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Government debt is an entirely different product than private debt. Different interest rate and all of that. Regarding the sovereign debt defaults, did we hav

• hga 17y ago
  It may be a different product but it's still in the same market for people who want to lend out their money. The different interest rates are because of different perceived levels of risk; normally a government can offer less because they're viewed as more likely to return the money. If they aren't in the market or to the degree they are less so, investors have no choice but to put their money elsewhere. As for your question, I don't think we can easily say. E.g. the BLS says the dollar lost 28% of its (CPI) value from 1940 to 1946 ... but I'm not willing to assign blame due to the discontinuity of WWII. If Japan defaults in its 3rd Lost Decade, will that be the cause of the initial '80s panic or decades of the wrong medicine to deal with it?
  • jbooth 17y ago
    IMO decades of the wrong medicine in Japan's case. In the case of an Argentina where a ton of crap hits the fan and they default a year later, it's a lot harder to blame the medicine. (regarding Japan -- the consensus is that they didn't do enough stimulus, and that in addition to their high savings rate is why they fell into a deflationary spiral. the government printing money and handing it out with coupons for blow and hookers would have been a better strategy than what they did)