Four Ways to Understand Greek Debt

There are so many ways to tell the story of Greek debt.

Some History

Dionysius the Elder, a Greek tyrant who ruled from 407 BC to 367 BC (when we think he was poisoned by his physician who was allied with Dionysius the Younger) had a debt problem. Having borrowed many drachmas to perpetuate his lavish living and military might, he faced a financial crisis. With the lending spigot having gone dry and his debts due, he ordered all citizens to hand in their cash. By re-minting into two drachmas every one that he received, he inflated the money supply and could afford to repay every citizen and what he owed. Not quite as great an idea as he might have thought, now every drachma was worth much less.

Since her independence in 1829, Greece defaulted four times: 1843, 1860, 1893 and 1932. Or, we could say that for half of the years since 1800, Greece has been in default or rescheduling her debt.

How Much, When and Who

Perfectly shown by this WSJ graphic, the Greek debt story is also about when Greece has to repay all that she owes:

From: WSJ

Yet another perspective is identifying her creditors:

From: WSJ

And finally, in a list of 312 entries, WSJ shows the complexity of the debt. Below I have copied just the top 10 in order of their due date.

From: WSJ

Update

According to Bloomberg, the Greek Prime Minister Tsipras just ordered “central government entities” to transfer funds to the central bank. Essentially a decree that confiscates reserves, the move provides enough for salaries and a $770 million IMF payment.

Certainly not the same as Dionysius but still, a tiny similarity?

Our Bottom Line: Alexander Hamilton

When we look at debt, I always think of one of my favorite people.

Alexander Hamilton surely knew about sovereign debt defaults and wanted to avoid them. Reading about his plan to fund and refinance the United States’ revolutionary war debt reveals his commitment to establishing our good credit. His approach was varied, including issuing new bonds to pay for those outstanding and servicing the interest promptly on the foreign debt.  It worked.  Even those in Holland, then the financial capital of the world, displayed confidence in our public credit. Adhering to the Hamiltonian philosophy, the United States has never defaulted on its debt.