(Stuart Englert, Money Metals News Service) Whenever the indebted United States nears its legal borrowing limit, the fiscal can kickers in Washington, D.C., and their misinformation-spewing mouthpieces spout an oft-repeated falsehood and make audacious predictions about the nation’s ability to finance its burgeoning debt forever.
“The U.S. has never defaulted on its debts,” claimed Voice of America in 2023.
“The nation has never defaulted on its debt, and it never will,” President Joe Biden said during a 2023 press conference.
“The United States has never defaulted on its debts,” contended an article published at usatoday.com in 2024.
Earlier this month, Treasury Secretary Scott Bessent reiterated Biden’s definitive prognostication, suggesting “the United States of America is never going to default” on its debt obligations. “That is never going to happen.”
Never is a long time.
Told in various forms and iterations, the bold statements about repaying the nation’s debts are intended to ensure confidence in the U.S. dollar and government-issued debt instruments. They are echoed by federal officials, politically driven pundits, ill-informed commentators, script-reading news anchors, and historically illiterate reporters in the mockingbird mass media.
Don’t believe them when they parrot the big lie or regurgitate presumptive prophecies.
Despite bogus assertions and grand pronouncements made during previous debt-ceiling dramas in the nation’s capital, the United States has defaulted on its debts and financial commitments. And if history is a teacher, it will again, either through outright nonpayment or, more likely, its equivalent: currency depreciation via monetary inflation. It’s happened in the past when metal was foundational and preferred money.
Both before and after the debt limit was established with the passage of the Second Liberty Bond Act in 1917, the federal government failed or refused to honor its obligations to redeem silver and gold for paper currency. Those broken precious metal promises resulted in defaults and engendered others.
Continental Currency Became Unkept Paper Promises
The nation’s first default occurred in 1779 when the fledgling U.S. government devalued its paper Continental currency. Authorized by the Continental Congress, the bills of credit were used to finance the Revolutionary War and specified redemption in silver or gold at a prescribed rate.
When the excess supply of promissory notes couldn’t be exchanged for hard currency at their prescribed rate, they lost value and became worthless, giving rise to the phrase “Not worth a Continental.” The rebellious American colonists preferred gold and silver coinage to unkept paper promises.
The revenue-strapped government also defaulted on other domestic and foreign debts in the 1780s after some of the 13 former colonies failed to uphold their financial obligations. Once the U.S. Constitution was ratified in 1788, Congress gained taxing authority and the ability to pay the nation’s debts.
The financial fiasco caused by the hyperinflated Continental currency and default led to the inclusion of the contract clause in the U.S. Constitution, which says, “No state shall… make any Thing but gold and silver Coin a Tender in Payment of Debts.”
The second default transpired during the American Civil War. Following the passage of the Legal Tender Act in 1862, the U.S. government halted the redemption of its paper Demand Notes for gold and silver. Failure to keep its promise to exchange constitutionally-prescribed coinage “on demand” for the paper IOUs constituted a default.
The law, however, allowed the federal government to bankroll the Union cause with a deluge of unbacked Greenbacks, so named for the emerald-colored ink used on their reserve side. Since the paper notes weren’t redeemable for precious metals, their value was volatile, fluctuating with the North’s battlefield losses and victories, and steadily declined as their quantity increased to finance the bloody and costly four-year conflict.
Volatility, depreciation of the fiat currency, and price inflation prompted the hoarding of gold and silver coins, which, along with increased exports of the monetary metals, created a shortage of hard currency.
After the South surrendered in 1865 and the Confederate government defaulted on its own debts, the U.S. government reduced the number of Greenbacks in circulation to strengthen and stabilize their value. Redemption of gold and silver for paper notes resumed in the 1870s, but savvy savers, wary and weary of debased and inferior paper currencies, continued to favor and squirreled away specie for hard times and wealth preservation.
Gold Criminalization and Demonetization Led to Default
The next major default ensued during the Great Depression of the 1930s when the value of circulating U.S. dollars and outstanding debt instruments dwarfed the value of the nation’s gold and silver holdings.
“Behind government currency we have, in addition to the promise to pay, a reserve of gold and a small reserve of silver, neither of them anything like the total amount of the currency,” President Franklin D. Roosevelt said during a fireside chat broadcast on May 7, 1933.
To obscure the financial fraud and ensuing default—which obliterated an estimated $100 billion in public and private debt—the U.S. government, through a series of calculated, coercive, and compulsory steps, asserted control over and ownership of the nation’s monetary gold.
Often referred to as gold nationalization, the process to this day is considered confiscation and theft by many constitutionalists, sound money advocates, and precious metal investors.
Regardless of what it’s called, the default was set in motion on April 5, 1933, when Roosevelt issued an executive order that outlawed most private gold ownership. The decree required Americans to surrender their monetary gold for paper currency at the rate of $20.67 an ounce.
Congress, several months later, approved a joint resolution voiding all gold contract clauses and passed the Gold Reserve Act of 1934, which prohibited the redemption of U.S. currency for gold. After signing the measure, Roosevelt raised the official gold price to $35 an ounce, devaluing the dollar by 40 percent and effectively stealing 69 percent in purchasing power from the law-abiding citizens who, 10 months earlier, were coerced to exchange their gold for paper currency.
The sweeping actions spawned a slew of lawsuits. In 1935, the U.S. Supreme Court in Nortz v. United States and Perry v. United States sided with the government by a slim 5-4 margin, upholding its spurious gold guarantees and deliberate debt default.
While Congress’ invalidation of all gold contract clauses was deemed unconstitutional, the court rulings supported redemption of Treasury-issued gold certificates and bonds, which stipulated payment in gold for paper dollars, since gold ownership was illegal. The court also concluded the gold certificates and bonds were redeemable in paper currency at their face value rather than at the government’s revalued—and higher—gold price, which would have provided the plaintiffs with additional Federal Reserve Notes.
Combined, the dictatorial presidential decree, controversial legislative measures, and convoluted high court rulings abolished gold as legal tender, nullified the gold standard in the United States, and allowed the federal government to default on its gold obligations. By rescinding the requirement under the Gold Standard Act of 1900 to redeem the nation’s paper currency for gold coins, the U.S. government broke its gold-for-paper currency pledge to the American people.
Another default took place in the 1960s as the U.S. government was demonetizing silver, removing the metal from the nation’s coinage and eliminating its convertibility contrary to the original, legal definition of a dollar.
While government-issued paper silver certificates include a clear assurance of payment in the actual gray metal—“Silver Payable to the Bearer on Demand”—the U.S. Treasury in 1964 halted their redemption for silver dollar coins and ended their exchange for silver granules in 1968. This failure to convert paper certificates into physical metal represented a default and repudiation, particularly since the nation’s founders defined a dollar as 371.25 grains of pure silver.
President Nixon Reneged on the Bretton Woods Accord
The most far-reaching default took place a few years later when the U.S. dollar was delinked from gold at the international level.
When President Richard Nixon took office in 1969, the amount of dollars in circulation exceeded by four times the value of U.S. gold reserves.
The shocker came in 1971. To halt the drain on the nation’s remaining gold stocks, Nixon reneged on the 1944 Bretton Woods agreement, and the United States failed to honor its commitment to foreign nations to redeem dollars for gold at a rate of $35 an ounce.
“I have directed [Treasury] Secretary [John] Connally to suspend temporarily the convertibility of the dollar into gold or other reserve assets except in amounts and conditions determined to be in the interest of monetary stability and in the best interests of the United States,” Nixon said in a televised address on Aug. 15, 1971.
Unable—and unwilling—to abide by the Bretton Woods accord and exchange gold for dollars, the president’s temporary suspension became permanent. The U.S. dollar no longer was “as good as gold.” Nixon demonstrated that fact by boosting the official $35 gold price to $38 an ounce in 1972 and $42.22 in 1973, thereby devaluing the dollar—the world’s leading reserve and trade currency—by another 20 percent against gold.
The Nixon shock, as the president’s startling announcement came to be known, and the subsequent “closing of the gold window,” opened the door to unprecedented credit expansion and borrowing, massive currency creation and price inflation, and today’s nearly $37 trillion national debt.
Those who support raising the nation’s roofless debt ceiling may claim the U.S. government has never defaulted, but they can’t erase or rewrite history.
Truth be told, the United States has reneged on its financial obligations, and its defaults always reveal that its paper currency and broken promises aren’t as sound and trustworthy as silver and gold.
A veteran journalist, Stuart Englert is the author of Rigged: Exposing the Largest Financial Fraud in History, which documents precious metals market manipulation and price suppression. You can visit his Substack HERE.
