The author has been described by News Ltd as an "iconoclast", "Svengali", a pollie's "economist muse", and "pungently accurate". Fairfax says he is a "Renaissance man" and "one of Australia’s most respected analysts." Stephen Koukoulas concludes that he is "85% right", and "would make a great Opposition leader." Terry McCrann claims the author thinks "‘nuance’ is a trendy village in the south of France", but can be "scintillating" when he thinks "clearly". The ACTU reckons he’s "an enigma wrapped in a Bloomberg terminal, wrapped in some apparently well-honed abs."

Wednesday, December 29, 2010

The curious case of Britain defaulting on her US debts

I learnt some fascinating historical facts today. During WWI the US lent Britain billions of dollars to enable the latter to fund its ultimately successful military campaign. As it turned out, Britain defaulted on these loans, only repaying its American sponsors 90 cents on the dollar. France and Italy, which also borrowed billions from benevolent US taxpayers, similarly defaulted, and repaid much more pithy sums of 40 and 24 cents on the dollar, respectively. But the most amazing anecdote was this: the British Prime Minister at the time, Bonar Law, published an anonymous letter in The Times criticising his own decision. Law was irritated that they did not hold out for a lower amount, but felt compelled to respect the terms struck by his negotiating team. The lesson here resonates today: restructure your debts and let creditors wear some of your pain. Unfortunately, European states appear unwilling to impose the same strictures on their private creditors.