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Apples and oranges. The effect of a government bankruptcy on the economy and the society (present and future) is not really comparable to the effect of a bankru
by vkreso 9y ago
Apples and oranges. The effect of a government bankruptcy on the economy and the society (present and future) is not really comparable to the effect of a bankruptcy amongst individual economic agents. Those are completely different scales.
Also, morality is always attached to anything which involves society and its institutions. For example, good faith in contracts (bona fides) which has evolved all the way from the roman republic is an example of codified morality which proved to be quite useful in societal transactions (i.e. it solidifies expectations of behavior and hastens transactions). Explicit moral value perhaps may not be visible ("basic economic tool") but it is certainly built into foundations of every and any contract.
- ellius 9y agoWithout bankruptcy protections, what prevents companies from lending out an unlimited sum of money? Countries don't die. You can't send them to debtors' prison. A lender could effectively sell a corrupt or stupid government unsustainable amounts of debt and then effectively put a lien on the country in perpetuity to get its money back. That hardly seems just towards the citizens, who committed no crime other than electing stupid leaders, many of whom might have been elected before they were even born.
- Laforet 9y agoIndeed. In 1825, France demanded a sum of 150 million francs to be paid by Haiti for the loss of French property during the war two decades ago and threatened miliatry invasion in the event of non-payment. The sum was later reduced to 90 million francs and paid in installments until 1947, some 120 years later. Many believed this debt to be the thing that crushed any prospect of development in Haiti's early history as an independent country.
- tanderson92 9y agoWell, credit ratings prevent them.
- tanderson92 9y agoThis is objectively true, so the downvotes are a bit baffling. Credit ratings are directly related to the rate premium bond holders demand for the extra credit risk. It is simply a fact that if the credit ratings are lowered to a sufficient extent, the rate that investors demand for the borrowing will make it no longer feasible.
- anigbrowl 9y agoAbout 10% of HN downvotes I see are applied on ideological rather than rational or grounds (leaving out those for rudeness or other inappropriate behavior). I take an irrational downvote as a small victory, albeit after making sure that it wasn't just for being a smartass or missing the point.
- gertef 9y agoSpot on. You reinvented the World Bank https://www.one.org/international/issues/debt-cancellation/ https://www.one.org/international/issues/debt-cancellation/ http://www.huffingtonpost.com/marcelo-giugale/does-debt-forgiveness-wor_b_5318764.html http://www.huffingtonpost.com/marcelo-giugale/does-debt-forg...
- astronautjones 9y agoYES, thank you
- fulafel 9y agoSovereign states eponymously don't need bankruptcy protection, as banks cannot collect from them. Countries pay back loans because they like to keep a good reputation for future loans, but this does not work in a situation where there is nothing to lose since you can't service loans anyway. (Of course banks can enlist other states to do strong-arming: See eg Greece who were pressured to accept a deal worse than default to benefit foreign EU banks)
- xamolxix 9y ago> See eg Greece who were pressured to accept a deal worse than default to benefit foreign EU banks how are they being pressured?
- jacobush 9y agoIf they don't agree, they will get booted from the Euro currency cooperation. Then they can't issue bonds in Euro. Would have to use their own currency - and that currency would not be in high demand. What would you use it for? Buy olives? Nah, export companies would rather be paid in Euros, dollars or just about anything else...
- xamolxix 9y agoWell, maybe but what is the non-pressure course that the EU should take here? Isn't that what they (Greece) signed up for when they joined the euro?
- candiodari 9y agoJust answering from an economic perspective: > What would you use it for? Buy olives? No, of course not. What government sells olives ? You'd use it to pay Greek taxes. Those you'll pay anytime you want to buy anything from Greece. So it doesn't matter if export companies get paid in Euros, Dollars, or anything else. They'd still owe taxes in (presumably) Drachma and that would create a market for Drachmas.
- 9y ago
- Consultant32452 9y agoNot always. The US technically defaulted on its debts when we dumped the gold standard. Luckily for us, we were still the biggest global super power so we were able to tell everyone to just suck it. For reference, there's an estimated $7 Trillion in gold in the world and the US is now $19 Trillion in debt.
- rootusrootus 9y agoAnd the upside is that the economy is much larger than it could ever have been while stuck on gold.
- throwanem 9y agoWill it stay that way? What happens if it doesn't?
- jacobush 9y ago- SHALL WE PLAY A GAME? - Love to. How about Global Thermonuclear War? - WOULDN'T YOU PREFER A GOOD GAME OF CHESS? - Later. Let's play global thermonuclear war.
- Consultant32452 9y agoI'm sure it matters, but not as much as a surface analysis would lead you to believe. If we had to hoard a bunch of gold to back up the size of our economy, and further demanded our trade counterparts do the same, then the price of gold would've risen and our ownership proportion of the total sum of gold would've matched our proportional global wealth. I don't have a strong opinion on asset backed currencies, but most of the things armchair economists say about it seem pretty irrational.
- selectodude 9y agoThere's more people in the country, so there's proportionally more dollars + a little more as an incentive to spend your money. If dollars gained value faster than economic growth (which you just effectiveally capped at the amount of gold your country possesses) nobody would ever spend it. I know I wouldn't.