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Thursday, July 7, 2011

America's Previous Debt Defaults, Or, The World Has Ended Several Times Before

The United States Treasury defaulted on certain T-Bills held by individual investors in April of 1979. Subsequent to this default, T-Bill interest rates rose 60% over the next few months. At the time, the Treasury blamed data processing errors and Congress' failure to raise the debt ceiling a few weeks prior to the default.

In 1933, during the height of the Worst Great Depression Prior to Barack Obama Taking Office, the Treasury repaid gold-based obligations with dollars, which is considered a default as the repayment terms differed from the actual vehicle of repayment.

In 1790, the US defaulted on external and internal debt obligations.

During the Depression of 1841-42, nine states defaulted on their debt obligations, and during the recessionary years after the Civil War (1873-84) ten states defaulted. These defaults are the reason so many states have constitutionally required balanced budgets.

So the next time some Congressional or Executive Branch Chicken Little tells you a default is unprecedented and they don't know what the results of a default will be, they are either lying to you or ignorant of history.

Some data compiled from NY Times July 7, 2011.

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