The U.S. Has REPEATEDLY Defaulted

It’s a Myth that the U.S. Has Never Defaulted On Its Debt

Some people argue that countries can’t default.  But that’s false.

It is widely stated that the U.S. government has never defaulted.  However, that is also a myth.

Catherine Rampbell reports in the New York Times:

The United States has actually defaulted on its debt obligations before.

The first time was in 1790, the only episode Professor Reinhart unearthed in which the United States defaulted on its external debt obligations. It also defaulted on its domestic debt obligations then, too.

Then in 1933, in the midst of the Great Depression, the United States had another domestic debt default related to the repayment of gold-based obligations.


Associated Press points out that the U.S. defaulted in 1814:

The young nation had a dramatic excuse: The Treasury was empty, the White House and Capitol were charred ruins, even the troops fighting the War of 1812 weren’t getting paid.


Historian Don Hickey isn’t surprised that the default in November 1814 gets overlooked. After all, he titled his book, “The War of 1812: A Forgotten Conflict.”

“He doesn’t know his history,” Hickey said of the president. “It’s that simple.”

To be fair, not many people do. When it comes to the War of 1812, naval heroics and the rockets’ red glare get the ink. The failure to pay some bondholders on time doesn’t make it into many history texts, said Hickey, a professor at Wayne State College in Nebraska.

Donald Marron writes at Forbes:

The United States defaulted on some Treasury bills in 1979 (ht: Jason Zweig). And it paid a steep price for stiffing bondholders.

Terry Zivney and Richard Marcus describe the default in The Financial Review…:

Investors in T-bills maturing April 26, 1979 were told that the U.S. Treasury could not make its payments on maturing securities to individual investors. The Treasury was also late in redeeming T-bills which become due on May 3 and May 10, 1979. The Treasury blamed this delay on an unprecedented volume of participation by small investors, on failure of Congress to act in a timely fashion on the debt ceiling legislation in April, and on an unanticipated failure of word processing equipment used to prepare check schedules.

The United States thus defaulted because Treasury’s back office was on the fritz in the wake of a debt limit showdown.

This default was temporary. Treasury did pay these T-bills after a short delay. But it balked at paying additional interest to cover the period of delay. According to Zivney and Marcus, it required both legal arm twisting and new legislation before Treasury made all investors whole for that additional interest.

Many consider Nixon’s decision to refusal to redeem dollars for gold to constitute a partial default.  For example, University of Massachusetts at Amherst economics professor Gerald Epstein notes:

Forty years ago this month, on August 15, 1971, President Nixon “closed the gold window”, refusing to let foreign central banks redeem their dollars for gold, facilitating  the devaluation of the U.S dollar which had been fixed relative to gold for almost thirty years. While not strictly a default on a US debt obligation, by closing the gold window the US government abrogated a financial commitment it had made to the rest of the world  at the Bretton Woods Conference in 1944  that set up the post-war monetary system. At Bretton Woods, the United States had promised to redeem any and all U.S. dollars held by foreigners – later limited to just foreign central banks — for $35 dollars an ounce. This promise explains why the Bretton Woods monetary system was called a “gold exchange standard” and why many believed the US dollar to be “as good as gold”.  When Nixon refused to let foreign central banks turn in their dollars for gold, and encouraged the devaluation of the dollar which reduced the value of foreign central bank holdings of dollars, the Nixon administration effectively “defaulted” on the United States’ long-standing obligations ending once and for all the Bretton Woods System.

James Grant says in the Washington Post:

The U.S. government defaulted after the Revolutionary War, and it defaulted at intervals thereafter.


Things were very different when America owed the kind of dollars that couldn’t just be whistled into existence. By 1790, the new republic was in arrears on $11,710,000 in foreign debt. These were obligations payable in gold and silver. Alexander Hamilton, the first secretary of the Treasury, duly paid them. In doing so, he cured a default.


But in the whirlwind of the “first hundred days” of the New Deal, the dollar came in for redefinition. The country needed a cheaper and more abundant currency, FDR said. By and by, the dollar’s value was reduced to 1/35 of an ounce of gold.

By any fair definition, this was another default. Creditors both domestic and foreign had lent dollars weighing just what the Founders had said they should weigh. They expected to be repaid in identical money.

Language to this effect — a “gold clause” — was standard in debt contracts of the time, including instruments binding the Treasury. But Congress resolved to abrogate those contracts, and in 1935 the Supreme Court upheld Congress.

The “American default,” as this piece of domestic stimulus was known in foreign parts , provoked condemnation in the City of London. “One of the most egregious defaults in history,” judged the London Financial News. “For repudiation of the gold clause is nothing less than that. The plea that recent developments have created abnormal circumstances is wholly irrelevant. It was precisely against such circumstances that the gold clause was designed to safeguard bondholders.”

The lighter Roosevelt dollar did service until 1971, when President Richard M. Nixon lightened it again. In fact, Nixon allowed it to float. No longer was the value of the greenback defined in law as a particular weight of gold or silver. It became what it looked like: a piece of paper.

John Chamberlain argues at the Mises Institute that the U.S. defaulted on its:

  • Continental Currency in 1779
  • Domestic debt between 1782 through 1790
  • Greenbacks in 1862
  • Liberty Bonds in 1934

States Have Defaulted Also

States have also defaulted.  The Wall Street Journal notes:

Land values soared. States splurged on new programs. Then it all went bust, bringing down banks and state governments with them. This wasn’t America [today], it was America in 1841, when a now-forgotten depression pushed eight states and a desolate territory called Florida into the unthinkable: They defaulted on debts.

And Catherine Rampbell explains:

There were two episodes when a spate of American states defaulted on their debts, in 1841-42 (nine states) and 1873-84 (10 states). The havoc wreaked by these state-level defaults is part of the reason that so many states now have constitutional balanced-budget requirements.

China Alleges that the U.S. Has Already Defaulted By Weakening the Dollar

James Grant argues:

If today’s political impasse leads to another default, it will be a kind of technicality. Sooner or later, the Obama Treasury will resume writing checks. The question is what those checks will buy.


This is the unsustainable conceit of the world’s superpower-cum-super debtor. By deed, if not audible word, we Americans say: “The greenback is the world’s great monetary brand. You have no choice but to use it. Like it or lump it.” But the historical record of paper currencies is clear: Governments always over-issue it. The people finally do lump it.”

(Indeed, the average life expectancy for a fiat currency is less than 40 years.)

As Americans, we may not agree with these sentiments.  But is it us – or our creditors – who get to make the call?

Our biggest creditor – China – has said that America has already defaulted by printing too many dollars. For example:

A Chinese ratings house has accused the United States of defaulting on its massive debt, state media said Friday, a day after Beijing urged Washington to put its fiscal house in order.

“In our opinion, the United States has already been defaulting,” Guan Jianzhong, president of Dagong Global Credit Rating Co. Ltd., the only Chinese agency that gives sovereign ratings, was quoted by the Global Times saying.

Washington had already defaulted on its loans by allowing the dollar to weaken against other currencies – eroding the wealth of creditors including China, Guan said.

That might be Chinese propaganda. But the point remains that the U.S. might not be able to print money forever without facing consequences from our creditors.


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  • Honest Harry’s Used Cars

    This isn’t about defaulting on the debt.

    This is about stopping Obama, stopping ObamaCare, stopping NSA, and stopping the FED from printing more money.

    To change the issue of what is happening to be about defaulting on the debt, begs the real issues.

    Americans are sick and tired of the money printing to support the bankers, printing money to pay for the phony war on terror security apparatus, and printing money to support the welfare class.

    The average weight of people (men and women) collecting food stamps is over 280 pounds. No one is starving. These welfare people have money for tattoos and iPods. These welfare people are planning on never working another day as long as they live. Let them starve a while, and see if a job doesn’t gain a little more appeal. Repeal all minimum wage laws. Put these people back to work at a $1 an hour until they get themselves back in shape.

    • evan

      probably the most ill informed thing ive ever read, printing money to support the welfare class? printing money created the welfare class! lower minimum wage to 1 dollar an hour? you are the definition of tyrannical..


      • Honest Harry’s Used Cars

        They’re printing money every day to support the welfare class. Where did you think the money to pay for food stamps came from?

        And these unemployed 300-pound welfare recipients are not even worth $1 an hour, Evan. What sort of real work are they fit for?

        Peace? Haven’t you heard? Peace according to Obama, is war.

  • This is probaby the most important article ever to grace this website. You have brought to light the fountainhead from which debt slavery has flowed. Does anyone think it’s a coincidence that the highest inflation adjusted income the US has ever enjoyed hit it’s peak around the time Nixon went full fiat?

    People complain about a single payer system. The currency is the largest single payer system ever created and it’s right under our noses.

    Tender FRN’s guess who is really paying for that widget? The Fed is. Guess who really owns that widget? The FED does.
    Refuse to pay your income tax. They will take that widget right from you.

    Some quick facts of law.

    Paying with a note extinguishes the debt in personam but debt in rem remains.

    There is a big difference between discharging a debt and paying one.

    There is a big difference between executory contract versus and executed contract.

    All FRN’s are payable in Washington DC or any Federal Reserve bank (a federal enclave). The situs of a contract is where that contract is PAID.

    This is how the US via the FED can control all aspects of commerce.
    They are an undisclosed third party and people are unaware of the legal significance of paying with fiat paper currency.

    • Mr E

      Best comment. Understanding debt and more importantly, what money is, should be our top priority!

  • martae

    Don’t forget about silver certificates. They are clearly printed as being redeemable in silver, but the federal government refuses to honor it’s promise, the lying bastard. Anyone who is stupid enough to enable US deficit spending deserves to lose their money, the citizens have without having a choice in the matter. Death to the petrodollar.

  • gozounlimited

    China isn’t playing…….. Upset over U.S. fiscal crisis, China urges a ‘de-Americanized world’

    Upset that the fiscal stalemate in Washington is threatening the global economy, China called for the U.S. dollar to be replaced as the international reserve currency as well as for broader steps to create a
    “de-Americanized world.”…… Read More……

  • Iron-Clay

    The sooner the US falls the better.
    They bankrupted the USSR and forced it to split and it’s now time the favour was returned.
    Now who’s going to gather up all the US military arms round the world?
    When the USSR was split, those arms went everywhere and in fact are the arms the US are having problems with now … so where are all the US arms going to end up?
    Not really a problem, US military gear isn’t any good anyway.

  • Passerby

    I would add, according to the sites ( and, that united states inc. has already officially declared insolvency, as to it’s obligations to the fed, on 31st March, 2009.

    Bankruptcy Case No. 07-00105-PCW7

    Im pretty sure, noone special, that the owners of the fed own the us government & controls it with the council on foreign relations, or that they are all part of the same vampire squid at least.
    As for tax/central bank interest collection), the bill which created the IRS (a private bankster interest collecting agency which operates from the ‘city of london’ or ‘square mile’) was repealled shortly thereafter (pre-war). I think it is possible, but don’t quote me, that if you present this fact in the correct legal way, that the IRS can no longer collect from you since it is illegal. Before the fed there was little or no tax.
    The single biggest monetary & liberty cost to society is not social welfare (this idea is an MSM pumped ‘divide & conquer’ tactic) but the fraudulent/usurious interest created on the promissory note which you create when you sign a loan agreement (which is fairly odious to start with due to bankster market manipulation unnaturally maximising asset prices). Ever increasing the units of currency in circulation and thereby decreasing the value of those units and decreased purchasing power from stagnant wages. Stealth tax by inflation and concetration of monetary power from the very very many to the very very few.
    If you knew the truth you’d know that everything you are lead to believe is wrong.

  • William Barnett-Lewis

    Hoo boy. The usual “fiat” money bugaboo & its concomitant fantasy of the “Evil FED”. Hint: every money is fiat. You and yours agree to accept metal. The real wold agrees to accept paper because the economy is too big to be held back by foolishness. Thankfully the Germans in the middle of the 20th century stuck to gold – it held back their economy enough to allow their defeat. See The Wages of Destruction by Adam Tooze for starters, then an Econ 101 textbook for the rest.

    Now back to the real world for me.