The Sovereign-Debt Default Bomb – WSJ.com

By | July 5, 2021

After a financial crisis like the one of the past two years, ‘there’s typically a wave of sovereign default crises,’ he said. ‘If you want to know what’s next on the menu, that’s a good bet.’ Spiraling government debts around the world, from Washington to Berlin to Tokyo, could set the scene for years of financial troubles, he said.

Right now it costs about 2.6% of the principal each year for investors to insure Greek government bonds against default, according to CMA DataVision. Some say that’s too high, and that a European country like Greece, a member of the euro-zone, will never default. Prof. Rogoff, by contrast, thinks that 2.6% is too low. There’s a serious chance Greece will default, he said, adding that most people don’t realize that this is a tradition in that country. Greece has been in default for a substantial amount of its modern history as an independent country, he said. Even if the IMF steps in, they won’t do so until the crisis actually blows up. Continue reading…