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Comment by Grimburger | Hacker News Reader

> nothing particularly problematic ever actually happens, except in a few cases where the economy overall is in an extremely bad shape for a variety of unrelated reasons.

Quite sure you answered your own question here. Survivorship bias isn't a valid argument. Lebanon, Greece, Pakistan, Turkey all come to mind in the last decade, all with unsustainable amounts of debt.

The modern monetary system is a faith based system which hands leeway to governments to create and destroy supply at will. When people lose faith it all collapses very quickly, the failure modes are never slow. The relatively small Silicon Valley Bank is a great example of this and the systemic collapse in confidence of banking.

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> Quite sure you answered your own question here. Survivorship bias isn't a valid argument. Lebanon, Greece, Pakistan, Turkey all come to mind in the last decade, all with unsustainable amounts of debt.

Incompetent government is the higher risk.

And with Greece, the problem was only partly created by themselves: it was also the French and Germans who insisted that their bankers (who held a large portion of Greece's bond) be paid back and were willing to blackmail the Greek government. This is evidenced by the fact it all went away when the ECB said (Draghi: "whatever it takes") it would be the lender of last (like the US Fed is).

> Incompetent government is the higher risk.

or wrong incentives in gov't.

Those countries that was listed in the quoted comment are basically subsiding large portions of the people - fuel, food, public sector 'jobs' (non-productive jobs), etc - and funded it via debt.

I guess incompetence and 'malice' are indistinguishable at some point.

Lebanon and Pakistan aren't exactly politically stable, Greece was incompetently managed for a long time. Don't know about Turkey. Compared to the national deficits of basically everyone in the EU, US, and big Asian economies, it does look like GP is right that big national deficits can be managed?

Sovereign defaults are very rare events outside of banana republics. It's not survivorship bias so much as it simply doesn't normally happen, despite the vast majority of advanced economies having been neck-deep in debt for a long, long time.

An average citizens quality of life has dramatically decreased nonetheless, default or not.

> The currency has been devalued by 90% – still not enough to reflect its slide in full. Inflation is in triple digits. Public services have collapsed; without hiring a private generator, households can expect only an hour or so of power a day. Shortages of drinking water have contributed to disease outbreaks, including the first cholera cases for decades. Parents are sending their children to orphanages because they cannot feed them. A growing number of citizens have resorted to armed robbery as the only way to extract their own deposits (now vastly reduced in real terms) from banks when they desperately need to pay for basic services such as healthcare. The collapse of Lebanon, formerly known as the "Switzerland of the Middle East", has been described by Western media as one of the most devastating and worst financial recessions since at least the 19th century.

https://en.wikipedia.org/wiki/Lebanese_liquidity_crisis

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