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The U.S. Has REPEATEDLY Defaulted
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 reported in the New York Times in 2011:
The United States has actually defaulted on its debt obligations before.
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.
(Update.)
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.
Terry Zivney and Richard Marcus describe the default in The Financial Review...:
Investors in T-bills maturing April 26, 1979 were told that the U.S. Treasury could not make its payments on maturing securities to individual investors. The Treasury was also late in redeeming T-bills which become due on May 3 and May 10, 1979. The Treasury blamed this delay on an unprecedented volume of participation by small investors, on failure of Congress to act in a timely fashion on the debt ceiling legislation in April, and on an unanticipated failure of word processing equipment used to prepare check schedules.
The United States thus defaulted because Treasury’s back office was on the fritz in the wake of a debt limit showdown.
This default was temporary. Treasury did pay these T-bills after a short delay. But it balked at paying additional interest to cover the period of delay. According to Zivney and Marcus, it required both legal arm twisting and new legislation before Treasury made all investors whole for that additional interest.
Many consider Nixon’s decision to refusal to redeem dollars for gold to constitute a default. For example, University of Massachusetts at Amherst economics professor Gerald Epstein writes:
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, by closing the gold window the US government abrogated a financial commitment it had made to the rest of the world at the Bretton Woods Conference in 1944 that set up the post-war monetary system. At Bretton Woods, the United States had promised to redeem any and all U.S. dollars held by foreigners – later limited to just foreign central banks — for $35 dollars an ounce. This promise explains why the Bretton Woods monetary system was called a “gold exchange standard” and why many believed the US dollar to be “as good as gold”. When Nixon refused to let foreign central banks turn in their dollars for gold, and encouraged the devaluation of the dollar which reduced the value of foreign central bank holdings of dollars, the Nixon administration effectively “defaulted” on the United States’ long-standing obligations ending once and for all the Bretton Woods System.
James Grant writes in the Washington Post:
The U.S. government defaulted after the Revolutionary War, and it defaulted at intervals thereafter. Moreover, on the authority of the chairman of the Federal Reserve Board, the government means to keep right on shirking, dodging or trimming, if not legally defaulting.
Default means to not pay as promised, and politics may interrupt the timely service of the government’s debts.
***
Things were very different when America owed the kind of dollars that couldn’t just be whistled into existence. By 1790, the new republic was in arrears on $11,710,000 in foreign debt. These were obligations payable in gold and silver. Alexander Hamilton, the first secretary of the Treasury, duly paid them. In doing so, he cured a default.
***
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.
By any fair definition, this was another default. Creditors both domestic and foreign had lent dollars weighing just what the Founders had said they should weigh. They expected to be repaid in identical money.
Language to this effect — a “gold clause” — was standard in debt contracts of the time, including instruments binding the Treasury. But Congress resolved to abrogate those contracts, and in 1935 the Supreme Court upheld Congress.
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. “For repudiation of the gold clause is nothing less than that. The plea that recent developments have created abnormal circumstances is wholly irrelevant. It was precisely against such circumstances that the gold clause was designed to safeguard bondholders.”
The lighter Roosevelt dollar did service until 1971, when President Richard M. Nixon lightened it again. In fact, Nixon allowed it to float. No longer was the value of the greenback defined in law as a particular weight of gold or silver. It became what it looked like: a piece of paper.
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
States have also defaulted. The Wall Street Journal noted in 2011:
Land values soared. States splurged on new programs. Then it all went bust, bringing down banks and state governments with them. This wasn’t America [today], it was America in 1841, when a now-forgotten depression pushed eight states and a desolate territory called Florida into the unthinkable: They defaulted on debts.
And Catherine Rampbell notes:
There were two episodes when a spate of American states defaulted on their debts, in 1841-42 (nine states) and 1873-84 (10 states). The havoc wreaked by these state-level defaults is part of the reason that so many states now have constitutional balanced-budget requirements.
China Alleges that the U.S. Has Already Defaulted By Weakening the Dollar
Grant argues:
If today’s political impasse leads to another default, it will be a kind of technicality. Sooner or later, the Obama Treasury will resume writing checks. The question is what those checks will buy.
***
This is the unsustainable conceit of the world’s superpower-cum-super debtor. By deed, if not audible word, we Americans say: “The greenback is the world’s great monetary brand. You have no choice but to use it. Like it or lump it.” But the historical record of paper currencies is clear: Governments always over-issue it. The people finally do lump it.”
(Indeed, the average life expectancy for a fiat currency is less than 40 years.)
And our creditor – China – has said that America has defaulted by printing too many dollars. For example:
A Chinese ratings house has accused the United States of defaulting on its massive debt, state media said Friday, a day after Beijing urged Washington to put its fiscal house in order.
“In our opinion, the United States has already been defaulting,” Guan Jianzhong, president of Dagong Global Credit Rating Co. Ltd., the only Chinese agency that gives sovereign ratings, was quoted by the Global Times saying.
Washington had already defaulted on its loans by allowing the dollar to weaken against other currencies – eroding the wealth of creditors including China, Guan said.
That might be Chinese propaganda. But the point remains that the U.S. might not be able to print money forever without facing consequences from its creditors.
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Obama trying to convince the world the US government is not a dead beat. That was the best joke this year. I see fear in the eyes of those that profit off our corrupt system. They know that soon the party will be over, they are just afraid of paying the tab. But in the end, everyone has to pay their tab.
This is probaby the most important article ever to grace this website. You have brought to light the fountainhead from which debt slavery has flowed. Does anyone think it's a coincidence that the highest inflation adjusted income the US has ever enjoyed hit it's peak around the time Nixon went full fiat?
People complain about a single payer system. The currency is the largest single payer system ever created and it's right under our noses.
Tender FRN's guess who is really paying for that widget? The Fed is. Guess who really owns that widget? The FED does.
Refuse to pay your income tax. They will take that widget right from you.
Some quick facts of law.
Paying with a note extinguishes the debt in personam but debt in rem remains.
There is a big difference between discharging a debt and paying one.
There is a big difference between executory contract versus and executed contract.
All FRN's are payable in Washington DC or any Federal Reserve bank (a federal enclave). The situs of a contract is where that contract is PAID.
This is how the US via the FED can control all aspects of commerce.
They are an undisclosed third party and people are unaware of the legal significance of paying with fiat paper currency.
Seems to me this applies to EVERY saver in the US!
Hey guys, guess what? Paul Krugman just declared personal bankruptcy. Guess the bill finally came for all those broken windows.
http://dailycurrant.com/2013/03/06/paul-krugman-declares-personal-bankruptcy/
Hey guys, guess what? Paul Krugman just declared personal bankruptcy. Guess the bill finally came for all those broken windows.
http://dailycurrant.com/2013/03/06/paul-krugman-declares-personal-bankruptcy/
Odious debt, FUCK 'EM!
http://blacklistednews.com/?news_id=29571&print=1
Never defaulted with Shadow Bank attached
so many states now have constitutional balanced-budget requirements
Many of the defaults mentioned involved real mony - gold and silver. ANY default involving the failure to pay in fiat currency is totally artificial and a CHOICE since the fedgov takes in $250 billion per month and only has to pay $30/mo. in debt interest. If for some stupid reason they can't prioritize that payment, that is a CHOICE to not enable such prioritization, not a true inability to pay. Thus, ANY US default involving fiat currency is a CHOICE.
The 14th Ammendment actually COMPELS the government to make the P&I payments!
Here's another default from: apnews.excite.com/article/20131014/DA9E0BU00.html
Once, 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.[...]
These lapses, little noted outside financial circles in their day, are nearly forgotten now.
Indeed, Treasury Secretary Jacob Lew frequently declares that the United States has always met all of its obligations; a Treasury spokeswoman declined to discuss any possible exceptions. President Barack Obama, reminding Congress of the urgency of raising the debt limit before a Thursday deadline, warned of "the chaos that could result if, for the first time in our history, we don't pay our bills on time."
Historian Don Hickey isn't surprised that the default in November 1814 gets overlooked. After all, he titled his book, "The War of 1812: A Forgotten Conflict."
"He doesn't know his history," Hickey said of the president. "It's that simple."
the next time DC burns,
i hope we get video coverage.
babylon is burning.
I'm wondering what will happen to various countries when the U.S. calls in all the old money and replaces it with new counterfeit proof dollars.The drug cartels and countries like Lebanon where 40% of all U.S. money is counterfeit is going to hurt a lot.The banks will scan all money to replace it with the new bills.It's also a method of determining where it comes from.With the new U.S. bills getting ready to roll out,there could also be the wrench thrown into the machinery when someone gets the idea of adding in the time deadline requirement.Nobody will want to get stuck with counterfeit.And the trouble for the drug gangs and their partnerships with the CIA will be converting to the new bills.Maybe the CIA will have t fly or truck the new bills around the globe in order to keep up their scams of laundering dope and getting around the general accounting office.
the US stock market is a huge money laundering scam, if you consider all the volume which comes in from overseas, which is never vetted. (quote: "80% of these new $100 bills are going OVERSEAS" BB
do you think those foreign brokers are checking to see where the money is coming from. this explains a couple of things though, what the war in Iraq was about, not oil not democracy, but creating offshore lines of investment to launder new or counterfeit money. (the financial crisis came about when 1T simply disappeared from the country, and it wasn't coming back fast enough) it became somewhat impractical for the FED to JUST buy S&P futures, too damn transparent, someone will figure it out, they have to go to cash and they have to launder it offshore. the Chinese government holds US bonds, but the Chinese and Russian plutocrats hold stock certificates. this is what happened in Argentina when the country crashed in 2006, and bondholders took a 50% haircut but stockholders were made whole again, and some made HUGE profits. the same thing will happen here, Save Yourself Buy Stocks, thats what the wealthy are doing. and then buy some put insurance to make it look good, you can double your profits
My thought is that when the government defaults, they just need to default to the entities who are not affected by the default, such as the Fed and other international banks. Think about it... the Fed and international banks can create as much money as they want out of thin air. Money is created through the creation of debt. There is no real and tangible money. It is "nothing". The worst case scenario of defaulting on a Central or international bank is that the bank wipes the debt off of their balance sheet and the money created from the debt stays in circulation. Who is really affected? Answer: no one. As long as the money being defaulted on is fiat and the entity taking the loss is a central or international bank, then it does not matter if the debt is paid back or there is a default.
The only time a default matters is when the people/entities being defaulted on are individuals who cannot create money out of thin air through the creation of debt.
This joke. This lie ... about treating banks (and the bankers who run them) like people is one of the things that has kept people enslaved through the entire fiat financialization era.
My thought is that when the government defaults, they just need to default to the entities who are not affected by the default, such as the Fed and other international banks. Think about it... the Fed and international banks can create as much money as they want out of thin air.
So you're saying that it's all fine and dandy for governments to create money without limit, but you criticize the central banks for doing the same?
The biggest distinction is that when the Fed creates money out of thin air to buy up roughly half of all newly issued debt, the Fed can keep that debt on their balance sheet forever and it can grow without bounds. There is no "debt-limit statute" restricting the money printing done by the Fed.
BUT, when it comes to government borrowing, there is that statutory limit.
That's the most important difference between the two types of monetary expansion/inflation that we have in current system.
There is a fixed limit to government borrowing by statute, but there is no limit to the size of Fed balance sheet. And they can keep unlimited debt on their books until it matures and then keep on buying MORE and MORE of it.
At least half of all home mortgages have been bought up by the Fed through MBSs and Fannie/Freddie. My own home mortgage was transferred from bank balance sheet to government balance sheet in 2008 even though my credit rating is 99th quantile. Many of you received such letters. The Fed will end up owning everything here that's bought on credit. And if you take out large student loans to be a doctor or lawyer they'll own YOU.
So, who is really in charge? It seems to me that it's the central banks that reign supreme over governments, at least here in the U.S. because government printing is limited, while Fed printing is unlimited. Lack of limits means power without limit.
A rational response to a tyrannical ruling regime is to overthrow it per 1776 Declaration of Independence.
But how can a central bank be "overthrown" when it controls government itself ... unless that government is overthrown?
The Framers warned us about the insidious powers of a banking system and, per Article 1, Section 8, they explicitly gave Congress the authority and responsibilities "To borrow Money on the creedit of the United States." and "To coin Money, regulate the Value thereof ..."
When Congress in 1913 delegated the latter authority and responsibility to a privately owned central bank, the Fed, it failed to follow the Constitution by granting control of our money supply to private bankers.
For 100 years the true ruler of the U.S. has been the Fed.
But Fed appointees require Senate confirmation. What we really need is a long-term Senate filibuster to permanently block all nominations to the Fed. If that can't happen, then burn the whole place down is my opinion.
The great deceipt by the great deceiver: Satan.
The United States has actually defaulted on its debt obligations before.
So this makes it ok!
After dozens of technical defaults, insanity (doing the same thing, expecting a different result) seems to be the only way forward..?
Uh, no mention of our default on the Civil War...Act of 1871? USA INC?
In the article the Default on Greenbacks was mentioned as happening in 1862.
The Greenbacks were issued in 1862 during the Civil War. Of course it was known as "The Crime of '71" as that was when the default happened.
The point of the article is to expose a myth and demonstrate that a Default can happen. The most current in history happened in April, 1979, with a partial default due to...A FAILURE TO INCREASE THE DEBT LIMIT. Sound familiar?
Tell me...WHAT HAPPENED TO THE PRICE OF GOLD AFTERWARDS??? DID IT EXPLODE TO ITS HISTORIC HIGH OF $848 right after the Temporary Default? What do you think might happen to the price of Gold?
Thank you GW. This is what I do expect from you.
To answer your questions:
Yes.
Gold rose.
Yes, for about one year, then fell again to a new higher "stable" price around $400 an ounce.
Gold MIGHT go up. However, given that gold has already seen about $1,800, and is now about $1,300 under the threat of default, the bloom may be off the rose.
The price of gold can and will do anything while the bullion banks can still dump tonnes of non-existent gold on the futures markets to suppress the price.
Fingers crossed the Chinese keep buying physical hand over fist...
I wish I could pay my bill by just printing money...
You can! It's easy. Look in the check book. See all those checks write away.
Then as The Donald would say Let the lawyers figure it out.
Bankruptcy. It's what the little crooks do.
The USA will also default if every nation that has its gold in the USA asks for it back ASAP.
You mean it would be a default if they asked for their rehypothecated gold back? Ummm... nope. They agreed to the rehypothecation when they tendered the gold for safe keeping, so they'd be stuck with the consequences of it.
Also - acts performed under the authority of a mutually agreed upon contract clause would not be default. People, and governments, should know what the contracts they sign say, and what they mean before signing. Germany might be an exception since their gold (post WW II) was probably not tendered voluntarily.
They agreed to the rehypothecation when they tendered...
Exactly. This is also the argument that has kept the Honorable Jon a free person. The deposits belong to the agency the depositor entrusts them with to do with as the top decision maker(s) judge as best. This is the essence of "trust". This is why participation in these institutions has suffered so greatly.
It's high time the US judiciary exercisies appropriate action against these frauds or they too should be charged and convicted of control fraud themselves for not exercising the power entrusted to them on behalf of the citizenry.
I think some years ago (maybe around 25 years ago) there was another default of sorts when it cut short some treasury notes with a high yield, paid them off and effectively robbed the holders of the higher interest they would have been entitled to.
By that logic paying off your mortgage early is a default.
"paying off your mortgage early is a default."
That would be a term of contract.
Not sure of the wording on the bonds but the contract is set for a duration. If there is a term of pre pay then that would be risk.
Pay me more .
They did that to savings bonds, also.
1971 closing the gold window I also count as a default.
It's mentioned in the article as one of the defaults.
Today, after years of watching the two political parties do the exact same shit over and over again, it just boggles my mind that anyone with half a brain could think there there are actual good guys and bad guys in Washington. Normally intelligent people are parroting all the same stupid partisan talking points they read on the Huffington Post or Fox News and getting very angry at anyone who disagrees with their finger pointing game.
It is amazing what a bunch of dumb fucks the Americans are these days. How it is possible that people with IQs over 80 can live in the same world as you and I and still insist that there is any difference between Republicrats and Demlicans is beyond me. Believing in the Red Team Blue Team meme today shows the same critical thinking ability of a pro wrestling fan that insists that that shit is real.
http://www.singledudetravel.com/2013/10/just-in-american-are-such-retard...
Its just the public "education" system doing its job. I think they did a good job because it is no mean feat to scrub critical thinking abilities out of the mass mind. The entertainment industry filled in the gaps, which helps also.
Indeed, since 1971 the US has been conducting stealth default through inflation and in the near future it will come back to bite us big time.
Global reserve status and the self-interests of the western central bankers and shadow banking/synthetics system is the only thing that has kept the S from hitting the F yet.
When China decides their self-interest exceeds the declining value of their US reserves and US export market, they will announce their 4,000 to 8,000 tonnes of Au and take over.
Then It will be time for the Fed, BOE, Comex and GLD to show their golden cards.
Thank you Alan..
Thank you Ben .
Thank you, Janet..
Thank you BOE..
Thank you Slick Willy, Fwank, Dudd, Shrub 43, and Choom Meister
Bingo. It is all about the global reserve currency status.
Thank you Woodrow..
Thanks again, Alan..
Thank you, Nixon.
The U.S. Govt will send them a small boat load of the new, more valuable $100 bills. "There you go; all paid up!"
But the point remains that the U.S. might not be able to print money forever without facing consequences from its creditors.
Might not be able to print money forever without facing consequences from its creditors? lulz