213 Years Of Sovereign Yields And Defaults

Tyler Durden's picture

As Jim Grant recently recently noted, America's default is inevitable, as he confronts the implied message of the Federal Reserve’s pro-inflation policy: We will default in the future, though no lawyer will call it “default.” However, a glance back at the last 213 years of global history shows it is not that unusual for major sovereign nations to rapidly crumble and enter a state of default. As Global Financial Data's Ralph Dillon points out, all of this fear and rhetoric over a US default had him thinking about history and defaults. How have other countries that have defaulted faired over history? Some good and some bad for sure, but for the developed markets and global economic powerhouses, those that did default are still here alive and kicking. In fact, some have defaulted 8 times and are still a major player on the world stage.

 

Via Global Financial Data's Ralph Dillon,

With a couple days to Armageddon, it appears that we will be going right down to the wire once again for yet another politically generated debt crisis. More nonsense and political posturing from our elected officials has had a  dramatic effect on the equity and bond markets and its movements. With every talk and whisper, the markets will react and quite possibly, over react.

While default is nothing new for many countries, it is for the United States. Many economists have said that a US default would have catastrophic consequences for the global community. Borrowing costs would essentially sky rocket, global equity prices would be leveled, dollars status as a benchmark questioned and most importantly, a reversal into another deeper and darker world recession.

All of this fear and rhetoric had me thinking about history and defaults. How have other countries that have defaulted faired over history? Some good and some bad for sure, but for the developed markets and global economic powerhouses, those that did default are still here alive and kicking. In fact, some have defaulted 8 times and are still a major player on the world stage.

So the question is, would a default really be that bad for us and is this an opportunity to get our own fiscal issues in order? Should we use a default to wake us up from this debt induced binge? Would it help us to address the bigger issues we face like debt and entitlements? One can only speculate and I guess we shall find out when we cross that bridge. But for the time being, it is being played out on the world stage by our inept and ignorant elected officials who are undoubtedly responsible for getting us into this mess in the first place. Without them, we would not be even talking about a debt crisis.

Here we take a look at historical 10yr bond yields to 1800.

(click image for large legible version)

 

With it, is a list of countries that have defaulted and when.

1.   United States 2013?

2.   Germany 1938,1948

3.   Japan 1942, 1946-1952

4.   France 8 times between 1558-1788. Last one in 1812

5.   Italy 1940. Almost daily speculation of another default since 2008

6.   Spain 1809, 1820, 1931, 1834, 1851, 1867, 1872, 1882 and 1936-1939. Since 2008, Spanish yields spiked considerably and have been volatile on the back of another default

7.   Austria 1938, 1940, 1945

8.   United Kingdom 1822, 1834, 1888, 1932