Debtor Nation

The United States is a nation of a debtors, and a debtor nation, sporting large budget and trade deficits. We’ve yet to default on our debts.

Don’t ever lend money to Russia, though. Russia famously defaulted on their foreign debt obligations in 1998, sending the world economy into a tailspin.

They’ve avoided payment on other obligations as well.

During the Russo-Japanese war of 1904-1905, the French underwrote much of the Russian war effort with bonds. These bonds became worthless in the Bolshevik Revolution of 1917. French bondholders made noise about the issue for years, but to no avail. Finally, when a post-Communist Russia re-emerged in the 1990’s and wanted access to global debt markets, Russia needed to convince Europe (and the world) that they could be trusted to pay their debts. Russia paid off its debt to France with a one-time $400 million gift in 1996 — equal to roughly 1.5% of what the bonds would have been worth with 79 years of interest.

Don’t get caught in the same deal.

Russia to repay pre-1917 debt - Bloomberg News/NYT

1 Comment to Debtor Nation

1. 

   you should check out the working paper titled “The Forgotten History of Domestic Debt” at nber.org. you’d dig it. In my opinion it is one of the most interesting papers on economics. The concepts and objective observations presented in this paper are invaluable.
parksmarts on May 19th, 2008

Leave a comment