Default More Than 400 Years Ago Leaves Scars: Christophe Chamley

Aug. 1 (Bloomberg) -- The House Republicans, many of themopposed to raising the federal government’s borrowing ceiling,might take a lesson from the first sovereign debt crisis:Spain’s default in 1575. What events more than 400 years agosuggest is that it’s easy to ignite a dangerous chain reactionin financial and credit markets and inflict lasting damage onthe economy.

Republicans today are playing the part of the cities ofCastile, whose delegates to the Cortes (the Spanish parliament)opposed raising taxes to service King Philip II’s long-termbonds.