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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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The Internationalization of Finance

The Internationalization of Finance

(p.95) Six The Internationalization of Finance
Why Not Default?

Jerome Roos

Princeton University Press

This chapter takes a closer look at the main lending cycles of the 1820s and 1870s, as well as the creditors' responses to the subsequent waves of default. It suggests that key elements of the first and second enforcement mechanisms—market discipline and conditional lending—were already present in embryonic form at an early stage in capitalist development. Beside occasionally resorting to the instrumental power of gunboats, especially during the imperialist era, the partial effectiveness of these two mechanisms generally ensured compliance during the good times, thus laying the foundations for the internationalization of finance over the course of the nineteenth century, even as the relative weakness of the underlying enforcement mechanisms meant that periods of calm were regularly punctuated by unilateral payment suspensions in times of crisis.

Keywords:   sovereign default, sovereign debt, internationalization, finance, lending cycles, creditors

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