American default

American default The untold story of FDR, the Supreme Court, and the battle over gold

Sebastian Edwards, 1953-

Book - 2018

"The untold story of how FDR did the unthinkable to save the American economy.The American economy is strong in large part because nobody believes that America would ever default on its debt. Yet in 1933, Franklin D. Roosevelt did just that, when in a bid to pull the country out of depression, he depreciated the U.S. dollar in relation to gold, effectively annulling all debt contracts. American Default is the story of this forgotten chapter in America's history.Sebastian Edwards provides a compelling account of the economic and legal drama that embroiled a nation already reeling from global financial collapse. It began on April 5, 1933, when FDR ordered Americans to sell all their gold holdings to the government. This was followed... by the abandonment of the gold standard, the unilateral and retroactive rewriting of contracts, and the devaluation of the dollar. Anyone who held public and private debt suddenly saw its value reduced by nearly half, and debtors--including the U.S. government--suddenly owed their creditors far less. Revaluing the dollar imposed a hefty loss on investors and savers, many of them middle-class American families. The banks fought back, and a bitter battle for gold ensued. In early 1935, the case went to the Supreme Court. Edwards describes FDR's rancorous clashes with conservative Chief Justice Charles Evans Hughes, a confrontation that threatened to finish the New Deal for good--and that led to FDR's attempt to pack the court in 1937.At a time when several major economies never approached the brink of default or devaluing or recalling currencies, American Default is a timely account of a little-known yet drastic experiment with these policies, the inevitable backlash, and the ultimate result."--

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Subjects
New Deal, 1933-1939.
Depreciation > United States > History > 20th century.
Default (Finance)
Published
Princeton, New Jersey : Princeton University Press 2018.
Language
English
Main Author
Sebastian Edwards, 1953- (author)
Physical Description
xxxiii, 252 pages : black and white illustrations ; 25 cm
Bibliography
Includes bibliographical references [235]-242 and index.
ISBN
9780691161884
  • Introduction
  • Timeline
  • Dramatis Personae
  • 1. Gold and the Professors
  • 2. A Tragic Disaster
  • 3. The Quest for Money
  • 4. A National Calamity
  • 5. Moderate Inflation Is Necessary and Desirable
  • 6. A Transfer of Wealth to the Debtor Class
  • 7. The Gold Clause Is Gone
  • 8. A London Interlude
  • 9. Order in Place of Chaos
  • 10. The Gold-Buying Program
  • 11. The Path to the Supreme Court
  • 12. Nine Old Men and Gold
  • 13. Embarrassment and Confusion
  • 14. The Waiting Game
  • 15. The Decisions, at Last
  • 16. Consequences
  • 17. Could It Happen Again?
  • Appendix: George F. Warren versus Irving Fisher's Plans for the Dollar
  • Notes
  • Bibliography
  • Index
Review by Choice Review

Eighty-five years ago, the US did the unthinkable. It was 1933, and the country was in a serious depression. Newly elected President Franklin Delano Roosevelt closed the banks and abandoned the gold standard backing the dollar. Edwards (UCLA) presents a well-researched history of a chapter in US money and banking policies, and he expresses it in a lively manner. Abrogating the gold standard meant America was now printing a fiat currency. This was a dramatic move, but Great Britain did it in 1931, and more than 20 countries had ceased backing currencies with gold or silver. Edwards moves adroitly from economics to the legal aspects of moving off the gold standard (America's default). Specifically, he addresses the legal contracts written with gold as payment. The book provides a good review of the four "Gold Clause" cases. In these cases, the Supreme Court ruled that the government could abrogate the gold clause in private legal contracts. Readers will come across numerous typographical errors (including a chapter heading) and a nonexistent Supreme Court justice ("McLean," p. 194). However, the content overcomes the proofreading failures. Summing Up: Highly recommended. Upper-division undergraduates through faculty. --Robert T. Sweet, Hood College

Copyright American Library Association, used with permission.
Review by Publisher's Weekly Review

Edwards (Toxic Aid), a UCLA economics professor, skillfully narrates a pivotal episode in American political and economic history he considers too little remembered. He reminds readers that in 1933, in the depths of the Great Depression, the FDR administration effectively engineered a default-something now considered unimaginable, despite the U.S.'s huge amount of public debt-by abandoning the gold standard, allowing debtors to repay creditors in fiat currency and replacing money backed by gold with money backed by the government. Edwards writes equally knowledgeably about economics and politics: he notes President Roosevelt's unwavering commitment to the "forgotten man," the Supreme Court's reluctant support of the executive branch (despite its aversion to the abrogation of contracts and the gold standard), and the prevailing economic wisdom of the time (for instance, Roosevelt's economic adviser, George F. Warren, believed that prices rose or fell according to the world's stock of gold). Edwards also notes that America's default may provide legal justification for other countries to institute sovereign defaults in the future. At a time of economic uncertainty at home and abroad, this comprehensive study of an important event in U.S. fiscal history has significant implications for today. (June) © Copyright PWxyz, LLC. All rights reserved.

(c) Copyright PWxyz, LLC. All rights reserved

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