In Good Times Prepare for Crisis: From the Great Depression to the Great Recession: Sovereign Debt Crises and Their Resolution

Ira Lieberman

Oct 2018 · Brookings Institution Press

About this ebook

Sovereign debt crises are a little like the weather: One can get ready to endure them and maybe take some steps to lessen their impact, but so far it hasn't been possible to prevent them. Like the weather, they just keep happening. That's the overriding thesis of this book tracing the major debt crises of the past century, starting with the Great Depression and running through the recent Great Recession.

Written by a former World Bank expert on debt crises, this book discusses best practices for how such crises can be resolved. As the painful experience of the past decade reminded everyone, frequent debt crises and defaults do great damage to economies and cause vast personal hardship. But resolving them has proven difficult—both economically and politically—and has taken time, almost always requiring a lender of last resort such as a country's central bank or the International Monetary Fund.

Too often, efforts to end debt crises have been little more than a palliative, and the debt overhang from one crisis contributes to the next, as illustrated by the ongoing saga in Greece. Both private and sovereign debts have increased substantially since the 2008 crisis, with inadequate deleveraging. This debt overhang leaves countries vulnerable and with limited maneuverability to address the next crisis.

This book does not pretend to describe how debt crises can be prevented. But it does draw useful lessons from recent crises that can help economists, bankers, policymakers, and others resolve the inevitable future crises with the least possible damage.

About the author

Ira Lieberman worked for the World Bank from 1994 to 2003, helping resolve financial crises in Mexico, East Asia (primarily Korea), Turkey, and Argentina. He worked with the Troika—the European Central Bank, the European Commission, and the IMF—on crisis resolution in Portugal in 2013 and in Portugal and Spain on crisis resolution in 2015. He also worked on the initial pro-market economic reforms in Russia from 1992 to 1995. Lieberman worked in Mexico from 1985 to 1987 after the 1980s debt crisis on postcrisis structural reforms including restructuring of highly indebted state-owned enterprises and preparation for privatization, a necessity due to Mexico’s sovereign debt crisis.