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But the rough equivalent may be about to happen in the bond market.Bonds can be insured against default via a credit default swap (CDS).
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"The answer is in the government".Although government debt is often described as "risk-free", history is littered with sovereign defaults or with countries achieving partial default via inflation and currency depreciation.
WITH events in Washington descending into farce, the markets are still assuming the US will avoid technical default via a deal or via a process that prioritises debt payment over workers' salaries and the provision of services.
In a recent book on sovereign debt, "This Time is Different", Carmen Reinhart of the University of Maryland and Kenneth Rogoff of Harvard conclude that "the evidence offers little support for the view that countries simply grow out of their debts".So, short of debt default or implicit default via inflation, that leaves two other ways of closing the deficit.
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Euro membership, for instance, has removed the option of quasi-default via inflation for the heavily indebted on Europe's periphery.
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But rather a dozen funny, blisteringly red-faced Kens than, as appears to be happening by default – actually via 150,000 Tory voters – four years of Theresa May.
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There was also concern about default spreading via a domino effect of sorts: Markets in weak eurozone economies would be spooked by the ECB letting Greece default, resulting in bank runs in nations like Portugal, Ireland and Italy.
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Justyna Jupowicz-Kozak
CEO of Professional Science Editing for Scientists @ prosciediting.com