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

Edwards (Toxic Aid), a UCLA economics professor, skillfully narrates a pivotal episode in American political and economic history he considers too little remembered. He reminds readers that in 1933, in the depths of the Great Depression, the FDR administration effectively engineered a default—something now considered unimaginable, despite the U.S.’s huge amount of public debt—by abandoning the gold standard, allowing debtors to repay creditors in fiat currency and replacing money backed by gold with money backed by the government. Edwards writes equally knowledgeably about economics and politics: he notes President Roosevelt’s unwavering commitment to the “forgotten man,” the Supreme Court’s reluctant support of the executive branch (despite its aversion to the abrogation of contracts and the gold standard), and the prevailing economic wisdom of the time (for instance, Roosevelt’s economic adviser, George F. Warren, believed that prices rose or fell according to the world’s stock of gold). Edwards also notes that America’s default may provide legal justification for other countries to institute sovereign defaults in the future. 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. (June)