CHART OF THE DAY: History Shows Why Another Sovereign Debt Crisis Is Right Around The Corner

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This chart from Gerard Minack at Morgan Stanley, inspired by the research of Harvard professor Ken Rogoff, shows how, surprisingly, sovereign debt crises are pretty common from a historical perspective.

 

The developed world has gone through many cycles of debt accumulation followed by sharp and sudden corrections of debt imbalances via sovereign debt crises of some form as shown below. The blue line indicates the percentage of nations either in default or restructuring their debt each year. You can see that individual national crises tend to clump together and happen in waves. The last wave was around 1990, while the 2000’s were characterised by a lull in overt sovereign debt problems.

Which means that a new wave of sovereign debt defaults could be just around the corner and would be perfectly normal historically speaking; since as Morgan Stanley said in their recent related report, ‘this time will probably not be different.’
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