July 30, 2014

Perils of High Debt Include Impatient Creditors

  • The national debt has grown significantly in recent years due to rising annual deficits. A deficit occurs in any year the government spends more...

History is filled with examples of governments that got into trouble by running up large debts, a phenomenon that is particularly appropriate to recall in early May.

That’s because Cinco de Mayo – misunderstood by many as Mexican Independence Day – is rooted in the Second Republic of Mexico’s difficulties in the early 1860s with heavy debts owed to France, Spain and Great Britain, as explained in a recent blog by David O’Donnell, The Concord Coalition’s development director.

When Mexico delayed its debt payments, the creditor nations took military action. On May 5, 1862, the badly out-numbered Mexican army pulled off an upset over French forces. But O’Donnell points out that this much-celebrated victory was short-lived: “The French regrouped and enhanced their collection methods by taking Mexico City, toppling the Mexican army and installing Maximilian I as the new leader of Mexico.”

Incurring national debt, O’Donnell notes, “does have consequences.”

Read more with A Cautionary Tale of Cinco de Mayo (That Doesn’t Involve Tequila)