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Letters to the Editor

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July 29, 2011

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To the editor:

We hear a lot about the supposed “fact” that, in our history, the United States has never defaulted on our debt. In fact, in essence, we have at least 5 times before.

1) Continental currency essentially defaulted in 1779 when Congress redeemed their notes at less then 1/38th their original value.

2) In 1790, the Continental Congress issued notes then refused to pay them back beginning March 1, 1782.

3) In August 1861, Congress created a new currency to finance the war. They were to be repaid “on demand,” but five months later they defaulted by refusing to redeem them on demand.

4) To finance the war, in 1917, Congress issued “Liberty Bonds” which were redeemable in gold. After Roosevelt became president during the Great Depression, he decided to domestically refuse to redeem them any longer in gold. In addition he confiscated private gold and then devalued the dollar by 40 percent which was essentially a default to our trading partners.

5) On Aug. 15, 1971, Nixon did away with the link between the dollar and gold. At that time gold was worth $35 an ounce and today it is around $1,600 an ounce. So that was essentially a 100 percent devaluation of the dollar — of interest to foreigners holding our dollars.

6) Currently we have been printing dollars with no additional reserves backing them, which devalues the dollar in the worldwide market.

Comments

Ron Holzwarth 3 years, 5 months ago

“Those who do not learn from history are doomed to repeat it”. - George Santayana

mom_of_three 3 years, 5 months ago

And what were the results to the economy, either domestically or worldwide, during those "defaults?" While saying we have never "defaulted" may be not be true, does not mean we should do it now because we may have in the past. Its what could, may or will happen if we default that scares the heck out of me.

pizzapete 3 years, 5 months ago

2) In 1790, the Continental Congress issued notes then refused to pay them back beginning March 1, 1782.

Do you have these dates mixed up? They refused to pay them (1782) before they were issued (1790)? Or am I reading this wrong?

Jimo 3 years, 5 months ago

The "default" was in 1782. The money was premised on loans from France and Holland, if I recall, and the creditors were primarily from France and Holland. When these countries didn't own up to their promises to the U.S., the U.S. stopped payment to the creditors. The Congress also questioned whether the new U.S. government was required to fulfill to the last word the obligation incurred under the former Articles of Confederation. In 1790, the Congress officially repudiated this debt, and used this repudiation to negotiate a different deal with partial payment made in return for satisfaction of the obligation.

We see the same thing today with France and Germany objecting to bailing out "Greece" when who really is being bailed out are French and German banks who lent money to Greece.

jayhawxrok 3 years, 5 months ago

The far right distorts history, they are allergic to facts of any kind.

Jimo 3 years, 5 months ago

"Currently we have been printing dollars with no additional reserves backing them, which devalues the dollar in the worldwide market."

The first part is true. But is so unremarkable the question is: why remark on it?

The second part is false. The dollar is not "devalued" because it isn't "backed" by "reserves" - whether shiny metal, necklaces of seashells, cows, or ivory tusks. The dollar is "backed" by the "full faith and credit of the United States," which assumes we don't elect nutjobs to office. It remains to be seen if our Mad Tea Hatters will cause a massive devaluation of the currency by refusing to honor our existing debts.

Jimo 3 years, 5 months ago

Elected officials don't have to be angels - just sane adults.

Gold was abandoned for damn good reasons. And the world economy has prospered ever since - to an unprecedented degree.

Indeed, abandonment of gold is hated primarily because it is on-going evidence that progress is possible in the affairs of men.

just_another_bozo_on_this_bus 3 years, 5 months ago

"Growth has slowed significantly since gold was abandoned as the world currency. We would have prospered even more on the gold standard," pronounces the King of France.

Jimo 3 years, 5 months ago

The implosion caused by the civil war among feuding Republicans - the insane wing ("hobbits")of the GOP versus the merely extreme wing ("trolls") - makes it clear that the Speaker must abandon the 'majority of the majority' rule: only bring to the floor for a vote bills that are supported by a majority of Republicans.

Boehner will need to bring a Democratic plan to the floor and then find 24 adult Republicans. Are there two dozens adults left in the GOP?

Jimo 3 years, 5 months ago

As one religious blogger put it yesterday:

Ultimately, the far-right ideology that controls the terms of this debate is going to fail for one simple reason: it won’t work.

Imagine walking into an interview for a job as a manager or CEO of a firm and telling them that you think your primary role is to do as little as possible and let your employees each pursue their own narrow self-interest to the exclusion of everyone else in the firm – the interview committee would think you’ve gone mad.

But this is precisely what politicians on the far right are asking of voters right now. The best of American democracy has always fostered political experimentation and pragmatic results over ideology, but in our current situation the experiment being run by the far right is playing Russian roulette with our common good, and will have disastrous consequences for our economy.

weeslicket 3 years, 5 months ago

still waiting for some grown-ups to make a sensible compromise. compromise. p-u-e

anyone else happen to notice that we could have had an agreement a couple of weeks ago on about a 4 trillion $ debt reduction. nope? nobody?
then it became 2 trillion. then 1 trillion (and also believe in mr. cato's moonbats).

we do, in fact, live within interesting times.

jafs 3 years, 5 months ago

I noticed that, although most people seem to have forgotten it.

The plan reduced the deficits more than either of the current ones, and included some proposals to remove tax loopholes and raise revenue.

Because of the stubborn refusal to consider any revenue-raising ideas, we find ourselves where we are now.

weeslicket 3 years, 5 months ago

yep. that's how i remember it as well.

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