Friday, March 28, 2014
Sovereign Debt in Turkey (the Ottomans)
In 1868, the Ottoman government spent 17% of its entire tax revenue just to pay interest on their debt.
They were well past the point of no return where they had to borrow money just to pay interest on the money they had already borrowed.
The increased debt meant the interest payments also increased. Three years later in 1871, the government was spending 32% of its tax revenue just to pay interest.
By 1877, the Ottoman government was spending 52% of its tax revenue just to pay interest. They were finished. They defaulted that year.
This is a common story throughout history.
By-the-way, the US is now spending 26% of available tax revenue to pay interest on its debt....