The Debtor Prisoner’s Dilemma
Explicit debt defaults are historically rare, because the risks and costs to borrowers and creditors alike are enormous. Indeed, from Argentina to Greece, managing modern debt crises involves the extraordinary logic of throwing good money after bad in the hope of masking the underlying unsustainability.
PRINCETON – Any economic slowdown increases debt burdens, whether for households or for states. Today, both are looking for ways to reduce the weight of debt – and some would prefer to escape it.