Author’s Note: Sovereign Debt

Having mentioned Gilea & Company’s policy on this, and even storified it, I should perhaps head off at the pass the inevitable someone pointing out that “sovereign debt doesn’t work that way”.

No, it doesn’t work that way here, where we are accustomed to extending a certain degree of trust and special privilege to governments.

There, on the other hand, the bankers behind Gilea & Company and other transstellar banking institutions which follow their lead are ideologically predisposed to not doing so, and would point to – to use Earth historical examples going forward in time – officially-sanctioned [commodity] currency debasement; massacring the Jewish bankers who lent you money to avoid repayment; defaulting on sovereign debt to private creditors because, well, what are they going to do and after all you are sovereign and can’t be compelled to honor your own deals1; inflating the currency to repay your debts with money which isn’t worth the money you lent them in the first place; and other such charming habits as evidence that the Sovereign Client Affairs department is, in fact, dealing with the shonkiest wide-boys on the block.

…as such, it behooves them to insist upon denomination hard currency that the client, specifically, doesn’t control, demanding significant collateral, and having a big stick handy (and visible) to deal with sovereign clients that fail to grasp that pacta sunt servanda, dammit, or else.

(It also helps in enforcement that the numbers on Gilea & Co.’s, and many other starcorporations, balance sheets & P&Ls are significant orders of magnitude bigger than many polities’ Gross System Products. Still, a few newcomers to the galactic system too impressed with their own sovereignty to realize that they’re actually going to be held to the obligations of their contracts get caught by this on a semi-regular basis, and thus become the instructive example for the next few would-be debtors.)

[1] ObWikipedia: “Since a sovereign government, by definition, controls its own affairs, it cannot be obliged to pay back its debt.”