As America’s politicians battle over the government’s debt ceiling, the US Treasury is thundering that a failure to raise the limit puts the nation on course to “default on its legal obligations – an unprecedented event in American history”. Alarming, but not quite correct.
The US has technically defaulted on its debt – failed to meet its payment obligations to holders of its Treasuries – as recently as 1979. The cause? Problems with the office equipment as deadlines approached, according to officials, which left a relatively tiny amount of debt repayments unmet for a few weeks.
Nonetheless, academics think the blip wreaked permanent damage, raising red flags as to the impact of current political wrangling.
Back in 1979, mirroring today’s events, Republicans were refusing to allow President Jimmy Carter, a Democrat, to raise the US debt ceiling. Then, the row was over raising it to $830bn, today, the question is whether to lift the $14.3 trillion limit (inflation, of course, has helped swell the figure).
The angry investors did eventually get their money, with back interest, and those holding debt maturing on May 17 were paid on time. US officials said what had happened could not even be classed as a default, merely a delay.
The approval to raise the debt ceiling did come at the last minute, but amid all the drama the cheques did not get written. In all, the US Treasury failed to pay around $120m to investors expecting their dues for Treasuries maturing on April 26, May 3 and May 10 that year.
Unfortunately, markets do not tend to care much about such niceties. A much-referenced academic paper, The Day the United States Defaulted on Treasury Bills, says the result of the technical default was a “one-time, permanent ratchet upward of yields” – the rates of return demanded by investors to hold the US’s debt.
“All other investors are a little bit weary of you, going forward,” Terry Zivney, one of the paper’s authors, explained in a recent interview. “Maybe next the time they’ll be the person that doesn’t get their $120m.”
Officials blamed a breakdown of word-processing equipment as they scrambled to prepare the cheques and the large numbers of small investors involved, which made the situation trickier.
- Default from 1979 offers clues on debt crisis (cbsnews.com)
- The day the US defaulted on treasury bills (csmonitor.com)
- Debt Ceiling, U.S. Default, and What’s Next (bargaineering.com)
- What Happened the Last Time the U.S. Defaulted on It’s Debt(ambitionamongotherthings.wordpress.com)
- When Did The U.S. Last Default On Treasury Bonds? (npr.org)
- Why Wall Street doesn’t seem worried about default (seattletimes.nwsource.com)
2 comments:
Carter, worst president in history?
REALLY DUDE?!?
He was not great, but there were worse... What about?
William McKinley (fascist piece of shit! Czolgosz should be posthumously declared a national hero...)
Theodore Roosevelt
Woodrow Wilson
...
Aside from those you might want to add Buchanan (debatable, some might blame him for the American Civil War), or the three interwar presidents- Harding, Coolidge, Hoover. THEN you can reasonably your recent picks (Carter, Reagan, the Bushes, Clinton, Obama...) that partisan hacks on the Left and Right like to assign "best/worst president ever" status. Americans (whether Democrat hacks who call Bush/Reagan the worst president ever or Republican hacks who call LBJ/Carter/Clinton/Obama worst president ever) who assign such arbitrary titles to such recent presidents exhibit severe historical myopia.
Anon come out come out wherever you are... by bequeathing us Iran, Hizabllah, the creeping puppetization of Syria, the Iran-Venezuela fun partners, Carter is automatically promoted to top 5 worst.
Let alone an inflation + unemployment number,what, ABOUT 23.
Not easy.
He, in 1976, became the last dem I have voted for in national office.
McKinley worst? GO BACK TO DKG, and McCollough and read.
Buchanan MIGHT HAVE BEEN WORST, but Jeff Davis never wanted to destroy the USA or regard it as the Great Satan.
Carter ALSO broke the damn on Glass Steagall by declaring the FDR practice designed to KEEP the now FDIC insured savings banks from excessive risk by preventing loans in actuarial declared high risk geo graphical areas. Cater said it was racist.
LBJ is not terrible, but 8/2/65 cannot be erased.
Bill Clinton looks pretty good right now, doesn't he?
Obama is going to run away with the prize.. overseas - nuclear Iran, the Iranization of Egypt, Syria, Yemen, Tunisia, inept handling of the denouements in AFPAK, and Iraq, allowing strategically needed weapons to die, failing to get the govt out of the way after inaug, setting RECORDS for fucking it up with stimulus bills which HAVE NEVER BEEN RESPONSIBLY ACCOUNTED FOR, declaring they needed all their authority to keep unemplyment below 8% then watching it top 10 (AND WITH MANIPULATION TO KEEP IT THAT LOW), setting records for uneremployment, creating an economy where those men over 45-45 may NEVER have career related job advancement again (See Krauthammer) .. have I left anything out?
Oh yeah, creating a bitter, vitriolic partisan situation which makes it almost IMPOSSIBLE to resolve any issue in a true compromise by telling the nation that his opposition is EVIL AND RACIST, by displaying HIMSELF AND HIS IDEAS AS THE GOOD. THE ONLY GOOD.
Barack Obama will find history records him as Jimmy Carter on Crack
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