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."
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Michael Perelman Economics Department California State University michael at ecst.csuchico.edu Chico, CA 95929 530-898-5321 fax 530-898-5901
