4 ms·

True. It's important to remember debt isn't a perfectly liquid asset because one or more countries may decide it's not worth repaying, then it becomes tantamoun

True. It's important to remember debt isn't a perfectly liquid asset because one or more countries may decide it's not worth repaying, then it becomes tantamount to a pyramid scheme of borrowing. If/when that happens, the power of the West may fall into slightly different hands of mafia-types as did the Soviet Union. Greece also comes to mind.

solotronics 8y ago
One interesting thing to consider is that countries holding larger and larger amounts of each others debt could be stabilizing in geopolitics. If your neighbor owes you $100 you aren't going to punch him because you would never get the money back.
- pjc50 8y ago
  Oh, debts survive wars. They can often outlive countries. France is still paying a single annuity from 1738, although countries have learned not to issue eternal debts since then.
  - orf 8y ago
    https://www.cbsnews.com/news/a-government-pension-thats-lasted-271-years/ https://www.cbsnews.com/news/a-government-pension-thats-last... if anyone else is interested
  - rosege 8y ago
    And it took the UK until December 2006 to finally repay the USA and Canada their WW2 debts http://news.bbc.co.uk/2/hi/uk/6215847.stm http://news.bbc.co.uk/2/hi/uk/6215847.stm
    - Armisael16 8y ago
      ...has the UK changed governments since then? I must’ve missed that.
  - cft 8y ago
    They usually don't. What you are taking about is worth only 1.20 euros a year. https://www.cbsnews.com/news/a-government-pension-thats-lasted-271-years/ https://www.cbsnews.com/news/a-government-pension-thats-last...
  - Semaphor 8y ago
    Germany is paying the Catholic (?) church nearly half a million every year because of a contract from 1803
- Bendingo 8y ago
  That's true, but somewhat dependent on which currency the debt is denominated in.
pjc50 8y ago
Default is definitely a thing, as are bondholder "haircuts", but that's what the IMF is for. They're coercive but not corrosive to the rule of law like mafia. Former Soviet union oligarchs came about due to privatization rather than debt.
- aswanson 8y ago
  Is there a scenario you can envision where the Soviet Union didn't devolve into a mafia state? Or is that the most stable equilibrium given its history?
  - pjc50 8y ago
    Well, other former communist states did better, such as Poland, Romania, the Baltics, Hungary. The problem was really that the prize was too big. Russia had the oil production. That made it worthwhile doing whatever was necessary to steal control of the money flowing from it. (Perhaps a more salient question is how and whether the US can be prevented from turning into a mafia state; will the ongoing prosecution roll up the network, or will the network roll up the prosecution?)

solotronics 8y ago

One interesting thing to consider is that countries holding larger and larger amounts of each others debt could be stabilizing in geopolitics. If your neighbor owes you $100 you aren't going to punch him because you would never get the money back.

pjc50 8y ago
Oh, debts survive wars. They can often outlive countries. France is still paying a single annuity from 1738, although countries have learned not to issue eternal debts since then.
- orf 8y ago
  https://www.cbsnews.com/news/a-government-pension-thats-lasted-271-years/ https://www.cbsnews.com/news/a-government-pension-thats-last... if anyone else is interested
- rosege 8y ago
  And it took the UK until December 2006 to finally repay the USA and Canada their WW2 debts http://news.bbc.co.uk/2/hi/uk/6215847.stm http://news.bbc.co.uk/2/hi/uk/6215847.stm
  - Armisael16 8y ago
    ...has the UK changed governments since then? I must’ve missed that.
- cft 8y ago
  They usually don't. What you are taking about is worth only 1.20 euros a year. https://www.cbsnews.com/news/a-government-pension-thats-lasted-271-years/ https://www.cbsnews.com/news/a-government-pension-thats-last...
- Semaphor 8y ago
  Germany is paying the Catholic (?) church nearly half a million every year because of a contract from 1803
Bendingo 8y ago
That's true, but somewhat dependent on which currency the debt is denominated in.

pjc50 8y ago

Default is definitely a thing, as are bondholder "haircuts", but that's what the IMF is for. They're coercive but not corrosive to the rule of law like mafia. Former Soviet union oligarchs came about due to privatization rather than debt.

aswanson 8y ago
Is there a scenario you can envision where the Soviet Union didn't devolve into a mafia state? Or is that the most stable equilibrium given its history?
- pjc50 8y ago
  Well, other former communist states did better, such as Poland, Romania, the Baltics, Hungary. The problem was really that the prize was too big. Russia had the oil production. That made it worthwhile doing whatever was necessary to steal control of the money flowing from it. (Perhaps a more salient question is how and whether the US can be prevented from turning into a mafia state; will the ongoing prosecution roll up the network, or will the network roll up the prosecution?)