This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
TheStreet Open House

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.

3 of 4

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
DOW 17,063.99 -34.46 -0.20%
S&P 500 2,003.12 -0.25 -0.01%
NASDAQ 4,587.0320 +6.7610 0.15%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs