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

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lolmao500's picture

Will the bullshit stop? How come even on ZH the default propaganda is pushed?? Not raising the debt ceiling AIN'T DEFAULT.

zorba THE GREEK's picture

default or not, the S&P futures are soaring. 

Reality has left the building, thank you for coming,

please exit to the rear.

max2205's picture

'Dramatic effects on the markets'!,! Not with Ben printing...I mean the chick with the fat ass

A Lunatic's picture

Are you kidding? Americans LOVE the Reality T.V. meme. This is sure to be a ratings sensation, as it appeals to all generations........

brettd's picture


We take in 200 billion a month.

Debt service is 20 Billion.

Leaving 180 Billion for "other" "essential" Federal Crap.


kurzdump's picture

Ok, seems logical. Now what happens to mature debt?

lucyvp's picture

unless the rollover machine breaks, and no one shows up to repurchase the 200B that rolls each month.

Wahooo's picture

Essentials - like the Wookie's garden.

ceilidh_trail's picture

Last I saw, the Wookies garden has gone to seed. The gardener is being paid but is only allowed to water it- no weeding or harvesting allowed. A metaphor for the clusterfart that is the .gov.

chump666's picture

It's a default on interest payments by the Treasury and since America is now a failed empire, it refuses to except reality - that sh*t ends.

The only thing that can be done (if no agreement is reached), and it's a hollow expectation, is the Fed can fill the gap and pay the Treasury.  If that was to happen (the Fed covers all the short term debt), the USD will tank as will ALL markets. 


lolmao500's picture

No it's not. The treasury can pay interest easily. They just have to cut the budget.

crakinshot's picture

"Aint" is not a word and this is a Strawman arguement because its plainly obvous that by itself not raising the debt ceiling doesn't mean a default. However, by not raising the debt ceiling the treasury will eventually be unable to borrow the money it needs to pay existing interest. Ergo the treasury will eventually default on its debt obligations without a rise in the debt ceiling.

SilverMoneyBags's picture

Exactly. Default means not paying existing bills. Not raising the debt ceiling means we aren't taking any new ones on. We have plenty of tax revenue to pay our interest.

Julian's picture

US will not default, its unconstitutional - everyone knows it, it's just political theatre and a chance to BTFD :)

Asia Green and DJIA futures up 103pts - what crisis?  Go long? 5% plus?


surf0766's picture

The constitution is a document of negative liberties.. You did you not understand what he meant when he said that. He cares nothing about that document. Only about  his collective.

max2205's picture

Shummer is getting to work!

TeamDepends's picture

With over 200 years of, what do you mean the cameras weren't ready?

Atomizer's picture

Just have a glace at Germany. Ponder over why the EU is a colossal entrail.

lotsoffun's picture

put next to that the depth's of the war's occuring or occuring shortly thereafter and the horror of the casualities in dead, wounded and bankrupted, homeless, seriously quality of life impaired (the last was a cute p.c. term).

please stop.  only for hedged bankster's is default a wonderful thing.


Uber Vandal's picture

If one misses one's credit card payment, is that not called a "universal default"?


The customer behaviors that can potentially trigger universal default pricing by a credit card issuer include the following:

  1. Being late (even once) on a credit card, mortgage, utility or car payment
  2. Going over the credit limit on any credit card
  3. Carrying too much debt overall
  4. Using over 50 percent of the credit line for an individual credit card
  5. Having too much available credit and open trade lines
  6. Making too many credit inquiries
  7. Getting a new mortgage or car loan



LetThemEatRand's picture

Not to switch gears here, but there was once a time when class action lawyers could sue those fuckers and put an end to this kind of bullshit even if the payout to individual consumers was relatively small and the lawyers made a shitload in the process.  But those rights have been taken away because "greedy lawyers" were destroying productive companies and tort reform was needed.  Good thing, too.  

WillyGroper's picture

That tort reform effectively nullified your right to recourse. Check out the SCOTUS ruling on generic drugs. Not pretty. Same with Obutthole indemnifying vaccine makers. 

LetThemEatRand's picture

The really nasty SCOTUS ruling from a few months ago relates to arbitration agreements that bar class actions.  When you sign up with a CC company, bank, internet provider, or any other Big Corp USA entity now, you unknowingly sign an agreement that you will arbitrate any dispute before industry insiders without the right to aggregate your claims (class action) with other consumers.  SCOTUS says it matters not that you had no idea what you were signing in the "agree to terms" click.  It will cost you more talk to a lawyer about your case than you can recover, so Big Corp can add endless bullshit charges to your bill without recourse.  And there are only a few competitors who all have the same provisions.  The public bought it hook, line and sinker.

El Vaquero's picture

Yeah, you have to know about it and opt out of the arbitration agreement.  Most of those agreements are written way above the average reading level of the average person.  How these contracts are conscionable is beyond me.  However, arbitration can be very, very expensive for the bank, especially if JAMS is an option.  AA is the other big one that can be used for these kinds of disputes.  If JAMS is selected by the consumer, it can easily cost the bank a non-recoverable $10k to arbitrate a CC case, and people getting sued have been using this to their advantage.  Banks try to squirm out of it any which way they can for most CC cases, as it will actually cost them far more to arbitrate than they will recover.  In fact, many have been removing the arbitration clauses from their cardholder agreements becuase of this.  The problem is that the older agreements have a survivability clause, and any account that is more than a couple of years old will have an agreement somewhere in the line that has that survivability clause. 

LetThemEatRand's picture

It's about who is being sued.  What they have done is taken away the consumer's right to challenge BS fees.  I provided a link a couple of posts below.  You still (for how long?) have decent rights if you are sued.

El Vaquero's picture

Sure, but as long as the arbitration fees are prohibitivly expensive for the bank (or whomever,) initiate arbitration over a minor dispute and see how quickly they fold.  If they don't fold, you know that the fee schedule for the arbitration forum is not too expensive.  IMO, it's more about befuddling people and keeping some of their dirty laundry out of the sunlght than anything else.  Take them to small claims and they'll pull the arbitration card, and unless you know the drill, you'll be left dead in the water.  The worst arbitration forum (NAF) was fundamentally shut down over a lot of this stuff, because it was found that they were a racket run by the banks.  From what I hear, whether or not you get a fair hearing in JAMS or AA simply depends on the luck of the draw. 

LetThemEatRand's picture

Not sure what you mean.  Filing an arbitration claim requires a several thousand dollar fee from the person who files it.  If you are making the claim (my point) to challenge a BS fee, you come out of pocket that amount just to start your case.  And you can't sue in small claims court if you signed an arbitration agreement, and if you are dealing with any major corporation for things like a CC or internet, you can't opt out.

El Vaquero's picture

There are different fee schedules for corporations and consumers.  While I do not know all arbitration forums, JAMS and AA will not cost anywhere near thousands of dollars for a consumer to initiate arbitration, and the company that you have a dispute with will have to pay the bulk of the costs in those forums.  The strategy that I mentioned above regarding consumers electing arbitration when being sued by a bank has been very successful when getting the banks to drop the suits because it will cost the bank a lot of money.  It did not cost these people a lot, and they were often able to get fee waivers and had to pay nothing.  I agree, I don't like the shunning of due process in this way, but it is what it is, and you had better learn how to take adavantage of it because you can bet your ass the other side is doing exactly that. 

kurt's picture

Me no speaky legaleeze, me hire you fuck bad poople, yes

DOT's picture

Tort law was supplanted by the UCC. Merchant Banks and their Mouthpieces are scum.

El Vaquero's picture

You can still sue the fucks under the FCRA and the FDCPA and various state laws and win.  There are still ways to turn the screws on them, but people very, very rarely do.  I've been through the ringer with a large bank and its bad records.  They sued me, and they hired the most shyster type of lawyers you could imagine.  Each lawyer with the law firm averages several hundered cases per month, if that gives you any idea.  Most people are embarrased and cannot hire an attorney to defend them, and are incapable of defending themselves.  Most cases are won because the person doesn't even respond to the complaint and summons.  I watched one of these guys completely thrash an old grandmother in the courtroom, and it was disgusting.  He was acting compassionate while twisting the knife in her gut.  The law was clear, and the woman made some statements that completely screwed any chance she had by admitting to the debt, so she lost, but the look of disgust on the judge's face and the look of being completely broken on the woman's face still sticks with me. 


The bank used this law firm exclusively in my state for this type of litigation.  I went through several court records, and it was pretty clear that not only did the judge that I had really disliked this lawfirm, but that the bank was mass producing affidavits.  Then I found a blog written by the very girl that signed mine, and she talked about her job.  They way they produce affidavits for litigation is best described as a sweat shop.  The scant records that they filed with the lawsuit were internally inconsistant as well.  The suit should have never happened, and I'm still confused as to what went on.


To make a long story short, I pounded them with discovery requests and told them that they were going to have to produce every shred of evidence pertaining to the case.  They jerked me around, and I pressed on them, and they went running for the hills.  Dismissed with prejudice, pro se.  Then they came after me again, but now, having gone through that shit, I was able to completely rattle the dogs they sent after me.  Now, I'm the plaintiff with both the bank and the lawfirm as defendants.  The last of this kind of case that the law firm lost had a fairly large jury award (7 figures,) but it was a different bank that was a co-defendant. 


For every single person like me, there are thousands who will just roll over and take it in the ass.  We have been conditioned to think that it is good and moral to pay back money that was created by a corrupt bank, and people are ashamed that they cannot.  We have been conditioned to believe that banks have good records, when all too often, they do not.  Banks pull so much bullshit that they probably could be sued into oblivion, but they won't be. 


So, if it ever seems like my hatred of banks is personal, well, it fucking is. 

fonzannoon's picture

I'm not sure if you have been here in a prior life, but if not, happy 1 week. I like you. Stick around.

El Vaquero's picture

I've been lurking here for months and have no plans for leaving anytime soon.  I was sort of aware before I was sued, but that case really sent me down the rabbit hole.  Talk about a rude wakeup call. 

fonzannoon's picture

I lurked for a year before I said something, and when I did I got it stuffed up my ass. Those were fun days. This is a kindler gentler ZH, but we need help. You seem to have a particular insight into this topic. It's helpful. Thanks.

Its_the_economy_stupid's picture

Here, here.


Also, i think we all lurked for a year before signing on.

FreeNewEnergy's picture

Stick around, El Vaquero. I too am in litigation with a couple of sleazy law firms and the sleaziest of banks, BofA, as defendant in their foreclosure suit and plaintiff in my fraud suit. I'm pro se against two different firms and enjoying it greatly.

I inherited my dad's house, complete with horrid Countrywide loan, immediately defaulted. That was four years ago July. Bank sued in March 2010 and I answered, crickets since, though they keep paying the taxes (did I tell you how much I love BofA?) which, in NY state, are quite a load.

So, sued for fraud because the SOL was running out in June of this year, they answered, got a call from attorney who verbally offered "options" and haven't heard from her since.

I could motion for failure to prosecute (1 year in NY) but why bother? The lawyers would have 90 days to come up with reasons for their absence and the judge would probably grant them extensions. I'll wait until we're six years down the road (can't actually believe it's gone on this long) and their SOL runs out. If the case gets dismissed, they may not be able to re-file. Already some cases on the books in NY that say dismissal nullifies tolling, if that's the correct term.

Anyhow, welcome to the comments section. You're in good company.

fonzannoon's picture

thanks teddy tampon, you are a special kind of retard.

Teddy Tenpole's picture



you lurked here before you wrote a blog too, teeeeeheeeee...  pickle jinx . OMG, we're like totally the same... 



awe, little blog crush makin ya blush, LMAO

fun though, makes me feel like 6th grade, "you're a tampon, no you are...

for what it is worth, mental retardation is a tragic thing (not that you care)


I'm da fonzzzz, eeeeeh.  Hey Mrs. C can I borrow a tampon?


doomer douche

LetThemEatRand's picture

Very true for when you are sued.  There are still consumer protection laws on the books that will protect you.  For how long is debatable.  But the rights to sue them when they add bullshit charges to your CC account, internet bill, phone bill, etc, are gone.  SCOTUS took the right to a jury trial and wiped their asses with it.   Here's the opinion if you're interested.   http://www.mondaq.com/unitedstates/x/249150/Class+Actions/US+Supreme+Court+Ruling+In+American+Express+Case+Upholds+Class+Action+Arbitration+Waivers

Snippet:  "According to the majority ruling, the courts must "rigorously enforce" arbitration agreements in keeping with their terms, even for claims alleging a violation of a federal statute, unless the FAA's mandate has been "overridden by a contrary congressional command." The Court majority found no contrary congressional command that requires rejection of the class-arbitration waiver here. Justice Scalia wrote "[t]he antitrust laws do not guarantee an affordable procedural path to the vindication of every claim," or "evince an intention to preclude a waiver" of class-action procedure. Further, the Court reasoned, the "effective vindication" exemption, which originated in dicta of a 1985 case, only applies when the contract outright denies a remedy – not when it prices it out of reach, because the principle comes from a desire to prevent "prospective waiver of a party's right to pursue statutory remedies."

In a nutshell, if the consumer wants to sue over a $20 charge, they have to pay a lawyer thousands of dollars to do it, and bring the action in an industry regulated arbitration forum.   

Dr. Engali's picture

How can he possibly say that default is new to the U.S? The U.S has defaulted plenty of times:

1. Default of 1779. To finance the Revolutionary war, the Continental Congress printed inflationary dollars, paying their creditors only 2.6 cents on the dollar. Hence the old saying “not worth a continental”.
2. Default of 1790. The Continental Congress borrowed $11 Million. The government refused to repay any of this debt.
3. The Greenback Default of 1862. In 1861 Congress created a new currency called the greenback, $60 million worth, redeemable at any time for 4.8 ounces of gold per dollar. But in 1862 the US treasury refused to redeem in gold and issued non-redeemable notes at a 40% discount from original value.
4. The Liberty Bond Default of 1934. To finance WWar I our government sold Liberty Bonds in 1917 @ 4.25% interest payable in gold at $20.67 per ounce. By 1933 our lying government had issued $29 Billion of these bonds but had only $4.2 billion in gold. So Pres. Roosevelt confiscated every citizens’ gold making it a crime to own gold and devalued the bonds 40%.
5. The Default of 1971. After WWar II the US printed dollars backed by gold again @$35 per ounce, but Pres. Nixon had to default on the gold redemption. Congress then went wildly insane, printing money backed only by the “Full Faith & Credit of our Lying Government.” As a result today your dollar is worth only one sixteen hundreds of its 1971 value. That is less than 1cent of an ounce of gold in purchasing power.

A Lunatic's picture

See, default isn't such a scary thing after all.......

fonzannoon's picture

That's kind of a valid point. 

TeamDepends's picture

We were interupted by a caller for breast cancer so, uhm,

Withdrawn Sanction's picture

It is if you're a bankster...w/a cascade of derivatives tied to and sometimes secured by Treasuries.  I could almost feel sorry for them, but then realize they've so thoroughly invited what's headed their way, default or no, it would be practically rude not to let it unfold.

Wahooo's picture

How to get the words "greedy bankers" in every middle school and high school history book?

seek's picture

I'd argue the US has defaulted twice in the past hundred years, on June 5, 1933 and again on August 15, 1971. (For the history impaired, FDR took the US off the gold standard in 1933 and Nixon closed the gold convertability window for foreign countries in 1971.) There were of course defaults prior to this as well.