Fall 2015 Brookings Panel on Economic Activity Weblogging: Greece: Reinhart and Trebesch

Fall 2015 BPEA Th 1:00 PM: Reinhart and Trebesch: I note the statement that:

external creditors fared rather benignly in Greece, despite the many years of default. The real ex-post returns on the defaulted bonds were in the range of +1% to +5%, despite the losses due to haircuts and arrears… partly the result of the high yields… but also because partial debt service continued even in severe crisis years…

That seems to explain why people lend to Greece–that when the crisis comes, they have enough control to squeeze the lemon hard, whatever the excess burden of the taxes imposed and its cost for the Greeks.

Are the lessons: (a) a country should not borrow in a currency it cannot print, and (b) a country should not let its firms borrow in a currency it cannot print because private debt will be turned into public debt in a crisis?

It does make me wonder: what would have been the macroeconomic consequences for Texas in the early 1990s had the federal government insisted that Texas reimburse the RTC for payments made by the RTC to depositors in Texas S&Ls?