A Short History of US Credit Defaults - John S. Chamberlain - Mises Daily

Apparently, we have defaulted on our debts before and -- if the debt talks in DC are any indication -- we may well do it again. The following article provides a concise history of past events in the history of the U.S.

It does not seem to be a matter of will we (or Europe for that matter) default, but in what manner we choose to default -- i.e. Who gets the shaft?


From the mises.org:
A Short History of US Credit Defaults - John S. Chamberlain - Mises Daily: "What Will Happen in August of 2011?

Many people are wondering about the possibility of a default by the Treasury on August 3, 2011, when, according to the Treasury's projections, it will no longer be able to meet all expenses without additional borrowing.

In this event, it is unlikely a default will occur. Historically, governments prioritize debt service above all other expenses. If the expansion of funds via debt becomes impossible, the Treasury will cease paying other expenses first, starting with 'nonessential' discretionary expenditures, and then move on to mandatory expenditures and entitlements as a last resort.

In extremis, what will happen is that all the losses will be foisted onto the Federal Reserve. The Fed holds something on the order of $1.6 trillion in debt issued by the Treasury of the United States. By having the Federal Reserve purchase blocks of Treasury debt and defaulting on these non-investor-held securities, the United States can postpone a default against real investors essentially forever."