19th Century American financial history

Michael Pollak mpollak at panix.com
Thu Dec 12 14:11:12 PST 2002


I was talking to an economist friend and mentioned one of our favorite lbo-talk arguments, that the US had defaulted on its debts all the time during the 19C and used that defaulted capital to fuel its building of infrastructure. And he responded that as far as he knew, the US government had never in its history defaulted on its debts thanks to the father of our country's chief of staff, Alexander Hamilton. Companies of course defaulted. But that's a different thing -- companies always go bankrupt everywhere without calling into question the creditworthiness of the state.

I could think of two possible responses. One was that the US federal government was negligibly small during the 19C except during the Civil War and the War of 1812, so that it might have been state bonds that went bust, which were functionally the same thing. The second was that railroad and canals, which I seem to remember were the main culprits, are always essentially quasi-national companies no matter what their technical ownership since you can't build them without eminent domain and all kinds of state support. And on top of that I was wondering about what role (state-chartered) banks might have played during our long winter without any kind of central bank.

But the main drift of these reflections was to make me realize how little I actually know about the details about 19C US financial history. Can anyone recommend a good book on the subject? Soundess counts most of course, but amusement value would be appreciated if possible.

Also if anyone can proffer any immediate responses to my friend's objection that US 19C defaults weren't really comparable to 20C third world state defaults because ours weren't state defaults, they would be appreciated also.

Michael



More information about the lbo-talk mailing list