Working Paper 22
How Debts Fall: Five Episodes of Sovereign Debt Reduction and the Strategies That Drove Them
October 2026
Abstract
Five episodes of major sovereign debt reduction: Britain 1815-1900, the US 1946-1974, Sweden in the 1990s, Canada in the 1990s, Belgium 1993-2007. Strategies range from the century-long surplus grind to financial repression to legislated fiscal rules. The folk story that America grew out of its war debt is quantitatively wrong: interest-rate distortions removed more debt than primary surpluses. A three-tier checklist of observable conditions for successful large-scale consolidation, with Japan and Italy as the red-flag cases.