ISSN (Print) - 0012-9976 | ISSN (Online) - 2349-8846

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Five Observations from the World of Sovereign Debt

Perfect Market Puzzles

With the problem of sovereign debt everyone seems to assume that someone else, often referred to as 'the market', has figured out the solution. But even in the face of mounting billions in default and growing coordination problems, it looks to us as if nothing of the sort has occurred. The mechanism of the invisible hand is magical indeed - when it operates at all. But its operation is not safe to assume. Not even under the best possible set of conditions.

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