Carmen Reinhart and M. Belen Sbrancia: The Liquidation of Government Debt
Berkeley Economic History Seminar: http://www.imf.org/external/np/seminars/eng/2011/res2/pdf/crbs.pdf
You can liquidate government debt in six ways:
- You can pay it off.
- You can "restructure" it.
- You can destroy the value of your currency.
- You can let inflation nibble it away.
- You can let growth nibble it away as a share of economic resources when investors are happy to hold it at sub-market interest rates.
- You can let growth nibble it away as a sure of economic resources when your regulatory system forces investors to hold government debt at sub-market interest rates.
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