Wednesday, May 21, 2025

The US has never defaulted on its debt — except the four times it did

 For reference: https://thehill.com/opinion/finance/575722-the-us-has-never-defaulted-on-its-debt-except-the-four-times-it-did/

 “As much as I deplore this refusal to fulfill the solemn  promise of bonds of the United States,” wrote Justice Harlan Stone, a member of the majority, “the government, through exercise of its sovereign power…has rendered itself immune from liability,” demonstrating the classic risk of lending to a sovereign.

The Treasury could decide to create a new currency (or cryptocurrency) and then pay back its debts in the new currency.

That is what it did in the four times referred to in the article:

1. issue "greenbacks" in place of "demand notes" in 1862

2. issue paper currency in place of gold coins in 1933

3. issue federal reserve notes in place of silver certificates in 1968

4. break the US commitment to redeem dollars held by foreign governments for gold (under the Bretton Woods Agreement) and give them non-convertible federal reserve notes in 1971

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