MARK RIEPE: I'm Mark Riepe. I head up the Schwab Center for Financial Research, and this is Financial Decoder, an original podcast from Charles Schwab. It's a show about financial decision-making and the cognitive and emotional biases that can cloud our judgment.
Today's episode airs shortly after Independence Day 2026, and it's the country's 250th birthday. I hope you had a happy Fourth. And in light of this, we're doing something a little different.
For several years, once a week, I would pick a day at random and then do a social media post about an event that happened on that day. The posts were about events that had something to do with economics, financial markets, investing, that sort of thing. I haven't done any since last February because every so often life gets in the way, as well as I've got to do my real job, but for this episode we dove back into all these old posts and pulled out several that we're going to share.
We haven't picked these randomly. We've grouped them into several themes, and the themes are ones that speak to types of events that come up again and again throughout the history of the country. These themes may or may not be any more important than any other themes we could have chosen, but I find them to be interesting, and I hope you do as well.
I'm also not claiming that this is some sort of definitive economic and financial history of the United States. In almost all cases, these events have many learned tomes written about them, and it would be wonderful if you listened to this episode and felt the need to learn more about the events. So let's get going with theme number one.
The first theme is that the debt of the federal government is always a subject of discussion. We're going to start in 1792. George Washington is president, and the ink has barely dried on the Constitution. And already, the federal government is running a deficit.
In 1792, federal receipts are about $3.7 million, while spending is just over $5 million. So the government borrows by issuing bonds. One of those bonds became known as the "Washington Bond" because George Washington bought it as a sign of his confidence in the ability of the new government to pay its debts. At the time, the national debt was about $77 million. That was roughly a third of the country's total economic output at the time.
So from the very beginning, the country is dealing with the same question: How much debt is too much? The answer isn't obvious. A couple of decades later, the question became more urgent.
The War of 1812 put serious pressure on the country's finances. In 1811, federal revenue was about $14.4 million. By 1814, it dropped to $11.2 million, largely because trade collapsed, and most federal revenue came from tariffs, another topic that has been hotly debated from the beginning of the country until today.
Meanwhile, spending exploded. It went from $8 million a year in 1811 to nearly $35 million at the height of the war. The difference got financed with debt. And the national debt roughly doubled in a few years. Bond investors began to worry. They fretted not just about whether they' would be repaid but how they would be paid. After all, in the aftermath of the American Revolution, the federal government dealt with huge deficits by printing more money, and inflation was a big problem
The debtholders in the War of 1812 started demanding payment in gold and silver. But those reserves were limited. Gold holdings fell sharply from hundreds of thousands of dollars to almost nothing. By late 1814, the government was struggling to make payments. One Treasury official described the situation bluntly: "Payments are not being made on time, and obligations are being dishonored." In my opinion, this is the first and only time that the federal government has defaulted on its debt.
Before I jump to the next theme, though, here's a quiz about a not-so-fun fact. When's the last time a U.S. state defaulted on its debt? Remember, Puerto Rico is not a state.
That's enough time: The answer is Arkansas. In 1933, the governor declared the state would not make the required payments due on its highway bonds. It was during the Great Depression, so maybe we give Arkansas a break. But its shaky financial affairs pertaining to highway construction and maintenance were years in the making.
The tipping point was in 1931 when revenue to the Highway Commission dropped 10%. Money was tight. People drove less, bought fewer cars, let their licenses lapse. The state couldn't make payments on its highway bonds. And the state and the creditors unsuccessfully negotiated, and to break the stalemate, the Roosevelt Administration got involved. It refused to give Arkansas much-needed federal funding until they resolved the dispute.
Finally, months later, Arkansas passed legislation, and the bondholders won. But gas taxes soared to 6.5¢ a gallon, which is $1.62 in today's dollars. The bottom line is that defaults, whether by individuals, companies, municipalities, states, or countries, are messy. And fortunately, no states have followed Arkansas' footsteps.
Theme number two is that our currency itself has always been the subject of much debate. Today we argue about whether a penny should exist and whose face is or isn't on our paper money and whether we should just digitize everything. As with debt, the currency was a thing right from the beginning.
In 1775, the Continental Congress was raising money for military expenditures. It was a complicated business, and eventually there wasn't enough gold and silver to back the money the government issued. Alexander Hamilton eventually saved the day by straightening out America's monetary affairs. If you don't believe me, buy the soundtrack to Hamilton, and it explains everything.
But here's an interesting detail you don't hear much about. Back then the practice was that each bill would be hand signed and numbered by not one but two authorized persons. As the Revolution gained steam and more paper currency was being issued, there were simply too many bills being issued for these two people to handle the load. Congress authorized another 28 to be signers. It also specified, and here I'm quoting, "that each gentleman, who signs the Continental bills, be allowed and paid out of the Continental Treasury 1 and 1/3 dollars for every thousand bills signed and numbered by him."[1] How many of these people succumbed to carpel tunnel syndrome? I'm not sure, but this isn't easy work.
I wanted to know whether this was a lucrative job. So let's assume that you would need a minute every so often to massage the numbness out of your hand, plus a 10-minute break per hour. It would take an estimated 7.27 hours to complete 1,000 bills, resulting in an hourly wage of 0.18 continentals. That was the name of the currency. Using an online historical inflation calculator, that works out to be approximately $7.33 per hour, which is freakishly close to the current federal minimum wage of $7.25. As the 250th birthday celebrations continue, be sure to toast these tireless scribes who sacrificed their right—and probably a few left—hands to make it possible to pay for the Revolution.
Now, with Hamilton on the job, you might think that by the early 1800s, we would have had a single national currency. You would be wrong. Private banks issued their own notes—paper money backed, in theory, by gold and silver. If you trusted the bank, the note had value. If you didn't, well, it didn't.
In 1842, a bank in Philadelphia, the Bank of Penn Township, issued notes that other banks simply refused to accept. They didn't have confidence in it. The bank failed, and it was not alone. In the span of a few days, multiple banks closed or suspended operations.
There were other issues with banknotes, and it wasn't just whether a note was legitimate; it was also where it came from. A banknote issued by a local bank might be accepted at face value. But if it was issued hundreds of miles away, it got discounted. Because whoever held it had to travel—physically travel—to redeem it for gold or silver. Time, cost, and uncertainty all got priced in. There were entire markets built around this. There were brokers who tracked the value of banknotes issued by hundreds of banks across the country.
It would be a while until federal currency came on the scene. Which brings me to the story of Salmon P. Chase. He was Secretary of the Treasury for the U.S. government during the Civil War.
As in the Revolution, there wasn't enough gold and silver to pay the bills for the Civil War, and so the printing presses were set up to print what were called greenbacks. Predictably, inflation rose, and the greenbacks lost much of their value relative to gold.
As for Chase, the guy in charge of the Treasury, when it was time to print the first $1 greenbacks, he thought his face should be on them. Not George Washington. Chase's face. It goes to show that inflation and currency issues have been around for a long time. But currency is dynamic, and eventually Washington ended up on the $1 bill.
Theme number three is that taxes have always been a thing. Founding Father Benjamin Franklin is sometimes credited as saying that the only two sure things are death and taxes. But he wasn't the first to figure that out. There was a play in 1716 called The Cobbler of Preston. In it, a character says, "'Tis impossible to be sure of anything but Death and Taxes."
Like many things in U.S. history, taxes have changed since our founding. Income taxes were not always a feature of the US. Tariffs were the primary source of revenue for decades. The federal income tax as we know it came about with the ratification of the Sixteenth Amendment in 1913.
But how did we get there? It started with the Revenue Act of 1861, established to fund the Civil War. To enforce this act, the Revenue Act of 1862 created the Office of the Commissioner of Internal Revenue, or what we now know as the Internal Revenue Service.
That wartime measure was repealed in 1873, but the income tax wasn't dead. A new income tax was passed in 1894, but one year later, was found to be unconstitutional. That ruling provided the impetus to amend the Constitution and take the question out of the courts. It recognized the income tax as within the scope of federal power and was ratified. But lasting questions like how is income defined and how should the tax burden be shared continue to be asked and will no doubt be shaped by legislation and interpreted by courts.
And that brings me to theme number four, and that is the courts and lawmakers have and will presumably always continue to shape our economy and markets. Lots of events fall into this bucket and many are obvious so let me touch on a couple of the less obvious ones.
Let's start with margarine. It was invented by a French chemist in the 1800s as a cheaper alternative to butter. Consumers liked it. Dairy producers, not surprisingly, did not. And in the U.S., they pushed back.
Congress responded with a tax on margarine in 1886. The policy evolved so that white margarine, its natural color, was taxed lightly. But yellow margarine, made to look like butter, was taxed heavily. In some places, the rules went further. Manufacturers were required to dye margarine pink. The goal was to make it less appealing, so people wouldn't buy it. Some states banned margarine outright.
Predictably, people adapted. They crossed state lines to buy it. Yes, margarine smuggling was an actual thing. The federal tax stayed in place for decades and wasn't fully repealed until 1950.
Tariffs are another example of a piece of legislation that has been around right from the beginning and continues to this day. I'm not going to venture into current controversies around newer tariffs. If you want to hear about that, you can always listen to the WashingtonWise podcast by Mike Townsend. No, I'm going back to my favorite tariff story.
Let me set the stage for you. Imagine you have a blanket. Now imagine that, in order to make your blanket wrap around you better, you cut holes in it and add some wide fabric tubes to those holes. You put your arms into the tubes, and they're still covered by the blanket, so you've got some mobility, but you're still covered by the blanket. What I've just described is the "Snuggie"—one of the great inventions of all time.
Now, what does this have to do with tariffs? Well, let me answer your question with a question: Is your modified blanket still a blanket, or is it a piece of clothing, or is it something else entirely? And this isn't just theoretical word play. In 2017, a judge ruled that the Snuggie does, indeed, retain its blanket-like character. It does not cross the border into the clothing realm.
This matters because of tariffs. In 2017, imported blankets had a tariff of 8.5%. But imported clothing had a tariff of 14.9%. The Snuggie was ultimately classified as "Other." The tariff on items in the "Other" category was a mere 7%. And this is just one example of how the judicial branch influences the markets and trade.
My last theme is number five, and that is the Founding Fathers were people and had investing problems and opinions just like the rest of us. I'll start with Thomas Jefferson. After all, he wrote the first draft of the Declaration of Independence. He died on July 4, 1826, exactly 50 years after it was adopted.
When I grew up, I had heard or was taught that, after the British burned the Library of Congress during the War of 1812, it was Thomas Jefferson who donated all his books to help rebuild the library's collection. Not exactly. Jefferson didn't give his books; he sold them to the federal government to replace what was lost. He was paid $23,950, which is worth over $600,000 today.
Why did he sell the books? He needed the money. I used to think Jefferson's financial woes were all of his own making, but that's not necessarily true. For example, he co-signed for a $20,000 loan taken out by a protégé, who was also a former governor of Virginia. That man's daughter was married to Jefferson's grandson. The man used the loan for land purchases that went bust during the Panic of 1819. Jefferson was on the hook for the loan. Yes, he was culpable. But I sympathize with him. He must have felt a lot of social pressure to lend his friend the money.
But let's not forget that Jefferson was also creative and that creativity extended to personal finance. Facing crushing debts, he planned to sell lottery tickets for ten dollars each, and the winner would get Monticello, his beloved estate. Unfortunately, he died before the lottery could be arranged, and his estate owed $107,273.63,[2] which his heirs spent decades dealing with.
I don't want to end on a downer, so let's talk about Benjamin Franklin. As you probably know, he wrote Poor Richard's Almanack, first published in 1732. He put out an annual edition until 1758, and it made him both famous and rich. Those books covered a lot of ground, but they also included a lot of personal finance advice. Was his advice any good? Let's take a look.
First of all, he appreciated the importance of money. He wrote, "Light purse, heavy heart,[3]" and "Nothing but money is sweeter than honey."[4] The last time I checked, much of what we want in life costs at least something. So I'm with him on this.
But he was a proponent of thrift. For example, he wrote, "The art of getting riches very much involves thrift." Another gem was "If you know how to spend less than you get, you have the Philosopher's Stone."[5] Finally, "Beware of little expenses, for a small leak will sink a great ship."[6] It's hard to disagree with these sentiments.
Franklin also liked what we would call today "goals-based investing." He, correctly, in my opinion, understood that money isn't an end unto itself, but a means to an end. As he put it in the 1736 edition: "Wealth is not his that has it, but his that enjoys it."[7] In 1731, he expressed similar sentiments as follows: "The use of money is all the advantage there is in having money."[8]
Franklin was also not a fan of debt. Here are four especially pithy expressions he used: "Borrowing makes sorrowing." "Rather go to bed supperless than rise [in the morning] in debt." "The second vice is lying, the first is running debt."[9] And the topper here, "The borrower is slave to the lender." At first, I thought he was being too dramatic. But then I realized that, in his time, debtors' prisons were an actual thing. They weren't outlawed in the U.S. until 1833.[10] In fact, two signers of the Declaration of Independence served time in one. So the penalties of too much debt were more extreme than they are today.
Finally, successful investing is primarily about finding the right balance between risk and return. As an entrepreneur, Franklin had some wisdom around risk-taking. He recognized the downside and encapsulated it in this quote, "An egg today is better than a hen tomorrow." OK, I actually doubt he actually believed that, exactly. After all, an egg today gives you part of a breakfast today, but a hen can supply eggs for years. The problem is whether you can know for sure that the hen will be around tomorrow. Or as he put it, "Distrust and caution are the parents of security."[11]
He also wrote that, "'Tis easy to see, hard to foresee."[12] Ultimately, Franklin was the consummate entrepreneur and understood prudent risk-taking. As he wrote, "He that would catch fish must venture his bait," and "You cannot pluck roses without fear of thorns."[13] But he wasn't foolhardy. Just because you're a risk-taker doesn't mean you should be a reckless risk-taker. He said it this way, "Great estate may venture more; little boats must keep near shore."[14]
As is the case with all of the events and observations in this episode, we have learned a lot in the past 250 years. But Ben Franklin had the basics covered already.
That's it for this episode. I hope you enjoyed this jaunt down the wide and long memory lane of American history. And as the saying goes, everything old is new again. And we are still struggling with familiar questions and issues. And we're still refining laws and facing down problems.
But the world and the country have also changed quite a bit since 1776. And the United States has risen from colonial upstart to world leader. After the celebrations of our founding are over, we will persevere. And with luck, we will learn from our history and avoid the same mistakes. And meet the future with wisdom forged by experience.
That may be the most useful thing about looking back. It doesn't tell us what's going to happen next. But it reminds us that we've been working through versions of these problems for a very long time. And we've made it through 250 years of not just problems, but solutions, too.
As always, if you'd like to hear more from me, you can follow me on my LinkedIn page or at X @MarkRiepe. That's M-A-R-K-R-I-E-P-E. As always, we'd appreciate it if you gave us a rating or review on Apple Podcasts. Or comment on the show if you listen to it on Spotify. Or tell a friend, or a few friends, about us. We always like new listeners, so if you know someone who might like the show, please tell them about it and how they can follow us for free in their favorite podcasting app.
For important disclosures, see the show notes and schwab.com/FinancialDecoder.
[1] Journals of the Continental Congress, 1774-1789, volume II: 1775, May–1775, September, Worthington Chauncy, editor, 1905.
[2] Craig Daugherty, "Thomas Jefferson's Lavish Lifestyle—and Struggle with Debt," History.com, May 28, 2025.
[3] "U.S. Presidents Who Had Money Problems," Safe 1 Credit Union.
[4]Poor Richard's Almanack, 1733.
[5]Poor Richards's Almanack, 1736.
[6]Poor Richard's Almanack, 1745.
[7]Poor Richard's Almanack, 1736.
[8]Poor Richard's Almanack, 1731.
[9]Poor Richard's Almanack, 1748.
[10] Eli Hager, "Debtors' Prisons, Then and Now: FAQ, February 24,2025.
[11]Poor Richard's Almanack, 1748.
[12]Poor Richard's Almanack, 1736.
[13]Poor Richard's Almanack, 1734.
[14]Poor Richard's Almanack, 1751.