782 through 1790
Greenbacks in 1862
Liberty Bonds in 1934

States Have Defaulted Also

<snip>

[BlueStreak]

1. Interesting stuff. But mostly ancient history

I don't recall the 1979 incident, and I question the "steep price" claim.

Other than that, the only other event in modern economic history was the shift off the gold standard. That is not a default. It is simply moving completely to fiat, which all modern economies use now. Nothing was defaulted as long as you are a participant in the fiat money system.

I think there are plenty of questions to be raised about the fractional money system. It is essentially a giant Ponzi scheme that only works as long as there is rapid population growth / rapid economic expansion among the world population. As we approach the planet's carrying capacity, that system could crumble like a house of cards.

But that is a whole different question from "default".

[DonViejo]

2. Definitely ancient history...

and occurences when the USA wasn't a leader of the world.

[bananas]

4. It's easy to forget - a lot happened in 1979

The Meltdown at Three Mile Island, the Iran Hostage Crisis, Skylab came down, Russia invaded Afghanistan, ...

[Uncle Joe]

8. 1979 was nothing compared to this

1979 was a very short term and miniscule default/partial default compared to the total debt and yet interest rates started to rise nonetheless.

http://en.wikipedia.org/wiki/United_States_credit_default

A full United States credit default has never happened on its debt obligations. In April 1979, however, the United States may have technically defaulted on $122 million in Treasury bills, which was less than 1% of U.S. debt. The Treasury Department characterized it as a delay rather than as a default, but it did have consequences for short-term interest rates, which jumped 0.6%. Others view it as a temporary, partial default.

Not to mention the 1979 credit default wasn't premeditated, being more of a glitch, but deliberately not raising the debt ceiling as the Republicans are doing today and provoking nationwide economic devastation is in a whole different category.

[Laelth]

3. Poppycock.

While historically accurate, the defaults described in the OP occurred in vastly different historical conditions. Now, the USD is the world's reserve currency, and now we're the greatest economic engine on the planet. Our current situation is not even remotely comparable to those described in the OP. Now, a US default can do a lot more damage to the world economy.

-Laelth

[EC]

5. not really the same

these were more like transfer of funds that were late. Oh yeah, the United States were also sued because of the late payments.

[beerandjesus]

6. The 14th Amendment was ratified in 1868

I think anything prior to that counts as "ancient history" for our purposes.

On the other points, I defer to other posters.

[SlipperySlope]

7. If you repeat a lie often enough, it becomes the truth.

"If you repeat a lie often enough, it becomes the truth." - Joseph Goebbels