A default is a default is a default ...
If a Government is hopelessy overleaveraged and over-indebted, who will it default on
- its workers, or
- its pensioners, or
- its supliers, or
- its future taxpayers, ... but NOT
- its current creditors and bondholders
Is this what is now called the "moral hazard trade" or rather a case of crashing of the weakest link ?
The effort to cut spending seems to be falling first and foremost on US Federal civil servants, the workers, whose.
This suggests that breaking that "labor contract" is seen as the path of least resistance or least cost for a debt-pressed Government.
The same was seen nearly everywhere in the Eurozone debt crisis, with the cuts to wages and pensions as the primary deleveraging mechanism.
In contrast, in a corporate default, workers are given top priority in repayment.
Reforma do IRC e Portugal perde dois lugares no 'ranking' da competitividade
A análise de António Gaspar, Mariana Abrantes de Sousa, Mário Caldeira Dias e Rogério Fernandes Ferreira, num programa conduzido por Catarina Tavares Machado. "Conselho Consultivo" de 6 de Setembro de 2013.
If a Government is hopelessy overleaveraged and over-indebted, who will it default on
- its workers, or
- its pensioners, or
- its supliers, or
- its future taxpayers, ... but NOT
- its current creditors and bondholders
Is this what is now called the "moral hazard trade" or rather a case of crashing of the weakest link ?
The effort to cut spending seems to be falling first and foremost on US Federal civil servants, the workers, whose.
This suggests that breaking that "labor contract" is seen as the path of least resistance or least cost for a debt-pressed Government.
The same was seen nearly everywhere in the Eurozone debt crisis, with the cuts to wages and pensions as the primary deleveraging mechanism.
In contrast, in a corporate default, workers are given top priority in repayment.
Reforma do IRC e Portugal perde dois lugares no 'ranking' da competitividade
A análise de António Gaspar, Mariana Abrantes de Sousa, Mário Caldeira Dias e Rogério Fernandes Ferreira, num programa conduzido por Catarina Tavares Machado. "Conselho Consultivo" de 6 de Setembro de 2013.
Lá como cá, é a regra do elo mais fraco.
ResponderEliminar
ResponderEliminarLá como cá, é a regra de ...o elo mais fraco.
Debt doesn't matter? This is really big NEWS!
ResponderEliminarReaders who live by the debt snowball will be glad to know it, it's music to their pockets.
Pity it doesn't fit with REALITY as we know it.
First, just put the word DOMESTIC pretty much everywhere: an increase in government DOMESTIC debt that is shared equally by all DOMESTIC agents and thus leaves net DOMESTIC assets unchanged has no DOMESTIC welfare consequences at all.
Second, all the talk about the debt limit seems to overlook the "elephant in the room", the likelyhood hat US Government debt has gone well beyond sustainability.
Third, as the Eurozone countries found out tragically, public debt as defined by the Maastricth criteria may or may not matter, but Gross External Debt certainly does. And we have the "scars" of the cuts in disposable income to show for it.
See http://ppplusofonia.blogspot.pt/2013/10/workers-in-front-line-of-sovereign-debt.html
Curiosamente, a crise do limite de dívida pública, à Americana nunca aconteceria em Portugal.
ResponderEliminarPorque não?
Porque em Portugal a dívida pública vai simplesmente acumulando, sem qualquer limite, nem constitucional como o alemão, nem orçamental como o americano.
Até ao descalabro total, como viemos a sofrer.
É uma ilusão acreditar em cortes temporários.
ResponderEliminarPortugal tem que reduzir o défice orçamental de uma forma permanente.
Sem grande recuperação da economia e das receitas fiscais, isso implica um corte permanente no grosso da despesa pública, isto é nos encargos com salários e pensões do Estado.
PPP Lusofonia