The (sovereign) default option

Sovereign debt default was a lot more common when it was literally sovereigns defaulting. Kings liked money. They didn’t like paying it back. So, quite often, they didn’t.

In the richest economies, default has become rare. One of the reasons the Greek financial crisis is dominating headlines and moving markets around the world is the rarity of a rich country failing to pay back the IMF.

But back in the nineteenth century, defaults were far more common. The table below compares the number of sovereign debt defaults in a selection of European countries from 1800 onward. There are lots of different ways of classifying a sovereign debt default; I’ve used the dates from this paper.

For more on the history of sovereign debt, plus a reading list, visit my 2011 post Screwing the moneylenders.