Sovereign debt crises are a little like the weather: One can get ready to endure them and maybe take some steps to lessen their impact, but so far it hasn't been possible to prevent them. Like the weather, they just keep happening. That's the overriding thesis of this book tracing the major debt crises of the past century, starting with the Great Depression and running through the recent Great Recession.
Written by a former World Bank expert on debt crises, this book discusses best practices for how such crises can be resolved. As the painful experience of the past decade reminded everyone, frequent debt crises and defaults do great damage to economies and cause vast personal hardship. But resolving them has proven difficult—both economically and politically—and has taken time, almost always requiring a lender of last resort such as a country's central bank or the International Monetary Fund.
Too often, efforts to end debt crises have been little more than a palliative, and the debt overhang from one crisis contributes to the next, as illustrated by the ongoing saga in Greece. Both private and sovereign debts have increased substantially since the 2008 crisis, with inadequate deleveraging. This debt overhang leaves countries vulnerable and with limited maneuverability to address the next crisis.
This book does not pretend to describe how debt crises can be prevented. But it does draw useful lessons from recent crises that can help economists, bankers, policymakers, and others resolve the inevitable future crises with the least possible damage.
1. Historical Context: The Export of Capital and Sovereign Debt Crises, 1815–1914
Part I: External Financing during the Interwar Period and the Great Depression, 1919–39
2. Private Market Lending
3. Debt Service Disruptions
4. International Relations and Interwar External Sovereign Debts
Part II: External Sovereign Debt, Syndicated Bank Loans, and Sovereign Debt Crises in Developing Countries, 1955–94
5. Flow of External Capital to the Developing World after World War II, 1955–73
6. From Petrodollar Recycling to Debt Recycling, Syndicated Bank Loans and Sovereign Debt Crises, 1974–83
7. Debt Service Disruption and Bank Debt Restructurings, 1955–94
8. Debt Restructuring and International Relations, 1955–94
Part III: Globalization, Financial Sector Liberalization, and Emerging Market Crises, 1990–2005
9. The Flow of Capital to Emerging Markets, 1990–2005
10. Emerging Market Crises and the Mexican Crisis, 1994–97
11. The East Asian Crisis, 1997–2003
12. Crisis Resolution in Korea, 1997–2003
13. The Turkish Crisis, 2001–05
14. The Argentine Crisis, 2001–04
Part IV: The Great Recession and Crises in the Advanced Economies, 2007–15
15. The Japanese Crisis as a Precursor to Crises in the Advanced Economies
16. Causes of the U.S. Crisis, 2007–10
17. Ad Hoc Interventions before the Lehman Brothers Collapse
18. A Systemic Approach to Crisis Resolution after the Lehman Brothers Collapse
19. The Great Recession: From Financial Crisis to Economic Crisis
20. The Eurozone Crisis, 2008–15
21. The Eurozone Crisis: From Banking Crises to Sovereign Debt Crises to Bailouts
22. Conclusion: Are We Prepared for the Next One?
A. A Comparative Overview of Debt-Crisis Regimes: From the Great Depression through the Great Recession
B. Commercial Bank Debt Restructurings with Sovereign Debtors, 1980–89