Journal Article

What We Learn from a Sovereign Debt Restructuring in France in 1721

Abstract: A debt is a promise to perform a certain action (make a payment) in the future. A default is a failure to perform the action when the time comes to do so. If performance of the action were always in my interest, the promise to perform it would be superfluous. When we promise to do something, it is precisely because we may well not want to do it. Debt usually takes the form of a contract, which courts can enforce. But sovereign debt (debt issued by governments) is harder to enforce, because governments aren?t easily constrained by courts. How can sovereign governments make promises and be believed?

Keywords: Sovereign debt; securities;

Bibliographic Information

Provider: Federal Reserve Bank of Chicago

Part of Series: Economic Perspectives

Publication Date: 2016

Issue: 5

Pages: 1-17