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Why Not Default?$
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Jerome Roos

Print publication date: 2019

Print ISBN-13: 9780691180106

Published to Princeton Scholarship Online: May 2019

DOI: 10.23943/princeton/9780691180106.001.0001

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Three Enforcement Mechanisms

Three Enforcement Mechanisms

Chapter:
(p.68) Four Three Enforcement Mechanisms
Source:
Why Not Default?
Author(s):

Jerome Roos

Publisher:
Princeton University Press
DOI:10.23943/princeton/9780691180106.003.0005

The structural power of finance in sovereign debt crises is a product of the financial sector's position as the principal creator of credit-money within the capitalist economy, and it revolves around its capacity to withhold the short-term credit lines on which all states—as well as firms and households—depend for their reproduction. This chapter discusses the three enforcement mechanisms of debtor compliance through which the structural power of finance is hypothesized to operate, specifying in each case the precise conditions and countervailing forces bearing on their overall strength and effectiveness. These mechanisms are market discipline; the conditional emergency lending by creditor states and international financial institutions; and the intermediary role fulfilled by domestic political and financial elites inside the borrowing countries.

Keywords:   finance, sovereign debt crises, capitalism, short-term credit, market discipline, emergency lending, intermediary, credit-money, debtor compliance

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