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Of Bond Vigilantes, Central Bankers and the Crisis of 2008

In: A World of Public Debts

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  • Adam Tooze

    (Columbia University)

Abstract

The financial crisis of 2008 and its aftermath in Europe have repoliticized the question of public debt. A familiar theme is that of the “bond vigilante”, the self-appointed bond market guardian who imposes discipline on high-spending politicians. In its modern form, that narrative emerged from the debt crises of the 1970s–1990s. Since 2008 the idea of bond market dominance has enjoyed a dramatic revival. Though it has some obvious relevance in the case of weaker members of the Eurozone and fragile emerging markets, this chapter argues that it is not an adequate framework for analyzing sovereign debt more broadly. Since 2008 most advanced economies have been able to borrow on extraordinarily easy terms. To understand why, we must take the strategic game between debtors and creditors seriously, acknowledge the role played by struggles within the political system and reckon with broader macroeconomic trends.

Suggested Citation

  • Adam Tooze, 2020. "Of Bond Vigilantes, Central Bankers and the Crisis of 2008," Palgrave Studies in the History of Finance, in: Nicolas Barreyre & Nicolas Delalande (ed.), A World of Public Debts, edition 1, chapter 0, pages 453-478, Palgrave Macmillan.
    • Handle: RePEc:pal:psitcp:978-3-030-48794-2_18
    DOI: 10.1007/978-3-030-48794-2_18
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