債務上限

Loans to a king do not always pay

The market panic began when the US succeeded in reaching settlement, not when it failed to do so. There is sense in this: the debate about the debt ceiling accelerated recognition that sovereign debt repayment is more about politics than economics.

Businesses and individuals pay their debts because they have to, but sovereign borrowers are in a different category. Sovereign immunity follows the logic of sovereignty. The courts impose the authority of the king and, therefore, cannot be used against the king.

The considerable assets of governments are generally not available to their creditors. Some arrangements pretend to bypass this principle – the UK Treasury building is the subject of a complex securitisation and the Athens metro might be privatised. But anyone who imagines that such security could be enforced is living a dream.

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