American Default: The Untold Story of FDR, the Supreme Court, and the Battle over Gold.

• Author: O'Driscoll, Gerald P., Jr.

American Default: The Untold Story of FDR, the Supreme Court, and the Battle over Gold

Sebastian Edwards

Princeton, N.J.: Princeton University Press, 2018, 252 pp.

Sebastian Edwards has written a very important book on a monumental episode in U.S. history, the great debt default of 1933-35, which was a true turning point in American political and economic history. The episode belies myths drat Americans construct about their history: America has strong protection of private property rights, is bound by the rule of law, and pays its debts.

Between 1933 and 1935, a series of events and actions culminated in default on U.S. sovereign debt and corresponding forced defaults on private debts. In recounting that story, Edwards proceeds at a fast pace, as the events themselves did. He writes well, and, at times, the book reads like a novel.

Edwards reprises the period 1929--32 and then moves into the presidential campaign in full swing by March 1932. It's mostly about FDR and campaign staff and advisers because, incredibly, President Hoover did not campaign until very late. At the core of FDR's advisers were professors constituting the "Brain Trust," mainly Raymond Moley, Rexford Guy Tugwell, and Adolfe Berle. FDR leaned on them heavily. As Edwards makes clear, however, they knew little about the issues they would be facing (such as gold and foreign exchange).

It was not at all clear in early 1932 that the gold standard was a problem for America. Jacob Viner had pointed out that the United States had the largest stock of gold in the world. The percentage of monetary liabilities backed by gold holdings at the Federal Reserve exceeded the statutory requirements of 40 percent. Between then and Election Day (November 8, 1932), all that would change.

What changed everything, of course, was that the Federal Reserve never acted to stem the crushing price deflation and tumbling economic activity. Nor did the Fed do anything effective to address the banking crisis. The crumbling banking system would force political action. And the political forces of the day, conservative, populist, and just plain self-serving, would shape the course those actions took.

The "do nothing" tag on Herbert Hoover is incorrect. He conceived and even had a blueprint drawn up for a bank holiday to stop bank closures. However, he let his attorney general and the Fed board of governors dissuade him from the plan. FDR adopted the idea and even used Hoover's blueprint.

When a new wave...