St Patrick explains those Anglo Promissory Notes (for the day that’s in it)

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  • Greenflag

    The Irish /British /American/Spanish/Greek people should not be surprised at at what is going on .It has happened before but never before to Ireland . Up to 1933 government defaults and repudiated debts included countries such as Austria , Bolivia, Brazil, Bulgaria, Canada, Chile, Ecuador, Costa Rica, Germany, Greece, Guatemala,Latvia,Mexico, Peru,Romania, Russia, Turkey and Yugoslavia as well as a dozen States in the USA .

    Lessons learned ? from the European Sovereign debt crisis of the 1920’s are long forgotten . The losers of WW1 -Germany, Austria Hungary, Turkey were bankrupt . But the winners mainly Britain and France had accumulated vast debts they could NOT pay.

    The Versailles Treaty was to ensure that Germany would be forced to pay reparations so that France could repay it’s debt to Britain and the United States and Britain could pay it’s debt to the USA .

    The ‘slight’ problem was that like Greece and Ireland among others today (2012) Germany could’nt and would not make the payments as decreed so no one could pay off their debt .

    By the mid 1920’s it was obvious that the expected ‘repayments’ were not happening and would’nt happen . This gave rise to complex (think Greece and Ireland again) international negotiations and an agreement that included the ‘restructuring’ of German obligations -along with new lending to Germany (Greece again 2012) . Just like now the 1920’s agreement was considered a ‘success’. The Dawes plan (Dawes was USA VP 1925-1929) reduced German payments and restructured the debt to 25 years i.e 1949. Part of the plan was that the humiliating French military occupation of the Rheinland (to enforce repayment ) would end .

    Foreign creditors were to have oversight of the Reichsbank , Germany’s Central Bank (think of the ECB and Troika in Dublin and Athens ) The Dawes creditors were to have ‘collateral’ German customs duties , taxes on tobacco, beer and sugar and revenue from alcoholic spirits.

    But how can any creditor enforce their rights to such collateral if a powerful government (important word that -powerful) decides NOT to pay ? Simply put they can’t .

    New loans from the USA (think ECB to Greece) would make germany’s planned payments possible . Americans would lend the Germany money so it could pay France and Britain so they could pay the USA .

    You might think the above plan would not be sustainable and it was’nt !

    As late as 1930 with 19 years left to maturity these 7%Dawes Loan bonds traded above their face value at 109. Foreign bonds became popular in the ‘new ‘financial capital ‘of the world New York.

    Things do change don’t they . Best laid plans and all that .
    In 1934 the German government anounced it was no longer paying on Dawes bonds . By 1936 35% of the sovereign bonds floated in New York in the 1920’s were in default-an experience similar to defaults on subprime mortgages in the present time. The vast majority of the sovereign debt that had been created by World War 1 also defaulted .

  • Greenflag

    The Irish /British /American/Spanish/Greek people should not be surprised at at what is going on .It has happened before but never before to Ireland . Up to 1933 government defaults and repudiated debts included countries such as Austria , Bolivia, Brazil, Bulgaria, Canada, Chile, Ecuador, Costa Rica, Germany, Greece, Guatemala,Latvia,Mexico, Peru,Romania, Russia, Turkey and Yugoslavia as well as a dozen States in the USA .

    Lessons learned ? from the European Sovereign debt crisis of the 1920’s are long forgotten . The losers of WW1 -Germany, Austria Hungary, Turkey were bankrupt . But the winners mainly Britain and France had accumulated vast debts they could NOT pay.

    The Versailles Treaty was to ensure that Germany would be forced to pay reparations so that France could repay it’s debt to Britain and the United States and Britain could pay it’s debt to the USA .

    The ‘slight’ problem was that like Greece and Ireland among others today (2012) Germany could’nt and would not make the payments as decreed so no one could pay off their debt .

    By the mid 1920’s it was obvious that the expected ‘repayments’ were not happening and would’nt happen . This gave rise to complex (think Greece and Ireland again) international negotiations and an agreement that included the ‘restructuring’ of German obligations -along with new lending to Germany (Greece again 2012) . Just like now the 1920’s agreement was considered a ‘success’. The Dawes plan (Dawes was USA VP 1925-1929) reduced German payments and restructured the debt to 25 years i.e 1949. Part of the plan was that the humiliating French military occupation of the Rheinland (to enforce repayment ) would end .

    Foreign creditors were to have oversight of the Reichsbank , Germany’s Central Bank (think of the ECB and Troika in Dublin and Athens ) The Dawes creditors were to have ‘collateral’ German customs duties , taxes on tobacco, beer and sugar and revenue from alcoholic spirits.

    But how can any creditor enforce their rights to such collateral if a powerful government (important word that -powerful) decides NOT to pay ? Simply put they can’t .

    New loans from the USA (think ECB to Greece) would make germany’s planned payments possible . Americans would lend the Germany money so it could pay France and Britain so they could pay the USA .

    You might think the above plan would not be sustainable and it was’nt !

    As late as 1930 with 19 years left to maturity these 7%Dawes Loan bonds traded above their face value at 109. Foreign bonds became popular in the ‘new ‘financial capital ‘of the world New York.

    Things do change don’t they . Best laid plans and all that .
    In 1934 the German government anounced it was no longer paying on Dawes bonds . By 1936 35% of the sovereign bonds floated in New York in the 1920’s were in default-an experience similar to defaults on subprime mortgages in the present time. The vast majority of the sovereign debt that had been created by World War 1 also defaulted .

    tbc

  • Greenflag

    apologies above duplicated .

    TBC

  • Greenflag

    Governments are complicit in promoting debt not only their own national debt but as history shows loans to the Allies in WWI and WW2 ,loans to Germany in the 1920’s loans to developing countries in the 1970’s , which defaulted in the 1980’s. And now loans to fellow governments in the EU .

    With respect to St Patrick’s attempt at explanation above and the ‘default ‘ history in the above post -Ireland nor Greece is in any position to ‘default ‘ alone in this crisis -It will take a multiplicity of countries . It will happen sooner or later and ‘restructuring ‘ of the 3.5 billion mentioned above is the first step !