The Anti-Economist — From the July 2013 issue

The Scarlet Debtor

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Debt forgiveness is one of the most important innovations of modern capitalism, but it is a fairly recent one. Though the Constitution gives Congress explicit authority to enact “uniform Laws on the subject of Bankruptcies throughout the United States,” early U.S. bankruptcy laws were short-lived and provided mostly for involuntary proceedings initiated by creditors. Before the elimination of federal debtors’ prisons in 1833, jail was a common consequence of failure to pay. Not until the Nelson Act of 1898 did the country have a lasting bankruptcy code and thus a framework for debt protection.

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  • ahoy

    “Ocampo favors an international debt court with authority to manage negotiations between lenders and creditors”

    Aren’t lenders and creditors the same thing?

  • Marco

    Question : Madrick writes : ” The risk of damaging defaults creates much more uncertainty for lenders, and a reasonable bankruptcy provision would likely reduce interest rates… “. In contrast, it seems to me that increased uncertainty asks for higher interests rates since it reduces the supply of lenders and willing investors.

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