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Comment by skeptikal | Hacker News Reader

The idea that the US will de jure default on its obligations is risible.

De facto its happened at least once before when Nixon closed the gold window overnight.

In 1933 Congress unilaterally devalued the dollar by nearly seventy percent, rewrote the gold clauses in private contracts, largely forbid the private possession of gold, and managed to get away with it. The Supreme Court conveniently decided to ignore the Constitution on that occasion.

Why do you believe this was unconstitutional?

If a state did it, it would be a straightforward violation of the Contracts Clause. With regard to Treasury bonds and gold certificates it was the government rewriting its own contracts. It was a violation of the contract on every Federal Reserve Note and bank deposit as well. Redemption in gold had been suspended before, but the value had not been, and in the late nineteenth century the government started redeeming gold certificates again at full face value after an interruption during and after the Civil War.

So if you start out by issuing an executive order requiring everyone to turn in their gold in exchange for certificates denominated in dollars and then a few months later you decide that those certificates and all other deposits are worth 70% less in gold then they were before it amounts to a systematic taking that looks like the worst violation of the Takings Clause ever. i.e. "Nor shall private property be taken for public use, without just compensation" (from the Fifth Amendment).

In theory states could do something similar under the taxing power, but Congress doesn't have the power under the Constitution to enact property taxes in any way that is practical. We have the 16th Amendment so they could do that in a practical way on incomes.

Congress just decided to jointly repossess 70% of the financial wealth of the country, and ignore every solemn representation they or anyone else had ever made to the contrary. It that is not unconstitutional it should be.

There were alternatives, they could for example have recapitalized the Federal Reserve system, with a debt for equity swap at the cost of wiping out the original shareholders, of course. The banks held title to a worthless enterprise and Congress sanctioned a massive levy of their depositors to keep them afloat.

The Supreme Court disagreed and held the Gold Clause constitutional: https://en.wikipedia.org/wiki/Gold_Clause_Cases

Of course. And the SCOTUS under FDR was ruling under the threat of court packing. A lot of rulings from then are risible.

My favorite is telling a farmer his homegrown pig feed is illegal because it effects interstate commerce.

The one that best illustrates bad law with good intentions is the migratory birds act: protect wildlife -> good. Doing so by making international treaties supersede the constitution -> not good (that ruling has been cut back)

All on 5-4 votes, which is not exactly a compelling vote of confidence for a contract case.

"Justice McReynolds wrote the dissenting opinion. He protested that gold clauses were binding contracts, and that allowing the administration's policies to stand would permanently damage faith in the government to uphold its own contracts and those of private parties. McReynolds distinguished the cases at hand from the Legal Tender Cases, arguing that in the earlier cases the government sought to continue operating until it could meet its obligations, while the Roosevelt administration apparently sought to nullify them."

https://en.wikipedia.org/wiki/Gold_Clause_Cases

Well, I would be one to argue that the US de facto defaults all the time.

But Nixon’s gold window was the most egregious.

On the flipside, at least it ultimately resulted in laying the background that politically enabled private ownership of gold again. I'd rather be able to trade away my pieces of paper for gold than play a rigged game where I buy pieces of paper that 'represent' gold I can't own.

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