4 ms·

> When a government gets in over their head bad things happen too, up to and including wars. Do they? I havent looked in a while but my recollection (of south

> When a government gets in over their head bad things happen too, up to and including wars. Do they? I havent looked in a while but my recollection (of south america in particular) is that the impact of government bond default is actually pretty low. A couple years without good international bond market access, higher premiums for a few years, maybe some wrangling with the IMF and surface level "restructuring." But sooner rather than later its back to issuance on the open market with willing buyers after those premiums.

lend000 5y ago
I suspect some Argentinians and Venezuelans would disagree with you about the degree of consequence. Argentina: decades of inflation and economic stagnation. Venezuela: societal collapse. With game theory, you can see how a certain amount of debt, especially when borrowed from foreign lenders, can be the optimal choice for long term relative national growth. That's pretty much what the US did for most of its history up to ~2001. But unsustainable, growing debt, certainly has consequences.
- donavanm 5y ago
  So the original comment was that When a person is in over their head, they can possibly file for bankruptcy. When a government gets in over their head bad things happen too, up to and including wars. For a government default is *very* similar to the US personal & commercial bankruptcy process. Its generally structured, governed by contracts, creditors take a negotiated "haircut", payments are deferred or restructured, etc. In light of this yes, Argentina is a great example of teh real effects. This quick hit from WSJ[1] highlights argentina issuing a new 100-year bond in 2017, with massive subsciption, 3 years after a default and 3 years before the next. Looking at the articles infographic[2] the timeline actually includes two different defaults, 2001 & 2014. There are 4 lean years of little to no issuance in 02-05, and a tiny hit in the number of issuance in 14-15. My recollection is that larger studies across time and geography actually show minimal impact to yields ~7 years after default. So yes, governments absolutely have access to mechanisms similar to bankruptcy. And no, default is absolutely not catastrophic to future funding, debt management, or spending. And yes again, the people of places like argentina & venezuela have suffered greatly for generations but that seems to be a different proposition than "governments cant manage huge and/or unsustainable debts without drastic outcomes." [1] https://www.wsj.com/articles/argentina-sells-2-75-billion-of-100-year-bonds-1497905921 https://www.wsj.com/articles/argentina-sells-2-75-billion-of... [2] https://si.wsj.net/public/resources/images/BF-AR635_ARGENT_16U_20170619185419.jpg https://si.wsj.net/public/resources/images/BF-AR635_ARGENT_1...

lend000 5y ago

I suspect some Argentinians and Venezuelans would disagree with you about the degree of consequence. Argentina: decades of inflation and economic stagnation. Venezuela: societal collapse. With game theory, you can see how a certain amount of debt, especially when borrowed from foreign lenders, can be the optimal choice for long term relative national growth. That's pretty much what the US did for most of its history up to ~2001. But unsustainable, growing debt, certainly has consequences.

donavanm 5y ago
So the original comment was that When a person is in over their head, they can possibly file for bankruptcy. When a government gets in over their head bad things happen too, up to and including wars. For a government default is *very* similar to the US personal & commercial bankruptcy process. Its generally structured, governed by contracts, creditors take a negotiated "haircut", payments are deferred or restructured, etc. In light of this yes, Argentina is a great example of teh real effects. This quick hit from WSJ[1] highlights argentina issuing a new 100-year bond in 2017, with massive subsciption, 3 years after a default and 3 years before the next. Looking at the articles infographic[2] the timeline actually includes two different defaults, 2001 & 2014. There are 4 lean years of little to no issuance in 02-05, and a tiny hit in the number of issuance in 14-15. My recollection is that larger studies across time and geography actually show minimal impact to yields ~7 years after default. So yes, governments absolutely have access to mechanisms similar to bankruptcy. And no, default is absolutely not catastrophic to future funding, debt management, or spending. And yes again, the people of places like argentina & venezuela have suffered greatly for generations but that seems to be a different proposition than "governments cant manage huge and/or unsustainable debts without drastic outcomes." [1] https://www.wsj.com/articles/argentina-sells-2-75-billion-of-100-year-bonds-1497905921 https://www.wsj.com/articles/argentina-sells-2-75-billion-of... [2] https://si.wsj.net/public/resources/images/BF-AR635_ARGENT_16U_20170619185419.jpg https://si.wsj.net/public/resources/images/BF-AR635_ARGENT_1...