It has since added formidably to its debt liabilities.

Europe s debt problems should, in fact, still be quite manageable provided the requisite write downs and debt restructurings are implemented.

Europe s debt problems should, in fact, still be quite manageable provided the requisite write downs and debt restructurings are implemented.

During the Great Depression, many debt contracts were indexed to gold.

And Europe s debt problems are now widely acknowledged to be due to ill conceived aspects of European integration.

If the debt ceiling absolutists are naïve, so, too, are simplistic Keynesians.

Countries debts undoubtedly play a vital role in the global financial system.

Borrowing countries such as Argentina or the Ottoman Empire regularly defaulted. They were then punished for a few years by not having access to international capital markets.

Will it be possible for them to rollover their market funding in these circumstances?

But even large and stable countries such as Britain and the US are finding auctions of government paper increasingly problematic.

Borrowing countries such as Argentina or the Ottoman Empire regularly defaulted.

Some crisis prone countries such as Latvia are already unable to sell any more debt.

The debt ceiling absolutists grossly underestimate the massive adjustment costs of a self imposed sudden stop in debt finance.

The banks then dump the IOUs on the European Central Bank, which then provides the actual cash.

What really upset investors, of course, was the realization that, yes, some day untenable debt guarantees will have to be withdrawn.

They would have to tackle the banking and the sovereign debt problems simultaneously, without neglecting to reduce divergences in competitiveness.

Nothing less will persuade investors to go near debt issues from the eurozone s fiscally challenged members.

Lenders to defaulting countries were also punished, as their instruments (mostly bonds) became worthless.

To be sure, a huge, sustained burst of growth could still cure all of Europe s debt problems as it would anyone s.

Indeed, Russia is running fiscal and current account surpluses of 2 and 17 of GDP respectively. Despite being up to its neck in debt its obligations equal 75 of GDP Russia appears able to pay its creditors.

Shorting bonds by purchasing a CDS contract carries limited risk but almost unlimited profit potential, whereas selling a CDS contract offers limited profits but practically unlimited risks. This encourages short side speculation, which places downward pressure on the underlying bonds.

Despite being up to its neck in debt its obligations equal 75 of GDP Russia appears able to pay its creditors.

This encourages short side speculation, which places downward pressure on the underlying bonds.

One extreme is the simplistic Keynesian remedy that assumes that government deficits don t matter when the economy is in deep recession indeed, the bigger the better. At the opposite extreme are the debt ceiling absolutists who want governments to start balancing their budgets tomorrow (if not yesterday).

Of course, the IOUs now lodged with the ECB may themselves have to be written down, threatening to undermine the ECB s own balance sheet.

As a consequence, they are crowding into bonds and debt instruments that they view, rightly or wrongly, as safe vehicles.

Major eurozone economies like Spain and Italy have huge debt problems of their own, especially given anemic growth and a manifest lack of competitiveness.

At the opposite extreme are the debt ceiling absolutists who want governments to start balancing their budgets tomorrow (if not yesterday).

NEW YORK Sovereign debt crises such as the one in Greece can be resolved only through bold steps by both debtor and creditor.

If the European periphery countries had their own currencies, it is likely that debt problems would morph right back into elevated inflation.

Domestic resource mobilization, remittances from expatriate workers, private debt and equity flows, and philanthropic contributions exceed official international aid by a wide margin.

Is there a risk that rising oil prices already reaching all time highs will cause further debt defaults worldwide?

The prices of structured securities such as collateralized debt obligations have come down, because the institutional fraud of a multi fold chain of securitizations has been detected. Cash back loans to NINJA (No Income, No Job, and No Assets) customers that included voluminous fees to brokers and were securitized and structured up to 60 times do not represent any value.

But it does this by giving the banks newly conjured government IOUs not euros in return for dodgy debt.

The only way for the government to shore up growth in the short run is to pursue more debt driven stimulus, as it did earlier this year.

The prices of structured securities such as collateralized debt obligations have come down, because the institutional fraud of a multi fold chain of securitizations has been detected.

The big American investment banks received excellent ratings up to the last moment, and so did the CDOs with which they betrayed the world.

Debtor countries pay substantial risk premiums to finance their debt, which is reflected in their high economy wide borrowing costs.

Exporters of any particular commodity should issue debt that is denominated in terms of the price of that commodity, rather than in dollars or any other currency.

People who did not pay their creditors were sent with their families to debtors prisons, as John Dickens, Charles father, was for owing 40 pounds.

Exporters of any particular commodity should issue debt that is denominated in terms of the price of that commodity, rather than in dollars or any other currency. Jamaica, for example, would issue aluminum bonds

Everyone has known the truth that Greece can never service its current debt obligations in full but nobody involved in the negotiations would say it.

But the debate about austerity and the cost of high public debt levels misses a key point Public debt owed to foreigners is different from debt owed to residents. Foreigners cannot vote for the higher taxes or lower expenditure needed to service the debt.

Lower demand for Greek debt caused its price to fall, meaning that its yield in terms of market interest rates rose.

Common taxation and Eurobonds should form part of the new fiscal structure, and the European Stability Mechanism should include a debt redemption fund large enough to resolve sovereign debt crises.