A short history of U.S. credit defaults (You didn't know it's happened multiple times before?) 

Betcha didn't know this: Only a few months after Congress created the dollar, the government defaulted on the new currency. Happened in 1862.

Five months after what was then called the "Greenback" was created in 1861, President Lincoln's Treasury Department failed to redeem them in January, 1862.

As the Ludwig von Mises Institute's John S. Chamberlin explains, that led to a fundamental change in approach:

"The original greenbacks were $60 million in demand notes in denominations of $5, $10, and $20 which were redeemable in specie at any time at a rate of 0.048375 troy ounces of gold per dollar. Less than five months later, in January of 1862, the US Treasury defaulted on these notes by failing to redeem them on demand," Chamberlin writes.

"After this failure, the Treasury made subsequent issues of greenbacks as 'legal-tender' notes which were not redeemable on demand, except through foreign exchange, and could not be used to pay customs duties.

"Depending on the fortunes of war, these notes traded at a discount ranging from 20 percent to 40 percent. By the stratagem of monetizing this currency with bonds and paying only the interest on those bonds in gold acquired through customs fees, Lincoln's party financed the Civil War with no further defaults."

Chamberlin counts at least four other defaults by the central government and offers some arresting thoughts about what might happen should the current impasse between President Obama and congressional Republicans over raising the national debt ceiling continue after Aug. 2, including the possibility that the old saw "we owe it to ourselves" can be turned on its head as a solution to the crisis.

Well worth reading, which you can do here.

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Mark Tapscott

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