Hamilton, James.
The drama began in Greece. Where is it going to end?
Let me begin with some observations on the basic mechanics of sovereign debt default. If you borrow $1 at a 5% interest rate, next year you’re going to owe $1.05. If you don’t pay any of it back and just roll over the debt, you’d then have to borrow $1.05 next year, meaning you’d owe $1.10 at the end of the following year. It’s hard to see how that game can go on forever, even if it’s a sovereign government doing the borrowing.
Πηγή: Econbrowser