Thursday, September 8, 2016

The social consequences of state directed defaults

Firms get under water
Time comes when they must rectify their obligations
To continue
Or cease !

If they cease
They default

Now the counter parties take the loss

What if the state assumes the loss because state action at some level up to and including macro management

Caused the default

Surely the state by generalizing the loss to the whole of society
Reduces to the max possible
Any real damage to citizens