Edward Chancellor of GMO (and author of one of my favorite books Devil Take the Hindmost: A History of Financial Speculation) has written a comprehensive analysis of why debt crises occur, how they play out and where the risks lie today.
If you’re concerned with public debt levels around the world, this is a great read. Here’s Chancellor’s introduction to the paper:
This paper seeks to answer several questions: Why in the past have governments defaulted on their debts? When have deeply indebted countries kept faith with their creditors? Under what conditions do governments opt for inflation rather than default? And, in the light of our historical findings, is Greece really the crest of a wave of sovereign debt crises about to crash down upon the developed world?
As you may have gathered, the debt crisis in countries that control their monetary policy and issue debt in domestic currency is really an inflation issue. The US will never technically default – they will print money and devalue the currency first.
But does he think the US is at that point? Read on…
By using this site you agree to the 'Terms of Use'. This is not advice. This site features the opinions of the various authors and sources. While Plan B Economics makes every effort to provide high quality information, the information is not guaranteed to be accurate and should not be relied on. Investing involves risk and you could lose all your money. Consult a professional advisor before making any investing decisions.
