Werner Lorbeer
Thursday March 28th, 2013

Federal Bankruptcy: What is Normal?

It is really surprising what surprises some people!

If you trust your money to a bank, you are the debtee of the bank. There is no way the bank would keep “my money” safe. It is only insured up to 100,000 €, the remainder is subject to the usual insolvency procedure in case of a bankruptcy. Of course, the capital that used to belong to the owners is gone and the same is true for those who bought “bonds” from the bank that were insured, such as bank loans or derivates, etc.

Now this might be boding ill, but it is not really a surprise: if a state is bankrupt, then so are its banks. After all, huge parts of the federal debt were bought up by the banks using the money their customers had given them. Or would it be better if banks refused to finance the state? Basically, private debtees can only get rid of their debts inside the legal order. That makes the private debts safer – which is a fact mirrored at the bond market during the last years.

But then, how else could the enormous savings capital of the citizens be invested if not through the state and administrative units? To be sure, the citizens might invest in naturals, but especially in Germany, this is done less often than in the rest of Europe. For example, we have less property owners than Cyprus.  So what really matters – be it savings for old age or for one’s education – is that states are kept in good solvency in order to organize an important characteristic of money: maintaining its value.

If a state spends more money than it gets from its citizens through taxes, fees, customs, etc., then its solvency is reduced. But he has the right to fall back on the fortune its citizens have built up. Because we democrats gave all our rights to the sovereign.

So what options does the state have in order to create a basis for a new currency after said state went bankrupt (= nobody was prepared to give it any more money)?
Here is a list of torture instruments, I am sure it is nowhere near complete:

  • Currency cut at exchange ratio;
  • Obligatory mortgage on property;
  • Obligatory loan for all bank accounts and deposits;
  • Exchange control regulations;
  • Replace money by coupons;
  • Forbid the ownership of gold;
  • Property taxation;
  • Compulsory expropriation;
  • Inheritance taxation;
  • All property goes back to the state;
  • Increase all taxes and other fees;
  • Inflation;
  • Debt cut through refusal of paying back state loans;

What an impressive list!

wl
(Translated by EG)

3 Kommentare zu “Federal Bankruptcy: What is Normal?”

  1. Chris Wood (Saturday March 30th, 2013)

    I find this about buying and selling “Schulden” confusing and probably confused. Buying and selling “Schuldpapiere” is normal. But debts have negative value. So when one “buys” a debt, one does not hand over money, but rather receives money. If it is normal in the German language to refer to “Schuldpapiere” as “Schulden”, this is unfortunate, and illustrates how confused the world (outside England) is.

  2. rd (Saturday March 30th, 2013)

    @Chris:
    In der ersten Relation (direktes Geschäft, keine Derivate) ist das ganz einfach:
    Ein “Schuldpapier” ist eine einseitige Verpflichtung einer juristischen oder natürlichen Person, am Ende einer festgelegten Laufzeit zu einem bestimmten Zeitpunkt den Inhaber des Papieres auszuzahlen. Zusätzlich kann z.B. jährlich ein Zahlung an den Inhaber garantiert werden, das waren z.B. die berühmten “Coupons”.
    Das heißt, so ein Papier ist stellt ein “relationship” dar mit zwei “Entities”: Dem Schulder (der sich zur Rückzahlung verpflichtet) und dem “Gläubiger”, dem aktuelle Inhaber des Papiers. Und der Gläubiger hat an den Schuldner eine Forderung, die zu einem festgelegten Zeitpunkt beglichen werden muss (soll).
    Solche Papiere heißen nun mal Schuldpapiere. Die kann man verkaufen und kaufen. Und wenn die Bonität des Schuldners schlecht ist, dann werden sie halt billiger (in Relation zum Nennwert).
    Ein Sonderfall, der Dich vielleicht verwirrt könnte sein, dass der Schuldner natürlich auch seine eigenen Schuldpapiere zurückkaufen kann. Das haben die Griechen ja vor kurzem gemacht. Sie haben einen Teil ihrer Schuldpapiere wohl zum halben Preis zurückgekauft und scheinbar ein gutes Geschäft gemacht. Ob das so war, wird die Zukunft zeigen.

  3. Chris Wood (Saturday March 30th, 2013)

    Dear Roland, my comment primarily concerned the buying and selling of “Schulden”, not of “Schuldpapiere”. I understand German very well. Remember “Fahnenbildung”.

Kommentar verfassen

*