If it’s happened before, why should we think it can’t happen again, in the face of rapidly increasing U.S. government debt?
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• “Loss of reputation for honorable dealing will bring us unending humiliation.”
The clearest summation of the judicial outcome was in the concurring opinion of Justice Stone, as a member of the majority:
• “While the government’s refusal to make the stipulated payment is a measure taken in the exercise of that power, this does not disguise the fact that its action is to that extent a repudiation.”
• “As much as I deplore this refusal to fulfill the solemn promise of bonds of the United States, I cannot escape the conclusion, announced for the Court, that the government, through exercise of its sovereign power, has rendered itself immune from liability.”
So five of the nine justices explicitly stated that the obligations of the United States had been repudiated. There can be no doubt that the candid conclusion of this highly interesting chapter of our national financial history is that, under sufficient threat, crisis and pressure, a clear default on Treasury bonds did occur.
About 250 years ago, in a celebrated essay, “Of Public Credit,” David Hume wrote:
”Contracting debt will almost infallibly be abused in every government. It would scarcely be more imprudent to give a prodigal son a credit in every banker’s shop in London, than to empower a statesman to draw bills upon posterity.”
Hume would have looked down from philosophical Valhalla in 1933-35 and seen his views confirmed. What, one wonders, would he be thinking now?