The US government is shut down, and the world economy is threatened if the US Congress does not raise the Debt Ceiling. Republicans and Democrats are at a stalemate and refuse to cooperate with each other. What to do?
Sometimes the way out of an impasse is for both sides to come together and blame a third party. A German Economist has found the perfect scapegoat: Germany.
Eonomist Uwe Bolt, writing in The Globalist, explains how Germany forced Congress to create the debt ceiling back in 1917. President Woodrow Wilson wanted to keep America out of the war raging in Europe, but German naval intransigence forced him to declare war:
However, the German navy, with its submarines, managed to cut Britain off from supplies. This effective blockade led to the sinking of two U.S. steamers off the British coast in February 1917. President Wilson broke off diplomatic relations with Germany and, after receiving Congressional authorization, declared war on the Kaiser on April 6, 1917.
Wars cost money. And Congress, recognizing that the president would need to borrow money, Congress enacted the Debt Ceiling:
So that the President would not have to return each time to beg for more, why not do the patriotic thing and give him the ability to borrow a fair number of times? So that things would not get out of hand, the proposal to set a debt ceiling was enacted. And so, with the approval of the Second Liberty Bond Act in October 1917, a patriotic-minded U.S. Congress loosened the nation’s debt issuance purse strings and basically created what we refer to today as the debt ceiling.
But that wasn't the end of Germany's wholesale destruction of the American economic system. Decades later, again, thanks to Germany, Congress eliminated the Gold Standard:
But Germany’s guilt for the U.S. predicament of today does not end there. The Second Liberty Bond Act also contained the so-called gold clause. Its effect was that these war bonds had to be redeemed in gold. And yet, U.S. gold reserves were far too small to make good on that promise.
Thus, some decades later, the U.S. Congress upon the request of President Franklin D. Roosevelt revoked the clause in 1933 retroactively. Coincidentally, many (including four of nine Supreme Court Justices in 1935) consider that action as the first U.S. debt default. Again, thanks to the Germans!