Two recent stories highlight the current moral double standards regarding defaults and indebtedness in general. The first article by James Surowiecki in the New Yorker uses the recent American Airlines umpteenth Chapter 11 filing, which was lauded as a “smart move” to shield the companies from the obligations it was supposed to honor, and contrasts this reaction to the stigma surrounding personal bankruptcies by home owners. We have discussed here before how one can never forget the personal responsibility aspect of the housing bubble – the people who bought houses they couldn’t afford – but Mr. Surowiecki has a point.
The second article in the Financial Times tries to tack the same “double standards” theme onto Germany, given its treatment of the heavily-indebted Eurozone members. It doesn’t work nearly as well, but for argument’s sake – and its use of Goethe quotes from Faust – it’s an interesting read.