Friday, May 27, 2011

When the US Defaulted--Bureaucrats Screwed Up

In a little-known episode, the US has actually defaulted on some Treasury Bills in 1979 due apparently to a perfect storm of events, including maneuvering over the debt ceiling plus bureaucratic problems.  Quoting from Donald Marron's quote of the original article: "on an unanticipated failure of word processing equipment used to prepare check schedules."

That phrase shows how far we've come in 32 years.  I'm curious what sort of word processing equipment they were using at that time--it seems a little late to be using IBM MT/ST's but if they were merging a file of payees with the check boilerplate they would have served.  If they were using more modern equipment, the data storage might have been a problem.  Our Lexitrons used cassettes for storage, the read/write heads would get out of alignment so a cassette recorded on one machine might not work in another.  Interesting also the operation wasn't computerized--after all punch card accounting machines were the way IBM got into computers back in the 1930's.  Maybe they tried to modernize and had some problems. 

Anyhow, bottom line is the US defaulted and a study seems to show it was expensive; the Treasury had to pay higher interest rates for a good period of time.

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