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US Never Defaulted On Its Debt? Not So Fast

That November, the government didn't have enough gold or silver in New England to pay bondholders their interest, as required by law.

Of course, logistics were tougher than in our electronic era. The Treasury needed to physically transport precious metals to New England. "We always have excuses, don't we?" Hickey said. "That just doesn't cut it."

Investors were quick to forgive, however.

"The war ended about three months later," Hickey said, "and so the financial crisis blew over."

___

COMPROMISE ISN'T EASY

Just like today, some politicians in the early 1800s believed their cause too crucial to negotiate.

"What you have at the time is a very bitter partisan divide between Federalists and Republicans that was, if anything, more bitter than the divide between the tea party and Democrats today," said historian J.C.A. Stagg, editor of President James Madison's papers at the University of Virginia.

"The Federalists thought (Thomas) Jefferson and Madison had ruined the country and had to be stopped," Stagg said.

Angry New Englanders were so opposed to the War of 1812 that their Federalist leaders seriously discussed seceding from the union. They were tagged as disloyal by Americans elsewhere, and that contributed to the party's downfall after the war.

The Jeffersonian Republicans, on the other hand, tried to blame all their troubles on Federalist opposition to the war, said Hickey, "just the way parties always blame their problems on the other side."

___

NEVER SAY NEVER

Instead of claiming the United States has "never" defaulted, it's safer to say America was born in default.

The former colonies emerged from the Revolutionary War deeply in debt. In 1790 the first secretary of the Treasury, Alexander Hamilton, took the issue in hand. His Treasury assumed responsibility for the states' debts, offered creditors less than they were owed and borrowed more money to put the new nation on solid financial footing.

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