I don't get it with "Sovereign Debt". People who lend money to Greece, New Zealand, Russia, Saddam or Mugabe have only themselves to blame when the sovereign tells them that they won't be getting their money back, sorry.
It's not like a mortgage on a house or a loan to a car factory, or bank, where the creditor can go to a court and demand payment enforcement or forfeiture of assets.
Countries are not car factories and cannot be foreclosed. The citizens can just vote to repudiate the loans, issue new currency if they wish, and carry on regardless, with a clean balance sheet.
There was whining around the world when Saddam's creditors were told they were out of luck. Too bad. It wasn't "the country" or "the electorate" which borrowed the money. It was the rulers. Same everywhere.
New Zealand is currently borrowing $1 billion a month to keep the game going. I feel zero obligation to repay those creditors. When the time comes, I'll vote to tell them they made a mistake giving it to those criminal deadbeats who had control of the country.
NZ will go from owing $170 billion to owing nothing, overnight. All the assets will still be sitting right where they are.
People who think government debt is secure debt are off their rockers. People talk of shares needing a risk premium, but in fact it's currencies, and sovereign debt, with sovereign backing, which should carry a hefty risk premium.
Mqurice |
