Debt and Default in the 1930s: Causes and Consequences

European Economic Review, 1986

Debt and Default in the 1930s:

1990

The World Bank Research Observer, 1990

Cato Journal, 1984

European Review of Economic History, 2011

We also mention here the contribution of business historians such as Norris (1978). 2 See Harold (1938, p. 27) for a discussion.

1988

This paper examines the patterns of defaults, renegotiations, and final settlements on foreign borrowing of several Latin American governments in the interwar period. One goal of the paper is to provide a detailed historical account of the borrowing and renegotiation experience of five Latin borrowers (Argentina, Bolivia, Chile, Colombia, and Peru). Another goal is to provide a quantitative assessment of the amount of debt relief that was implicit in the negotiated settlements of the defaults that were reached in the 1930s and 1940s. In general, the pattern of default and renegotiation resulted in substantial, though not complete, debt relief, in the sense of reducing the present value of debt repayments from the sovereign borrower to the bondholders.

2010

During the 1930s, rating agencies took up a central role in regulatory supervision that they still have today. The proximate cause for this changeover was the economic shock of the Great Depression. Exploring the performance of rating agencies in assessing the risks of sovereign debt, an important segment of the bond market, we do not find that superior forecasting capacities

2023

In the first half of the twentieth century, debt played an unexpectedly large role in shaping public views of American foreign relations. Debt-specifically, the public debt of other sovereign states-seems far removed from the everyday experience of Americans seeking credit from butchers and grocers or, in the global arena, decidedly dull in contrast to headlines about wars and assassinations. Yet if articles in thousands of local newspapers are an indicator, before World War I millions of Americans had been exposed to detailed coverage of the problematic indebtedness of the nearer nations of Latin America. To engaged readers in every corner of the United States, the financial entanglements of Cuba, the Dominican Republic, Nicaragua, and Honduras must have been a familiar trope-a sign of weakness if not immorality-and, as the policy of Dollar Diplomacy emerged after 1904, a harbinger of U.S. intervention. American strategic and financial interests converged on the Caribbean Basin after 1898, and as they did newspapers warned that the foreign debt of nations in the region threatened to trigger European intervention. By 1904, the Dominican Republic's inability to pay interest on its debt became actionable to U.S. policymakers: a page-one report in the New York Times of April 1904 noted that Italy, Britain, France, and Germany all had "large claims" against that nation and predicted that "threats to collect debts without regard to American interests, would certainly result in action by this Government." 1 In January 1905, President Theodore Roosevelt fulfilled that prediction by creating a "receivership" in the Dominican Republic. Imbedded within racial assumptions about tropical peoples, Roosevelt's justification for the receivership made financial solvency the acid test of civilization. "Chronic wrongdoing, or an impotence which results in a general loosening of the ties of civilized society, may … ultimately require intervention by some civilized nation," which in the Americas could only be the United States. 2 The receivership was also "discursively set within hierarchical assumptions in which the masculine-coded party assumed responsibility for the behavior of the feminine-coded party," as Emily Rosenberg explains. 3 Financial interventions proliferated under President Taft, and newspapers celebrated his administration's plan "to readjust and reduce the public debts of the five Central American republics, as has been done with Santo Domingo." 4 Americans learned from Taft that their country had to keep the "heavy foreign debt and chaotic national finances" of those nations from triggering "the ever-present danger of international complications." 5 Press coverage presented delinquent debtors as truculent children: the Morgan Country Republican in Versailles,

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Journal of Development Economics, 1986