The IMF has put together a remarkable paper that surveys Sovereign Debt restrcturings between 1950 and 2010.
The key conclusion isn’t much different to that of Reinhart and Rogoff – that dafaults tend to come in waves, with nothing for ages and then a bunch of them.
Among the defaults, it’s interesting to note that while Paris Club restructurings are more common, the private sector has lost more money.
The IMF calculates that Paris Club losses amount to USD$545bn, whereas Private creditors have lost USD$768bn.
The data also shows that the Paris Club is more likely to take face value reductions than the banking sector.
My guess is that we are headed back into one of these cyclical increases in default – and that both the offical sector and the private sector will have to wear greater losses. This does not necessarily mean that we have to have terrible growth – the mid 1980s were a period of high defaults but generally good growth … however it’s now the developed markets that have the debt problems, and my guess is that these will be harder to solve, and have greater implications for global banking.
This time is not different …