The ongoing sovereign debt crisis in Europe continues to weigh heavily oncredit markets and political systems throughout the developed world. 

When markets are irrational, it's impossible to say what might set them off, and fear of disaster becomes a powerful excuse for policy makers to do whatever they choose.

AEI Resident fellow Alex Pollock examines past sovereign debt crises, especially the European crisis of the 1920s, in the context of the current economic situation for a piece in the latest Financial Services Outlook and the Wall Street Journal.

Before the dominance of rating agencies, investment banks had the responsibility for signaling sovereign creditworthiness by supporting after-issuance market-making in that debt.

Greece's interests would be best served by an early large default and an early exit from the euro.

German and French policymakers have yet to face up to Europe’s real policy choice. They could choose to continue the pretense that the euro can be preserved in its present form. This would run the real risk of a costly and disorderly unraveling of the euro that could embroil a...

Suggesting that an orderly Greek exit from the euro should be manageable because Greece constitutes only 2 per cent of the overall eurozone economy is all too reminiscent of the policy complacency that preceded the Lehman bankruptcy in September 2008.

Interactions between debtor and creditor will produce a whole series of new solutions to match the reality on the ground.