U.S. defaults: from Lincoln to Roosevelt, from bankruptcy to the occasion
In the best traditions of Hollywood, the U.S. authorities agreed to raise the debt ceiling one day before the deadline for payment of obligations. True, if the congressmen had found common ground even seconds before the deadline, it is unlikely that the market realized the real threat - it is not the first time that the U.S. has avoided the debt ceiling "on tape" Default. Just should we believe the Democrats' rhetoric that the states have never yet refused to pay their bills? As a simple history book shows, someone is being deceitful here.
Default is the beginning of all beginnings
The funny thing is. conscious American history began with the default.. In 1775 the issue of credit bills was launched, the total amount of which amounted to $241 million. The raised funds went to finance the revolution and the armed struggle against Great Britain. As is well known, the American revolt ended in success but, what few people already know, also in financial collapse. Congress and 13 states threw obligations to each other like a hot potato, and in the end none of them have ever paid back the population.. American citizens, in turn, responded with a natural distrust of the continental dollar, which fell to 1/7 of the original rate. The authorities then promised to pay the obligations, but in a smaller and unfavorable proportion.
Four years later, the cautionary tale was repeated. The already independent States collected foreign debts from France and Holland in order to pay off their domestic obligations. However, the stream of money from Europe quickly dried up, and the American authorities were forced to confess for the second time that there was nothing to pay the debts of the population. On March 1, 1782, the U.S. declared a default, partially compensating the population's debts only ten years later.
Having made a mess of things at the very dawn of independence, the United States stepped on the same rake a third time in the Civil War era. Again the emission (this time of currency) was launched in the name of a good cause - the victory of the North over the slave owners of the South. The newfangled money token has been given the distinctive name "greenbucks" and even justified its appearance by providing Abraham Lincoln with funding for the army. However, the spoon of tar turned out to be very thick: only five months after the beginning of the issue of currency, the Treasury was forced to recognize that the turned into a worthless piece of paper.that was virtually unbacked by gold. When Americans learned of this news, they tried to have as little to do with the greenback as possible.
Regularities and "accidents"
Franklin Roosevelt is considered an iconic and legendary figure for U.S. history who led the country out of the of the Great Economic Depression and then laid the foundation for the country's rise to the forefront of the world. However, one cannot call the decision of the president who pulled the country out of the crisis a straw man. A comparison with Alexander the Great and cutting the Gordian knot is more appropriate. From the debts accumulated by America since the end of the XIX century, which amounted to an incredible at that time figure of $22 billion, Roosevelt got rid of it as simply and ingenuously as possible - he declared a defaultby denying compensation to one and all!
Well, and those who suddenly remember clearly events of 1979I'm sure you felt a sense of deja vu watching Barack Obama's recent proceedings with Congress. Back then, the Democratic president Jimmy Carter has also engaged in a protracted debate with lawmakers about increasing the state debt limit. So protracted that when the parties did find a consensus, the time available to the Ministry of Finance was not enough to pay for the liabilities that had "crept up unnoticed".
Officials cleverly justified themselves by the failure of payment processing equipment, but were forced not only to repay the overdue debts, but even to pay compensation to the investors who sued the state. This US technical default is known as an "accidental" default.