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An Analysis of the Historical Incidences of Government Default by the United States

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When you ask: How many times during history did the U.S. government default? The first result on Google search is a Wikipedia page that states: “The U.S. has never reached the point of default”

Is that really true? Let us delve deeper into the matter.

In 1933 when the U.S. government effectively defaulted on its gold bonds.

In response to the economic challenges of the Great Depression, President Franklin D. Roosevelt issued an executive order in 1933 known as Executive Order 6102. This order prohibited the hoarding of gold coins, gold bullion, and gold certificates by U.S. citizens and required them to be turned in to the Federal Reserve in exchange for paper currency.

As a result of this order, the U.S. government effectively defaulted on its gold bonds, which were debt obligations payable in gold. Holders of these bonds were unable to redeem them for the promised gold payments. Instead, the government offered a different settlement in which the bonds could be exchanged for different securities, such as new non-gold bonds or silver certificates.

In 1963 the U.S. government defaulted paying interest on some Treasury bonds

During the American Civil War, the U.S. government faced significant financial strain as it sought to finance the war effort. In 1862, the government issued “greenbacks,” which were paper currency not backed by gold or silver. As the war continued and inflation increased, the value of these greenbacks declined.

In July 1862, the U.S. government temporarily suspended the payment of interest on certain Treasury bonds, effectively defaulting on its debt obligations. This default lasted for about two years until Congress passed legislation in 1864 to restore the payment of interest and stabilize the situation.

In 1968  defaulted when  U.S. Government refused to redeem its silver certificate paper dollars for silver dollars

Prior to 1968, U.S. currency included silver certificates, which were paper dollars that could be exchanged for a specific amount of silver bullion or silver dollars. However, with the depletion of silver reserves and rising silver prices, the U.S. government faced difficulties in maintaining the silver backing of these certificates.

In 1968, the U.S. government ceased the redemption of silver certificates for silver dollars or bullion. This action effectively ended the convertibility of silver certificates into silver, breaking the explicit promise to redeem them for silver dollars.

In 1971 defaulted when  U.S. Government broke the commitment to redeem dollars held by foreign governments for gold under the Bretton Woods Agreement

Under the Bretton Woods Agreement, which was established after World War II, many countries agreed to peg their currencies to the U.S. dollar, which was in turn backed by gold. This arrangement allowed foreign governments to exchange their dollars for gold at a fixed rate of $35 per ounce.

However, as the U.S. faced economic challenges, including a growing trade deficit and inflationary pressures, the value of the dollar came under pressure. In response, on August 15, 1971, President Richard Nixon announced a series of economic measures, including the suspension of the dollar’s convertibility into gold.

This decision effectively ended the system of fixed exchange rates and the redeemability of dollars for gold, breaking the U.S. government’s commitment under the Bretton Woods Agreement. This also represents a the departure from the previous international monetary system.

Following this event, major currencies shifted to floating exchange rates, and the U.S. dollar became a fiat currency, no longer directly backed by a fixed amount of gold.

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