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Comment by ellius | Hacker News Reader

Without bankruptcy protections, what prevents companies from lending out an unlimited sum of money? Countries don't die. You can't send them to debtors' prison. A lender could effectively sell a corrupt or stupid government unsustainable amounts of debt and then effectively put a lien on the country in perpetuity to get its money back. That hardly seems just towards the citizens, who committed no crime other than electing stupid leaders, many of whom might have been elected before they were even born.

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Spot on. You reinvented the World Bank

https://www.one.org/international/issues/debt-cancellation/

http://www.huffingtonpost.com/marcelo-giugale/does-debt-forg...

YES, thank you

Indeed. In 1825, France demanded a sum of 150 million francs to be paid by Haiti for the loss of French property during the war two decades ago and threatened miliatry invasion in the event of non-payment. The sum was later reduced to 90 million francs and paid in installments until 1947, some 120 years later. Many believed this debt to be the thing that crushed any prospect of development in Haiti's early history as an independent country.

Sovereign states eponymously don't need bankruptcy protection, as banks cannot collect from them.

Countries pay back loans because they like to keep a good reputation for future loans, but this does not work in a situation where there is nothing to lose since you can't service loans anyway.

(Of course banks can enlist other states to do strong-arming: See eg Greece who were pressured to accept a deal worse than default to benefit foreign EU banks)

> See eg Greece who were pressured to accept a deal worse than default to benefit foreign EU banks

how are they being pressured?

If they don't agree, they will get booted from the Euro currency cooperation. Then they can't issue bonds in Euro. Would have to use their own currency - and that currency would not be in high demand. What would you use it for? Buy olives? Nah, export companies would rather be paid in Euros, dollars or just about anything else...

Just answering from an economic perspective:

> What would you use it for? Buy olives?

No, of course not. What government sells olives ? You'd use it to pay Greek taxes. Those you'll pay anytime you want to buy anything from Greece.

So it doesn't matter if export companies get paid in Euros, Dollars, or anything else. They'd still owe taxes in (presumably) Drachma and that would create a market for Drachmas.

Yes, but don't you think as much taxable activity as possible would be moved out of Greek jurisdiction? Especially as Greece would probably have to raise taxes quite a bit to finance the government... if they no longer have access to a euro bond market to do so.

Well, maybe but what is the non-pressure course that the EU should take here? Isn't that what they (Greece) signed up for when they joined the euro?

Well, credit ratings prevent them.

This is objectively true, so the downvotes are a bit baffling. Credit ratings are directly related to the rate premium bond holders demand for the extra credit risk. It is simply a fact that if the credit ratings are lowered to a sufficient extent, the rate that investors demand for the borrowing will make it no longer feasible.

About 10% of HN downvotes I see are applied on ideological rather than rational or grounds (leaving out those for rudeness or other inappropriate behavior). I take an irrational downvote as a small victory, albeit after making sure that it wasn't just for being a smartass or missing the point.

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