Mainly an open thread and effort to see if I can still post using blogger.
But I have very strongly the impression that countries which default on their debts do relatively well after the default. Default is associated with horrible economic performance, but I think this is because default is caused by horrible economic performance. I really mean default not renegotiation.
My examples are
1) Argentina: Default occured around the trough of the worst recession in an advanced market economy since WWII and before Greece right now. The year in which the default occured was terrible. It was followed by a long period of 6% growth per year bringing Argentina well past the pre-crisis trend.
2) Russia: I added “in an advanced market economy” to case 1, because transition economies had worse recessions. Russian performance pre-default was catastrophic. IIRC The Russian econmy has been growing quickly since they defaulted.
3) Iceland: They had a Cyprus level banking collapse and have low unemployment.
Note that good outcomes after default always astonish voters and lead to the most amazing political outcomes such as 4 consecutive terms for the Fernandez-Kirchner family, the worlds first openly gay head of government, and the ex USSR repeatedly electing an ex KGB agent (hey 2 out of 3 aint bad).
I think that the world financial system threatens to do horrible things to countries which default and that this is a total bluff which has been called at least 3 times.
What am I forgetting ?