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U.S. Government Defaults

edited August 2022 in Other Investing
I've often heard that the U.S. government has never defaulted on its debt.
This is simply incorrect as four explicit defaults have occurred.
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  • yup, I recall that 1971 business. I wrote a thing about it for a school class.
  • edited August 2022
    I was aware of the 1971 incident which led to the demise of the Bretton Woods Agreement.
    However, I was incognizant of the other defaults.
  • Does the US Government currently have any outstanding bonds that are redeemable / payable in anything other than more paper (or plastic) dollars?
  • 10m-old troll piece from the Hill, yawn
    ... penned by this lower-tier rightwinger:
    https://www.rstreet.org/team/alex-j-pollock/

    whose name I knew, sort of, from his mortgage-doc simplification initiative.
    "His interests include ... the pursuit of clarity." Me too!

    As for the content, much of it could be used as a strawman demo, or possibly, but that aside, the first two history examples are crisis-related (still horrible!!), the third is arguably not exactly a default, is it?, although I remember it because my then recently deceased grandfather used to give us kids silver dollars as presents. The last genuine crisis has to do with other govs, and lets Pollock give away his motive with the complaint "allowing the unlimited printing of dollars by the Federal Reserve today." (Horrible!)
    Oh, well.

    Weeds and more weeds, in excelsis, about 1971 (https://www.nber.org/system/files/chapters/c6883/c6883.pdf, omg):

    One reconciliation of these points may lie in the fact that what is critical for
    the smooth operation of a system of stable exchange rates is not continual
    policy convergence per se but a commitment to exchange rate stability with
    sufficient credibility to reassure agents that policies will be consistent with
    stable exchange rates over the long term. Monetary and fiscal policies could
    and did diverge in the short run. But market participants were confident that
    industrial countries pegging to the dollar would eventually adjust their policies so as to reconcile them with the maintenance of a pegged dollar rate. So
    long as this remained the case, international capital movements stabilized
    nominal rates, rather than destabilizing them, until those policy adjustments
    took place. The relative stability of other variables followed.


    PKrug draft, on contexts for such crises:

    https://www.princeton.edu/~pkrugman/next generation.pdf

    complete with a droll tagline.
  • He left out the 5th, or first one, which occurred toward the end of the War of 1812. Lenders in New England were issued short term bills toward the end of the war. It was not possible to redeem them at the time the war ended, and for some years thereafter; there was nothing in the till (the notes had to be paid in gold and there wasn't any).

    IIRC, the notes weren't paid until 1820 or so, and by awarding shares in the newly formed 2nd Bank of the US, not gold.

    History buffs can read the Report of the Secretary of the Treasury for those years; look on FRASER or hathitrust.org
  • Sorry. Getting very far afield, here. The early years were a muddled mess for the infant new country. Lots of veterans just plain got SCREWED:

    "...In 1797, Knox's claim was upheld. Martin's 100-acre farm was valued by three commissioners: one appointed by the settlers, one by the Proprietors and the third by the first two. Martin's was appraised for the sum of $170, payable over six years in three installments either in cash or in farm products. He could not raise the money and begged Knox to allow him to keep the land. There is no evidence that Knox even acknowledged his plaintive letters and appeared to let him remain on the land. Plumb Martin farmed only eight(8) acres of the original 100 he opted for. Knox died in 1806, never demanding payment from Plumb Martin. By 1811, his farmland was cut by half, and by 1818, when he appeared in the Massachusetts General Court with other Revolutionary War veterans to claim a war pension, he owned nothing.[7]

    In 1818, Martin's war pension was approved and he received $96 a year for the rest of his life.[6] Still, other war veterans were fighting for what they were properly owed and, in an effort to further the cause of the veterans, Martin published his memoirs anonymously in 1830. It was not considered a success and mainly fell to the wayside, apparently lost to history.

    In 1836, a platoon of United States Light Infantry was marching through Prospect and discovered that Plumb Martin resided there. The platoon stopped outside of his house and fired a salute in honor of the Revolutionary War Hero.
    *** So, not only did he fight and win, but afterwards, the Sec. of War first attempted to evict him, but then tacitly relented. "Thanks a lot, that's awfully white of you!"

    After all he had been through, JP Martin's gravestone simply states: "A Solder of the Revolution." (Stockton Springs, Maine.)
    https://en.wikipedia.org/wiki/Joseph_Plumb_Martin

    image



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