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Econ Myth Busting: Sorry John Carney, the U.S. is Not a Default Virgin

May 21, 2011 7:31 AM ETTBT, TMV, TLT
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Seeking Alpha Analyst Since 2009

Mr. Hileman has experience with both startups and well known companies such as Allianz, The Industry Standard, Bank of America, and The Home Depot. He has served on the boards of directors of both publicly traded and private companies. Previously Mr. Hileman co-founded a $300M San Francisco based incubator that financed and launched new technology ventures. At Montgomery Securities he worked in both Equity Research and Corporate Finance, where he executed over a billion dollars in M&A and underwriting transactions for the technology & financial services industries. Mr. Hileman holds an MBA from IMD in Lausanne, Switzerland, after which he completed a post-graduate fellowship with The World Business Academy. He completed his bachelors in Accounting and Economics at the University of Washington, where he was also elected student body president. He is currently a member of www.polar-vision.org team.
I'm a big fan of American Public Media's Marketplace radio show, but Friday's show featured CNBC's John Carney and Fortune's Leigh Gallagher discussing the U.S. debt situation.

Both John and Leigh stated the oft-repeated myth that the U.S. has *never* defaulted.

If only that were true.

The above summary is from Carmen Reinhart's and Ken Rogoff's research in their superb book This Time is Different.

As you can see from their research not only has the U.S. defaulted, but the U.S. has defaulted or 'restructured' (a partial-default) at least once every century since the founding of the republic. Details on each episode can be found in the book and at Carmen's website.

As Reinhart and Rogoff put it, the U.S. is definitely not a "default virgin".

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

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