Sovereign lending theories fail because countries can simply refuse to tax
Michael Cembalest · Michael Cembalest – Eye on the Market (Capital Allocators, EP.49) · Apr 23, 2018 · at 9:30
Michael Cembalest, Chairman of Market and Investment Strategy at J.P. Morgan Asset and Wealth Management, discusses lessons learned from sovereign debt and banking crises early in his career.
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“You know, for example, Walter Riston was famous for saying, well, lending to countries is better than companies because countries can't default. They have infinite power of taxation. Yes, they do until they decide not to exercise it. And so all of these kind of cocktail napkin theories tend to fall apart.”
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