Wednesday, September 28, 2011

An Ancient Greek Debt Solution

by Matthew Dalton

Wall Street Journal

September 28, 2011

The blade of sovereign default is hanging unsteadily over the neck of the euro zone. Greece will be first – of this investors are certain. But fears are rising that Ireland and Portugal will follow soon after.

So what should be done?

What’s past is prologue: History is littered with sovereign defaults. For some answers, let’s go back — WAY back.

The first recorded sovereign default appears to have happened in, um, Greece, according to Foreign Bonds: An Autopsy, by Max Winkler and Thomas H. Healy. (In fairness to Greece, the first recorded instances of many things are in Greece. )

The year was around 400 B.C.; Plato was an up-and-coming young philosopher; and Dionysius of Syracuse, a noted tyrant, had a problem: He’d borrowed too much money from his subjects.

Dionysius’s solution was to appeal to the solidarity of tribes all across Europe to pool their money into a giant pot that would repay Dionysius’s debts.


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