[julianj]

Hi all,

I'm having a discussion via email with someone about Geopolitics, Peak Oil and other things.

He said$this->bbcode_second_pass_quote('', 'B')ankruptcy for the USA is nothing new. The USA was bankrupt from its inception in 1783 up to the early-mid 19th century. It then emerged from bankruptcy through expansion - into French, Indian and Spanish territories - plus the discovery of goldfields in the far West, and this worked for a while, but by 1873 it was bankrupt again. The discovery of fresh goldfields and a new round of 'land-grabbing' from the Amerindians restored liquidity to the Treasury and economy, and thereafter the USA became a more or less solvent supplier of manufactured goods whereas previously it had been an endemically-bankrupt country supplying primarily raw materials (fish, timber, leather, cotton).

Being a major munitions provider in two world wars was an absolute gift to the US economy and its balance of payments.

[Leanan]

I'd say that's accurate enough. We did not become a world power until the 20th century.

And the reason for our rise was very much our rich natural resources.

However, I don't see what this has to do with peak oil or our current situation. North America is fully explored now. There's no more territory to expand to, no land to seize from the Indians, no huge gold mines (or oil wells) waiting to be found.

[zed]

My take on this is that "bankruptcy" isn't really the right word to describe the USA during those times. Nations don't file for bankruptcy like people, so it's really an ambiguous term.

The USA did not have an income tax until 1913, before this time almost all federal revenues came from tariffs. The country also had a currency backed by gold during this time (except the Civil War, I believe), limiting the federal government's ability to live beyond its means. Thus during this time the federal government was very limited in its spending abilities, and had substantial war debts at various times (Revolution, War of 1812, and Civil War).

The general point of the original post seems to be that the US was on shaky economic ground during its first 50-100 years and I would agree with that assessment. Before the Civil War the wealthiest states were Southern and based on plantation economies. Industrialization is what made the USA an economic power and it was really the Civil War (1860s) that made that happen.

[julianj]

Thanks for the info.

Julian

[pup55]

In fact, the question of whether to run budget deficits actually began in the early days of the country.

There was a school of thought that said that it was desirable for the government to borrow as much money as it could. At the time, the government borrowed money from the more affluent citizens (as they do now, in the form of bonds), and so it ensured the loyalty of the upper class to the central government because the government owed them money. Also, it allowed the central government to get bigger, and also allowed the government to hire employees, which was a convenient way to repay political favors, etc.

The main proponent of this idea was Alexander Hamilton, who was kind of a character.

Hamilton via Wikipedia

His main rival, Jefferson, believed in a small, cheap central government.

Ironically, the practice of deficit spending has been used by the current government for exactly the same reasons. The Chinese and Japanese have to keep the game going because they have too much invested. They spread the money they borrow throughout the economy (defense contractors, etc.) and the government gets bigger and more centralized.