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What We Learn from a Sovereign Debt Restructuring in France in 1721

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  • Francois R. Velde

Abstract

A debt is a promise to perform a certain action (make a payment) in the future. A default is a failure to perform the action when the time comes to do so. If performance of the action were always in my interest, the promise to perform it would be superfluous. When we promise to do something, it is precisely because we may well not want to do it. Debt usually takes the form of a contract, which courts can enforce. But sovereign debt (debt issued by governments) is harder to enforce, because governments aren?t easily constrained by courts. How can sovereign governments make promises and be believed?

Suggested Citation

  • Francois R. Velde, 2016. "What We Learn from a Sovereign Debt Restructuring in France in 1721," Economic Perspectives, Federal Reserve Bank of Chicago, issue 5, pages 1-17.
    • Handle: RePEc:fip:fedhep:00022
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    References listed on IDEAS

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    Cited by:

    1. Bindseil, Ulrich, 2019. "Early French and German central bank charts and regulations," Occasional Paper Series 234, European Central Bank.

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    Keywords

    Sovereign debt; securities;

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