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Author Topic: How bad should the sovereign debt crisis get?  (Read 1024 times)
blogospheroid
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July 21, 2011, 05:51:36 AM
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How bad do you think should the sovereign debt crisis get, before the powers start considering "genuine sovereignity sales"?

Presently, the nations in debt (PIIGS nations, especially) have too much debt and no way of paying the creditors in the currency in which they borrowed. This either leads to large defaults everywhere, which is not acceptable to the creditors or some really drastic repayment scenarios.

Genuine sovereignity sales are the most drastic repayment scenario I can imagine in which the debt is paid and the value of the currency maintained.

The country in debt, evacuates everyone on a piece of land, or chooses one which is vacant. It sells it off to the highest bidder. The UN security council agrees that the created entity is a new nation. People who migrate there on a permanent basis, have the option of getting the new citizenship of the nation in question.

The advantages that a genuine sovereignity sale provide
  • Countries don't need to change their entire structures of public payment that the IMF or WB would have insisted for normal repayment scenarios. They will not lose sovereignity in the sense of day to day fiscal affairs, provided  a large part of the debt is paid off.
  • The really difficult problem of how to pay off those billions with productive endeavours is outsourced to whoever choses to buy the land, the new nation.
  • The auction can always be cancelled if a high enough base price is not found
  • The currency value can be maintained and the otherwise total collapse into a commodity standard prevented
The disadvantage is ofcourse, the accusation of the return of colonialism where properties are run for the benefit of the rulers. The new land will HAVE to turn a profit for the buyers, otherwise no one would buy it.
So, what do you think? Will the situation become so bad that a genuine sovereignty sale be considered?
  

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July 21, 2011, 06:45:31 PM
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So, what do you think? Will the situation become so bad that a genuine sovereignty sale be considered?

Personally, no, I don't see this happening.  What I'm worried about is Europe will exhibit "bailout fatigue" similar to what happened to the US in 2008.  Think of Greece as the equivalent of Bear Sterns.  The first domino to fall and thus bailed out to prevent a systemic collapse.  The contagion continues to spread and eventually a much larger and more significant country (Spain perhaps) is in need of a similar bailout but will suddenly be allowed to default, similar to Lehman.  Thus causing a much greater problem and throwing the world into a deep recession/depression.

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July 22, 2011, 10:12:55 AM
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So, what do you think? Will the situation become so bad that a genuine sovereignty sale be considered?

Personally, no, I don't see this happening.  What I'm worried about is Europe will exhibit "bailout fatigue" similar to what happened to the US in 2008.  Think of Greece as the equivalent of Bear Sterns.  The first domino to fall and thus bailed out to prevent a systemic collapse.  The contagion continues to spread and eventually a much larger and more significant country (Spain perhaps) is in need of a similar bailout but will suddenly be allowed to default, similar to Lehman.  Thus causing a much greater problem and throwing the world into a deep recession/depression.

And you have been proved right. Greece was allowed to default. I never considered my scenario that much possible. Just wanted to float a thought around.

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July 22, 2011, 08:14:25 PM
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How bad do you think should the sovereign debt crisis get, before the powers start considering "genuine sovereignity sales"?

Presently, the nations in debt (PIIGS nations, especially) have too much debt and no way of paying the creditors in the currency in which they borrowed. This either leads to large defaults everywhere, which is not acceptable to the creditors or some really drastic repayment scenarios.

Genuine sovereignity sales are the most drastic repayment scenario I can imagine in which the debt is paid and the value of the currency maintained.

The country in debt, evacuates everyone on a piece of land, or chooses one which is vacant. It sells it off to the highest bidder. The UN security council agrees that the created entity is a new nation. People who migrate there on a permanent basis, have the option of getting the new citizenship of the nation in question.

The advantages that a genuine sovereignity sale provide
  • Countries don't need to change their entire structures of public payment that the IMF or WB would have insisted for normal repayment scenarios. They will not lose sovereignity in the sense of day to day fiscal affairs, provided  a large part of the debt is paid off.
  • The really difficult problem of how to pay off those billions with productive endeavours is outsourced to whoever choses to buy the land, the new nation.
  • The auction can always be cancelled if a high enough base price is not found
  • The currency value can be maintained and the otherwise total collapse into a commodity standard prevented
The disadvantage is ofcourse, the accusation of the return of colonialism where properties are run for the benefit of the rulers. The new land will HAVE to turn a profit for the buyers, otherwise no one would buy it.
So, what do you think? Will the situation become so bad that a genuine sovereignty sale be considered?
  

Most land is probably not terribly valuable except that which has some resources or is strategically located (e.g., Iraq, parts of Iran, Afghanistan, etc.)  The land itself would be a giant money sink-hole with defense considerations and the like.

I good value proposition is the actual people themselves.  If you can force them to work for you, and they are decent workers, that has a pretty good value.  But one can get the best bang for the buck...err...gold or whatever...by leaving the land and all it's hassles to some puppet regime and buy infrastructure like water and power systems.  The puppet regime can then force the people to use the utilities you own.  They could make laws such that it is illegal to capture rain water and must buy all their water from the utility company for instance.  And if you can arrange the right kind of regime, it can even enforce those laws.

There might be a market for things like the Pantheon.  I would get a kick out of owning the thing, and I assume that more powerful people would as well.  It probably could even be done in such a way that the Greek people continue to foot the bill for maintenance and such.


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July 23, 2011, 06:37:29 AM
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The whole Eurozone will sink it will just do so in a slow motion effect thus not to cause any chaos. Look at Greece it has already admitted it will default on a portion of its debt (25% i believe) next up with be Italy then probably Spain.  Anyone above the 100% GDP to debt ratio (which is exactly where USA is at right now) will default in some way.  The only reason the USA can have such high debt because it is used as a reserve currency for other currencies AND it is used in global trade oil, iron, diamonds, copper, and whatever you want is purchased in dollars and priced in dollars.

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July 23, 2011, 12:12:47 PM
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Most land is probably not terribly valuable except that which has some resources or is strategically located (e.g., Iraq, parts of Iran, Afghanistan, etc.)  The land itself would be a giant money sink-hole with defense considerations and the like.

I good value proposition is the actual people themselves.  If you can force them to work for you, and they are decent workers, that has a pretty good value.  But one can get the best bang for the buck...err...gold or whatever...by leaving the land and all it's hassles to some puppet regime and buy infrastructure like water and power systems.  The puppet regime can then force the people to use the utilities you own.  They could make laws such that it is illegal to capture rain water and must buy all their water from the utility company for instance.  And if you can arrange the right kind of regime, it can even enforce those laws.
I agree and disagree. Let me explain.
The value is really in genuine sovereignity and the possibility to utilise more than 50 years of economic and political knowledge. The people are valuable, no denying that. But it is the ability to put them into patterns of production and value creation that are not possible in today's mature democracies due to the effect of vested interests, that is really valuable.

There is no need to super-exploit anyone. There are intelligent, poor and hardworking people all around the world willing to work for what will be considered a pittance in the western nations. UAE, Bahrain, Qatar and Saudi Arabia essentially run on Indian and Phillipino labour. Imagine being able to give all these people a sphere where they can not only earn and remit, but also accumulate property.

Puppet regimes are unreliable. They can turn at a dime. When the person you have been bribing is gone and replaced by someone else, you have to begin the entire cycle of bribes again. Plus there are the profits of being in the governance industry. It's basically the difference between a legitimate business and illegitimate one.

Quote
There might be a market for things like the Pantheon.  I would get a kick out of owning the thing, and I assume that more powerful people would as well.  It probably could even be done in such a way that the Greek people continue to foot the bill for maintenance and such.
Sale of politically and culturally important landmarks is impossible. Some arbitrary vacant land which can be utilised to create a new country is actually easy in comparison. Plus, the parthenon's value is very limited, essentially down to the NPV of tourists ticket sales and from now to forever. It cannot be compared to the value of a new hong kong.


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