American Default (1934), Sebastian Edwards - book record, Amazon

Estou lendo este livro, e gostando. Leiam este artigo que postei anteriormente: 
https://diplomatizzando.blogspot.com/2019/02/roosevelt-e-o-abandono-da-clausula-ouro.html

American Default: The Untold Story of FDR, the Supreme Court, and the Battle over Gold

Sebastian Edwards

Amazon.com: Books

As an economic history nerd I can only applaud the work of my UCLA colleague Sebastian Edwards in his vibrant telling the story of the long forgotten Supreme Court showdown over the United States’ abrogation of contracts written with the gold clause. Remembering the inflation of the Civil War greenback era, most creditors demanded gold clauses in debt contracts in which they would be repaid in in either gold or its paper money equivalent value.

This system worked fine until the onset of the Great Depression. It is here where Edwards begins his story as President Roosevelt adopts an inflationist policy by first abandoning the gold standard by requiring all citizens to turn in their physical gold at the then $20.67/ounce price. Then in June 1933 Congress adopts a joint resolution authorizing Roosevelt to increase the price of gold which he ultimately does to $35/ounce and the legislation abrogates the gold clause in all contracts. Indeed, most economists credit the early recovery from the depression directly to the monetary easing associated with Roosevelt’s gold policies.

If Congress hadn’t abrogated the gold clause all debts would have been written up to reflect the devaluation by 69%. Thus it would require a payment of approximately $1700 to repay a nominal debt of $1,000. Needless to say a host of bankruptcies would have ensued.

Of course several creditors sued and Edwards skillfully moves the action from Roosevelt and Congress to the Supreme Court. The Supreme Court ruled that it was in Congress’ power to alter private contracts, but it was not in its power to alter U.S. government debt. However, the court ruled that as of the date of the Joint Resolution gold was still trading at $20.67/ounce and Americans were not allowed to possess physical gold at that time. Hence there would be no damages. A brilliant 5-4 ruling by Chief Justice Hughes.

The reason why these cases have been forgotten is that if they went the other way all hell would have broken loose. Instead of rallying as the stock market did after the ruling, stocks likely would have crashed. It would have triggered a constitutional crisis with Court versus the other two branches of government. Indeed the lead up to the ruling was a precursor to the 1937 court fight that Roosevelt would have.
As an aside Edwards notes that the United States had a treaty with Panama concerning the lease payments for the Panama Canal. That treaty had a gold clause in it. After a long negotiation in 1939 the lease payment was increased retroactive to 1934 thereby reflecting the dollar devaluation. Thus, the U.S. made good on its international treaty obligations.

“American Default” is a worthy addition to the economics literature of the Great Depression. It should be read with the works of Friedman & Schwartz, Bernanke, Irwin, Eichengreen and Sumner. And because it is more a history book than an economics book the lay reader should find it very readable. Further given the rising debt/GDP ratio in the U.S. when coupled with even larger unfunded liabilities, the idea of a 21st century American default is not totally improbable.

Reviews: 

"Sebastian Edwards' American Default is just such a superb history of the US exit from gold in 1933-34, satisfyingly detailed and highly accessible on both the relevant economics & law."---David Frum, 

"Edwards analyses the default that followed President Franklin Delano Roosevelt’s 1933 decision to devalue the dollar against gold. . . . The story is fascinating and the lessons eternal."---Martin Wolf, Financial Times

"[American Default] is the history of that mighty legal, moral, political and monetary controversy, the effects of which are with us still. . . . [Sebastian Edwards] knowledgably compares the 20th-century American default to Argentina’s 2002 abrogation of its dollar denominated debt."---James Grant, Wall Street Journal

"Brilliantly told."---Steve Hanke, Forbes

"Edwards ends his admirably accessible and illuminating book with some careful thoughts on recent financial crises around the world, such as those in Argentina and Greece, and shows why US gold cases from 1933 to 1935 are a useful precedent to understand how future such crises may be successfully resolved by hewing carefully to the rule of law. He believes that the cases may even be invoked by lawyers in other national, or international, arenas. If so, those involved will, no doubt, turn to this book for inspiration and guidance."---Benn Steil, Financial World

"Excellent. . . . A fascinating narrative of FDR's decision to devalue the dollar in 1933-34."---Scott Sumner, EconLog

"[Sebastian Edwards] skillfully narrates a pivotal episode in American political and economic history he considers too little remembered. . . . Edwards writes equally knowledgeably about economics and politics: . . . At a time of economic uncertainty at home and abroad, this comprehensive study of an important event in U.S. fiscal history has significant implications for today." (Publishers Weekly)

"Edwards’ book is fascinating, well written and enjoyable."---Geoffrey Wood, Central Banking

"Great book by UCLA economist Sebastian Edwards about a key moment in American economic history. Many economists believe that the most important thing FDR did to help the economy recover from the Great Depression was to go off the gold standard. As part of that policy, he pursued laws that rewrote many bond contracts, annulling gold clauses. It was controversial then (and surely would be again if such an issue were ever to arise). Edwards does a wonderful job telling the story."---Greg Mankiw, Greg Mankiw's Blog

"Fascinating. . . . I couldn't put this book down."---Brenda Jubin, Seeking Alpha

From the Back Cover: 

"American Default provides an in-depth look at one of the most important, but often neglected, events in U.S. economic history, the abrogation of bond’s gold clauses during the New Deal. Not only does the book provide an excellent discussion of the economics of this event, but it is a really good read because it delves into the personalities and the politics behind this effective default. I highly recommend it."--Frederic S. Mishkin, Columbia University

"I thought we knew about American abandonment of gold during the Great Depression. But American Default is an eye-opener. It is astonishing how chaotic were the circumstances and how woefully inadequate was understanding. Everyone interested in the history of gold, the Great Depression, the Greek or the Argentine crises, and in the crises to come should read this book."--Anne Krueger, Johns Hopkins University

"American Default is a fascinating and well-written book about the momentous decision to leave the gold standard in 1933. Sebastian Edwards skillfully weaves together the political, economic, and legal aspects of this important episode, with lessons for today. Highly recommended!"--Douglas A. Irwin, Dartmouth College, author of Clashing over Commerce: A History of US Trade Policy

"A really excellent book. Edwards provides a dramatic and readable account of monumental decisions that changed the course of history. American Default is sure to be a hit."--Michael D. Bordo, Rutgers University

Product details Hardcover: 288 pages Publisher: Princeton University Press (May 22, 2018) Language: English ISBN-10: 9780691161884 ISBN-13: 978-0691161884 ASIN: 0691161887

Roosevelt e o abandono da clausula ouro nos EUA - Mark Pulliam (Law and Liberty)

Estou lendo o livro citado de Sebastian Edwards: American Default (2018), uma história da maior decisão econômica da administração Roosevelt. (PRA)

Abandoning Gold and the Constitution?

by Mark Pulliam

Law and Liberty, February 25, 2019

https://www.lawliberty.org/2019/02/25/abandoning-gold-and-the-constitution/

Constitutional law scholars tend to focus on decisions involving abortion, same-sex marriage, desegregation, and administrative law, ignoring one of the 20th century’s most contentious legal battles: creditors’ challenge to President Franklin D. Roosevelt’s abrogation of the gold standard, and contemporaneous invalidation of “gold clauses” in contractual debt obligations, in 1933.  The New Deal spawned many events of interest to constitutional historians—such as FDR’s court-packing scheme, the abandonment of the Lochner line of cases, and the Carolene Products decision—but until the publication of Sebastian Edwards’s American Default in 2018, the great debt default of 1933-1935 had unaccountably been largely overlooked. [1] In the pre-“woke” era, constitutional battles were over economics, not culture, and no aspect of the economy is more fundamental than money.  

In response to the Great Depression, one of Roosevelt’s first acts as President, after taking office in March 1933, [2] was to ban the private ownership of gold—in the form of coins, bullion, or gold certificates—and to require all private gold holdings to be sold to the federal government at a set price. This unprecedented edict was quickly followed by taking the nation off the gold standard. Then, on June 5, 1933, at FDR’s behest Congress passed Joint Resolution No. 10, unilaterally annulling all “gold clauses”—contractual provisions requiring repayment of debts in gold, used in most bonds and mortgages since the Civil War to protect lenders against devaluation of paper money—in all past and future debt contracts, public and private. As the coup de grace, in January 1934, FDR devalued the currency by fixing a new price for gold almost 70 percent higher than its century-old price. 

Thus, to aid distressed farmers, debtors were allowed to repay their obligations with watered-down dollars, despite gold-denominated repayment obligations. Beleaguered rural voters favored inflation. (To remedy crippling deflation, FDR’s overarching goal was to increase domestic prices, especially for farm products.) Through these combined actions, the President and Congress had effectively wiped out more than 40 percent of all existing debt. Creditors were livid.  Bold holders who had purchased securities protected by gold clauses challenged the annulment as unconstitutional. This became one of the first skirmishes over the New Deal to be decided by the Supreme Court. In early 1935, following three days of argument, in a trio of related decisions [3] the Court upheld the federal government’s actions in a series of 5-4 decisions written by Chief Justice Charles Evan Hughes, with the conservative “Four Horsemen” dissenting. 

The majority blithely upheld the Joint Resolution invalidating gold clauses in private contracts, citing broad congressional power to regulate the economy and, with respect to the impairment of government obligations, denying that bond holders had been damaged by the taking. The rationale of Hughes’s opinion in the public debt cases was that annulment of the gold clause caused no economic injury to the bondholders because—even had the debt been repaid in gold coin—other features of FDR’s monetary reforms would have required that the gold be surrendered at a fixed price (less than actual market value). [4] The dissenters, who viewed FDR’s scheme as an abhorrent and dishonorable repudiation of contractual obligations, scoffed at this reasoning: “Obligations cannot be legally avoided by prohibiting the creditor from receiving the thing promised.” Justice James Clark McReynolds delivered the unitary dissent, departing from the prepared opinion to scornfully declare that the Constitution “is gone,” bitterly lamenting that “Shame and humiliation are upon us now.” 

This long-forgotten showdown occurred two years before the fateful “switch in time that saved nine,” but after the evisceration of the Contract Clause in Home Building & Loan Association v. Blaisdell (in another 5-4  opinion, also penned by Hughes). [5] To some extent, the result in the closely-watched Gold Clause Cases was pre-ordained: many financial analysts had publicly predicted that a ruling against the FDR administration would plunge the country into a catastrophic crisis. According to Edwards, it was “plainly clear” that invalidating the Joint Resolution “would create chaos, including millions of bankruptcies across the country.” 

American Default tells a fascinating story. Edwards, who teaches international economics at UCLA, brings a sophisticated knowledge of finance to his analysis of the chaotic conditions underlying the Great Depression, the circumstances leading up to FDR’s decision to nullify the gold clauses, and the international implications of this action. (The author casually name-drops prominent economists with whom he has rubbed elbows over the years, including Milton Friedman, Anna Schwartz, and Allan Meltzer.) His account goes behind the scenes in 1933, which he suggests is “possibly the most eventful year in American history during times of peace.”  The full cast of characters who played a role in the vaunted “First 100 Days” are often over-shadowed by FDR himself. Edwards explores the personalities of Roosevelt’s New Deal advisers, especially the economists and so-called Brains Trust. 

Edwards suggests that FDR’s team was ill-equipped to manage the intricacies of monetary policy. Much of what the would-be central planners did was a haphazard experiment. Indeed, FDR did not choose his Secretary of the Treasury until shortly before he was sworn in as President. Most of FDR’s agenda during the “Hundred Days” has been panned by economists and historians. The Agricultural Adjustment Act and National Industrial Recovery Act, both struck down as unconstitutional, accomplished little. The Great Depression continued throughout the decade of the 1930s. Nevertheless, Edwards maintains that FDR’s tempestuous monetary reforms in 1933-34 arrested the nation’s economic freefall and boosted prices. Moreover, Edwards concludes—albeit with qualifying caveats—that the debt default engineered by FDR had no apparent deleterious effect on America’s economy in the long run. In both cases, Edwards offers charts and technical data (complete with “M1”) in support of his position. Friedman and Schwartz reached the opposite conclusion in their 1963 book A Monetary History of the United States, 1867-1960.

How well does the book, subtitled The Untold Story of FDR, the Supreme Court, and the Battle Over Gold, hold up as legal history or constitutional analysis? We have become inured to fiat currency and monetary gimmicks on the part of the Federal Reserve, but are these innovations consistent with an originalist understanding of the Constitution? What did the Framers mean when granting to Congress the power to “coin money [and] regulate the value thereof”? [6] Were FDR’s reforms within the purview of the Constitution’s “necessary and proper” clause? [7] Were the Reconstruction-era Legal Tender Cases [8] correctly decided? These questions deserve comprehensive treatment. That argument isn’t contained in Edwards’ book. In contrast to Edwards’ economic analysis, his legal narrative is somewhat superficial, derived in large part from contemporaneous accounts, some historical archives, and William Leuchtenberg’s 1995 book The FDR Years: On Roosevelt and His Legacy, which he describes as “the standard work on the Supreme Court during the time of Roosevelt.”  

Edwards acknowledges that the statutory authority for declaring a national bank holiday was “doubtful,” and notes that acting Treasury Secretary Dean Acheson resigned his post because of his concerns that the administration’s policies were illegal.  Beyond this, his largely journalistic rendition of the Supreme Court litigation is informative and may satisfy a general audience, but does not break new ground as legal scholarship. In fairness, this was not the author’s intent; yet, an account of the Gold Clause Cases is incomplete without a reckoning of the larger constitutional questions. [9] 

Although FDR’s abandonment of the gold standard is a bell that even Robert Bork conceded was impossible to un-ring, the efficacy of economic policy does not necessarily determine its constitutionality.  

[1] A prominent exception is Kenneth Dam’s article, “From the Gold Clause Cases to the Gold Commission: A Half Century of American Monetary Law,” 50 U. of Chicago Law Review 504 (1983).

[2] Presidential inaugurations were moved to January following adoption of the 20thAmendment.

[3] Norman v. Baltimore & Ohio Railroad Co., 294 U.S. 240 (1935) (consolidated with United States v. Bankers Trust Co.); Nortz v. United States, 294 U.S. 317 (1935); and Perry v. United States, 294 U.S. 330 (1935). 

[4] Harvard Law School professor Henry Hart opined that “[f]ew more baffling pronouncements, it is fair to say, have ever issued from the United States Supreme Court.”

[5] 290 U.S. 398 (1934).

[6] Article I, section 8.

[7] Id.

[8] Knox v. Lee and Parker v. Davis, 79 U.S. 457 (1871) (overruling Hepburn v. Griswold, 75 U.S. 603 (1870)). See Robert G. Natelson, “Paper Money and the Original Understanding of the Coinage Clause,” 31 Harvard Journal of Law & Public Policy 1017 (2008).

[9] Gerard N. Magliocca, “The Gold Clause Cases and Constitutional Necessity,” 64 Florida Law Review 1243 (2012).