Re: An American Jubilee

[Michael Perelman <michael@xxxxxxxxxxxxxxxxx>]

I cannot say about the reasoning of the Court.  They seem to have been
swayed by the Treasury.  Roosevelt wanted to inflate the dollar to help
the economy get going.

On Sat, Oct 04, 2003 at 01:28:15PM -0700, Eugene Coyle wrote:
> Michael,
>     Can you tell us WHY the Supreme Court so ruled?
>
> Gene
>
> PS I will look later at the reference you give.
>
> michael wrote:
>
> >In light of the LDC debt problem, I have just been looking at:
> >
> >Kroszner, Randall S. 1999. "Is It Better to Forgive than to
> >Receive? Repudiation of the Gold Indexation Clause in Long-Term
> >Debt during the Great Depression." Manuscript. Chicago: University
> >of Chicago, Graduate School of Business.?
> ><http://gsbwww.uchicago.edu/fac/randall.kroszner/research/>
> >
> >
> >"Following the inflation during the Civil War, almost all long-term
> >financial contracts in the U.S. came to include a "gold clause"
> >which effectively indexed to gold the value of the payments to
> >creditors.  This clause protected creditors against devaluation of
> >the dollar since they could demand payment in gold or the
> >equivalent value of gold in nominal dollars if the price of gold
> >were to rise during the life of the contract.  On June 5, 1933,
> >Congress passed a Joint Resolution nullifying gold clauses in both
> >private and public debt contracts."
> >
> >"Although the Supreme Court struck down most of Roosevelt's early
> >New Deal programs, the Court upheld the government's ability to
> >alter financial contracts by refusing to enforce gold clauses.
> >Given that the price of gold rose from $20.67 per ounce to $35 per
> >ounce when the U.S. officially devalued in 1934, the abrogation of
> >these clauses was tantamount to a debt jubilee."
> >
> >--
> >
> >Michael Perelman
> >Economics Department
> >California State University
> >michael at ecst.csuchico.edu
> >Chico, CA 95929
> >530-898-5321
> >fax 530-898-5901
> >
> >
> >

--
Michael Perelman
Economics Department
California State University
Chico, CA 95929

Tel. 530-898-5321
E-Mail michael@xxxxxxxxxxxxxxxxx