Thread: A United States History of debt and default...

Another member asked me when the US had ever defaulted on loads, so it might as well be a public conversation. The US has defaulted on it's dept before, several times. Here are a few examples:

In 1968 the government revoked the right to redeem banknotes for gold, this left citizens and foreigners with nothing but paper notes in place of promised of gold. Around this time the Coinage Act of 1965 removed all silver from quarters and dimes, further devaluing US currency.

In August of 1971 the United States stopped allowing convertibility of the dollar into gold. As a result the dollar became fully fiat currency, backed by nothing but the promise of the federal government fiat. This action, referred to as the Nixon shock, created the situation in which the US dollar became the sole backing of currencies and was known as Nixon Stock [1]. The value of the US dollar also fell dramatically at this time and never fully recovered [2].

In 1933, Congress passed a resolution to avoid paying back bonds with gold, instead paying them back with paper money (which is essentially just a note). This was known as the Gold Repeal Joint Resolution [3] and was a violation of the "gold clause" of said bond.

During the Civil War the National Banks were created and the first paper money was issued known as "On Demand" notes, but nicknamed greenbacks. The US also issued war bonds to back this paper money, which it used to fun pay soldiers and fund the war effort. But this was basically fiat money, since later US bonds were only exchangeable for paper money, not gold.

The US has defaulted before and we'll do it again.

1. Nixon Stock

2. History of US dollar value

3. Gold Repeal Joint Resolution

4. Special Drawing Rights Act of 1968

Unpopular topic, finance. But banks are actually more powerful than standing armies.

I for one have accepted that we're screwed. Default is the only option; there are not enough politicians willing to cut spending to get us out of the red.

Originally Posted by My Fing ID

I for one have accepted that we're screwed. Default is the only option; there are not enough politicians willing to cut spending to get us out of the red.

Politicans are only slaves to the voters. We claim corporations and banks have all the power but i don't see washington sweating about polls of bankers.

I see them worried about polls of the American People.

The fact is The American People have corrupted themselves to the point of no return.

They want to take care of old people, but the fact is we are about to have so many old people, that it is probably a fiscal impossiblity to ever properly take care of them.

They want to have free healthcare.

They want to have a "living wage" even if that means destroying jobs.

But NONE of them, from the poorest to the richest, wants their taxes raised.

So our politicians are basically stuck.

Hell the GOP has been doing good work, trying like hell to at least get a real debate going, but the (*)(*)(*)(*) American people are still polling that they are unhappy with Congress.

I don't know WHAT it will take the shut the American People up and just make them accept whatever job they can find until things improve, to accept that social justice of European levels is to expensive a proposition for 310 million people and basically convince them to just mind their own business and quit worrying about what their neighbor is doing or making or buying.

Originally Posted by SiliconMagician

Politicans are only slaves to the voters. We claim corporations and banks have all the power but i don't see washington sweating about polls of bankers.

I see them worried about polls of the American People.

Really? A minority vote and a minority of voters actually know what's happening in Washington. A combination of polulism and apathy seems to allow Demorcrats and Republicans to be bought and paid for by interest groups.

Originally Posted by SiliconMagician

Hell the GOP has been doing good work, trying like hell to at least get a real debate going, but the (BLAH) American people are still polling that they are unhappy with Congress.

I hate hearing peolpe make excuses for the Republican party, when history tells us they have done exactly the same kinds of things that have got us into this situation and it wasn't just Lincoln and Nixon. If the Republicans could disgard all of their social conservative nonsense (marriage bans, abortion bans, drug bans, whatever) and just focus on financial issues, reducing government and personal freedom, they would win more elections and people would be more happy with them.

Originally Posted by SiliconMagician

I don't know WHAT it will take the shut the American People up and just make them accept whatever job they can find until things improve, to accept that social justice of European levels is to expensive a proposition for 310 million people and basically convince them to just mind their own business and quit worrying about what their neighbor is doing or making or buying.

How about never suggesting We the People shut up? But I agree people in a free society should be self reliant and free to make their own mistakes. Liberty is the whole package, personal, social and financial.

The American people will learn that, if we keep the dialogue going.

The only way the United States can "default" is through debasement. As for the Nixon Shock that wasn't a "default". He simply said that the US would no longer exchange USD for gold. They could still purchase items with their USD.

Originally Posted by akphidelt

The only way the United States can "default" is through debasement. As for the Nixon Shock that wasn't a "default". He simply said that the US would no longer exchange USD for gold. They could still purchase items with their USD.

It ended the practice of exchanging "paper money" for gold, which defaulted on our entire currency system. I suppose you could say it wasn't a direct default on loans, but our monetary system itself is a debt based currency (ever since the Civil War at least) and now it's an entirely fiat currency with no direct exchangeable value. Debasement is exactly what happened under Nixon as a result of several policy choices. So did we default under you definition?

I think so, yes.

Originally Posted by akphidelt

The only way the United States can "default" is through debasement. As for the Nixon Shock that wasn't a "default". He simply said that the US would no longer exchange USD for gold. They could still purchase items with their USD.

Yes, Nixon scrapping the gold from the dollar was in fact a default. Ask anyone.

Secondly, ask any economist and the dollar is getting debased. I wonder what that means according to your post....

Originally Posted by Joe Six-pack

It ended the practice of exchanging "paper money" for gold, which defaulted on our entire currency system. I suppose you could say it wasn't a direct default on loans, but our monetary system itself is a debt based currency (ever since the Civil War at least) and now it's an entirely fiat currency with no direct exchangeable value. Debasement is exactly what happened under Nixon as a result of several policy choices. So did we default under you definition?

I think so, yes.

The thing they learned about economics is gold is backed by nothing just like fiat money. The evolution of money lead to this point, unless you want to use a global currency like gold in which it's not about what your country produces but how much gold you find in the ground... then I guess we can go back to the gold standard.

Originally Posted by akphidelt

The thing they learned about economics is gold is backed by nothing just like fiat money.

Haha, no. Gold has intrinsic value. Paper is only valuable because a Bank or the Federal reserve says so, but gold is valuable no matter what, because people want it. People have wanted it for ten thousand years of human civilization and will continue to want it even if banks and governments fail.

What they learned was that they could default on their promise to pay back lenders with gold and instead give them "paper" which has no value outside of what the banking and financial system says it has. Gold was the promise and it wasn't delivered.

Originally Posted by akphidelt

The evolution of money lead to this point, unless you want to use a global currency like gold in which it's not about what your country produces but how much gold you find in the ground... then I guess we can go back to the gold standard.

I'd prefer to use a system in which our money has intrinsic value, like when our dimes contained real silver or our dollars where gold or silver coins. It's not so much an "evolution" of money as it is a fiat currency that would become worthless if banks stopped accepting it. The same cannot be said for gold or silver.

I can accept a bank note, just not if I was promised real gold.