
Broken Precious Metal Promises
The comments below are an edited and abridged synopsis of an article by Stuart Englert
US Default History: A Reality Rewritten in Paper Promises
Despite repeated claims by American officials that the US has “never defaulted” on its debts, the US default history tells a different story. From the nation’s earliest days to modern economic crises, the US has failed—through outright refusal or stealthy currency devaluation—to honour its financial commitments time and again. These historical defaults challenge today’s widely accepted narratives about the dollar’s reliability and the US government’s creditworthiness.
The US default history begins in 1779, when the Continental Congress issued paper money, promising redemption in gold and silver. As the war effort demanded more notes, they soon became worthless, giving rise to the phrase “not worth a Continental.” This devaluation of currency was the country’s first financial default.
The trend continued during the Civil War. The Legal Tender Act of 1862 introduced unbacked greenbacks to finance the Union army. Redeemable at first, these notes quickly lost their link to gold and silver. Their value fluctuated wildly, driven by war outcomes, and led to hoarding of hard currency, further deepening public distrust.
The most sweeping event in US default history occurred during the Great Depression. In 1933, President Roosevelt issued Executive Order 6102, criminalizing private gold ownership and mandating citizens exchange gold for paper dollars at $20.67/oz. Within a year, the price was raised to $35/oz, effectively devaluing the dollar by 40%. Congress then voided all gold clause contracts, and the Gold Reserve Act of 1934 ensured citizens could no longer redeem dollars for gold—breaking the long-standing monetary promise.
The trend continued into the 1960s with the demonetization of silver. Silver certificates, which once guaranteed silver “on demand,” ceased to be redeemable in 1968. This marked another break in public trust and another chapter in US default history.
But the most significant default came in 1971 under President Nixon, when the US abandoned the Bretton Woods agreement. Nixon suspended the dollar’s convertibility into gold for foreign governments, ending the international gold standard and ushering in an era of fiat currency. This “temporary measure” became permanent, devaluing the dollar yet again and triggering global monetary upheaval.
These cumulative defaults reveal a pattern: when faced with fiscal or political pressure, the US government has often chosen to break its monetary promises. In doing so, it has undermined confidence in its own currency, contributing to cycles of inflation and financial instability.
The US default history highlights how gold and silver—once foundational to the American monetary system—were systematically stripped away to support an expanding fiat system. While today’s policymakers continue to assure the world of the dollar’s stability, the historical record tells a more cautionary tale.
For Canadians and global investors alike, understanding the US default history is critical. It offers insight into the risks of currency devaluation, the unreliability of paper promises, and the enduring role of precious metals as true stores of value in times of crisis.