Thursday, December 02, 2010

US Governmnent Never Defaulted?

Well....maybe, maybe not.

We're reminded of something by ZeroHedge:

One argument that supports optimism concerning our budget deficits has to do with the historical fact that the U.S. has never defaulted. The problem here is that default as it's traditionally understood is too narrowly defined. If calculated on a currency-value adjusted basis, Washington has short-changed its creditors before and it continues to do so.

That from a review of a book by economists Rogoff and Reinhart.

Gold standard abjuration? Inflation?


1 comment:

J. Strupp said...

Oh no question about it. As you say, The U.S. partially defaulted in 1933 when we went off the gold standard.

I believe it was Rogoff and Reinhart's book that also mentioned an episode in the late 1700's when we defaulted on French debt following the Revolutionary War.

The term "default" has always been a loose one. Usually "default" is a bondholder haircut and a currency devaluation.

Ironically, this is what the Irish need to be doing badly right now.