The court observed only that the clause confirmed the "fundamental principle" that Congress may not "alter or destroy" debts already incurred.
More than three generations later, in 1935, Chief Justice Charles Evans Hughes, ruling in the case of Perry v. the United States, revisited the amendment and affirmed the "fundamental principle" that Congress may not "alter or destroy" debts already incurred.
Rather than destroy the debt, we have reshuffled it; initially from struggling homeowners to banks, then from banks to governments, and then from weak governments to stronger ones.It is rather like the game of Old Maid, where the loser is the player who ends up with the Queen of Spades; we all try to pass on the card to someone else.
Last year, Chilean artist, Francisco Tapia, set fire to documents representing $500m £326mm) worth of student debt during a protest at the country's Universidad del Mar, claiming he had 'freed' students by destroying the debt papers.
The economist Carmen Reinhart terms this era one of the "repression" of finance -- a term that sounds ominous but in fact is what allowed the postwar recovery to go forward and not to be destroyed by debt.
The AIG bailout benefited Goldman, the firm responsible for the largest share of many value destroying collateralized debt obligations (CDOs) against which AIG sold protection ($33 billion of the $80 billion).
I've written previously about how capitalism is currently in its endgame, similar to the endgame of Monopoly, where one player has accumulated nearly all of the property and money, and all the other players are afraid to make any moves at all, lest they land on the wrong square and are destroyed by debt.
Central banks were happy to create money, but refused to destroy the government debt they bought with it, and so debt obsessed governments embarked on fiscal consolidation in the middle of a huge recession.
The London economic consultancy Capital Economics has said: "There is a clear danger of a more sustained period of deflation, which would destroy peripheral countries' debt consolidation efforts, and could cause market concerns to once again spread from Greece".
It has been, to a certain extent, about two activist economists who spent years preaching that high debt would destroy America's economy in the future, pitching us into certain recession.
