Defaults
in sentence
234 examples of Defaults in a sentence
The largest global surges in sovereign
defaults
have usually followed a capital-flow reversal that overlaps with a spike in international interest rates.
Exceptionally low and stable interest rates have acted to dampen debt-servicing difficulties among the debtor countries and may also help explain the missing
defaults.
But a more cautious interpretation of the missing
defaults
is that the protracted nature of the downturn in international conditions has yet to take its cumulative toll, or that lingering weaknesses will only become evident once the major central banks move further along in renormalizing their policy stances.
One of the richest countries in the world around 1900 was laid low by decades of unsustainable economic policies that made people feel good in the short run but eventually ended in disaster, such as runaway inflation, financial crisis, and periodic debt
defaults.
Constraining new credit would fuel a surge in
defaults
on bank loans and wealth-management products, and would cause investment to contract much more rapidly than consumption can feasibly grow.
Real debt
defaults
are historically rare.
The borrower is cut off from international markets, and essential imports can no longer be purchased, while large-scale
defaults
threaten to plunge creditors into insolvency.
After the eurozone’s sovereign-debt crisis erupted,
defaults
were avoided by establishing the European Financial Stabilization Mechanism (since replaced by the European Stability Mechanism), and by crafting a more pragmatic and reinforced role for the ECB (acting with the European Commission and the International Monetary Fund).
Indeed, such
defaults
– combined with factors like large current-account or fiscal deficits, overvalued currencies, high public-sector debt, and insufficient foreign-exchange reserves – have always triggered financial crises, from the Mexican peso crisis in 1994 to the Russian ruble crisis in 1998 to the American subprime mortgage crisis in 2008.
The 1930’s are relevant here as well, given another series of
defaults
among European states, not least Germany.
What history tells us here is that
defaults
are not the privilege of poor, under-governed countries.
But an important insight from history is that unsustainable fiscal policies are more likely to result in
defaults
when fiscal problems cannot be inflated away.
And now he is proposing to impose a small tax on the largest banks’ liabilities, which he hopes will encourage “them to make decisions more consistent with the economy-wide effects of their actions, which would in turn help reduce the probability of major
defaults
that can have widespread economic costs.”
If Greece
defaults
and leaves the eurozone, these overdrafts will not be repaid.
Argentina may be almost as famous for its
defaults
as it is for its soccer teams, but it is hardly alone.
Venezuela is the modern-day record holder, with 11
defaults
since 1826 and possibly more to come.
There was also excess in the securitized products that converted these debts into toxic financial derivatives; in borrowing by local governments; in financing for leveraged buyouts that should never have occurred; in corporate bonds that will now suffer massive losses in a surge of defaults; in the dangerous and unregulated credit default swap market.
Sovereign
defaults
are common events with many causes.
So the design challenge of the future will be to create good
defaults
with easy editing/customization tools for those who care.
And, without a rapid return to growth, more
defaults
– and social turmoil – cannot be avoided.
Wrong-headed policies during the first Great Depression led to trade and currency wars, disorderly debt defaults, deflation, rising income and wealth inequality, poverty, desperation, and social and political instability that eventually led to the rise of authoritarian regimes and World War II.
But, in the absence of an international rule of law for resolving sovereign defaults, the world pays a higher price than it should for such restructurings.
With the financial sector facing a large volume of non-performing loans, the government could repeat what it did in the late 1990s, absorbing bad debt and recapitalizing banks, rather than allowing
defaults
and bank failures to shock the economy into recession.
He knows all about success via strategic defaults, followed by massive debt write-offs and the creation of assets from liabilities.
Moreover, financial crises triggered by excessive debt and leverage in the private sector are followed after a few years by sovereign
defaults
and/or high inflation to wipe out the real value of public debts.
Likewise, the formula for pricing mortgage-backed securities requires a statistical estimate of the frequency distribution of
defaults.
One can scarcely bear imagining the consequences: cascading bank and sovereign defaults, a devastating depression, the collapse of the euro (and perhaps even that of the European Union), global contagion, and potentially tragic political turmoil.
Several major lenders absconded with large amounts of deposits, and
defaults
by ordinary companies have become a serious concern.
A spike in
defaults
could destabilize the entire financial system and trigger an economic downturn.
So, as Hausmann and Santos ask, should Venezuela’s government default on its foreign debt, given that the historical record shows that nearly all domestic
defaults
go hand in hand with external default?
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