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Bond Default Is About Too Much Debt, Too Little Time: Joe Mysak

The last time a state defaulted on its bonds, it took eight years and the federal government’s help to come up with a remedy.

When Arkansas defaulted on its bonds in 1933, the politicians and investors talked about the same things we would talk about today. The state blamed underwriters for allowing it to sell too many bonds. Investors compared the willingness to repay debt with the ability to pay, and weighed the advantages of bonds backed by a pledge of taxing powers to those secured by specific revenue.