U.S. May Join Germany Of 1933 In Pantheon Of Defaults (Bloomberg, Oct 14, 2013)


Failure by the world’s biggest economy to pay its debt in an interconnected, globalized world risks an array of devastating consequences that could lay waste to stock markets from Brazil to Zurich.

U.S. May Join Germany of 1933 in Pantheon of Defaults (Bloomberg, Oct 14, 2013):

Reneging on its debt obligations would make the U.S. the first major Western government to default since Nazi Germany 80 years ago.

Germany unilaterally ceased payments on long-term borrowings on May 6, 1933, three months after Adolf Hitler was installed as Chancellor. The default helped cement Hitler’s power base following years of political instability as the Weimar Republic struggled with its crushing debts.

“These are generally catastrophic economic events,” said Professor Eugene N. White, an economics historian at Rutgers University in New Brunswick, New Jersey. “There is no happy ending.”

The debt reparations piled onto Germany, which in 1913 was the world’s third-biggest economy, sparked the hyperinflation, borrowings and political deadlock that brought the Nazis to power, and the default. It shows how excessive debt has capricious results, such as the civil war and despotism that ravaged Florence after England’s Edward III refused to pay his obligations from the city-state’s banks in 1339, and the Revolution of 1789 that followed the French Crown’s defaults in 1770 and 1788.

Failure by the world’s biggest economy to pay its debt in an interconnected, globalized world risks an array of devastating consequences that could lay waste to stock markets from Brazil to Zurich and bring the $5 trillion market in Treasury-backed loans to a halt. Borrowing costs would soar, the dollar’s role as the world’s reserve currency would be in doubt and the U.S. and world economies would risk plunging into recession — and potentially depression.

Senate Talks

Senate leaders of both parties are negotiating to avert a U.S. default after a lapse in borrowing authority takes effect Oct. 17, even as senators block legislation to prevent one and talks between the White House and House Republicans have hit an impasse. Democratic lawmakers said Oct. 12 that the lack of movement may have an effect on financial markets. After Oct. 17, the U.S. will have $30 billion plus incoming revenue and would start missing payments sometime between Oct. 22 and Oct. 31, according to the Congressional Budget Office.

Serial Defaulter

Germany, staggering under the weight of 132 billion gold marks in war reparations and not permitted to export to the victors’ markets, was a serial defaulter from 1922, according to Albrecht Ritschl, a professor of economic history at the London School of Economics. That forced the country to borrow to pay its creditors, in what Ritschl calls a Ponzi scheme.

“Reparations were at the heart of the issue in the interwar years,” Ritschl said in a telephone interview. “The big question is why anyone lent a dime to Germany with those hanging over them. The assumption must have been that reparations would eventually go away.”

While a delinquent corporation may go out of business, be broken up, sold to a competitor, or otherwise change its shape, sovereign defaulters are different. Weimar Germany deferred payments, stopped transfers, reformed the currency and wrote down debt, wringing a series of agreements from its creditors before the Nazis repudiated the obligations in 1933.

It took until the 1953 London Debt Agreement to lay to rest the nation’s reparations difficulties, essentially by postponing any payments until after reunification in 1990 of East and West Germany, according to Timothy Guinnane, Professor of Economic History at Yale University in New Haven, Connecticut. The U.S., eager to ensure Germany was a bulwark against communism, pressured creditors to agree to debt relief, according to Guinnane.

‘Economic Strain’

“The U.S. was not being generous or magnanimous in the London Debt Agreement, it rarely is,” Guinnane said in an e-mail. “Rather, it understood that if Germany was forced to repay all the debts it technically owed, it would put the new Federal Republic under intolerable political and economic strain.”

Payments on about 150 million euros ($203 million) of bonds issued to fund reparations ended in October 2003, according to the Associated Press.

After sovereign defaults and before a nation is allowed to borrow again, some sort of repayment is typically made, Carmen Reinhart and Kenneth Rogoff wrote in their 2009 book on sovereign bankruptcies “This Time Is Different.” While Russia’s Bolshevik government refused to pay Tsarist debts, when the country re-entered debt markets it negotiated a token payment on the debt, according to the book.

U.S., Germany, France

Germany and France have both defaulted eight times since 1800, according to Reinhart and Rogoff. While Germany was sufficiently big and strategically important to be helped to peaceful prosperity by its creditors, default typically doesn’t end well for smaller nations.

The U.S. has even failed to honor its obligations to the letter in the past. In 1979 it was late making payments on about $122 million of bills, blaming technical difficulties that the Treasury said stemmed from a failure in word processing equipment, Terry Zivney and Richard Marcus wrote in August 1989 in “The Financial Review.”

In 1935, the Supreme Court ruled the federal government was within its rights to reject claims for payment in gold on bonds that gave holders the option to demand the metal. Because the terms of the contract weren’t fully honored, some would argue that was tantamount to a default.

In 1790, the U.S. deferred interest payments on debt assumed by the new federal government until 1801, according to Reinhart and Rogoff.

Court Pursuit

Serial defaulters Argentina and Greece have retained political, if not economic independence. The Latin American nation failed to meet its commitments five times since 1951 and in 2001 gained the record for the largest-ever restructuring, a distinction it held until overtaken by Greece in 2012. Argentina’s bondholders are still pursuing the nation through the courts.

Including 2012, Greece has defaulted six times since 1826, three years before it gained independence, and has spent more than half the years since 1800 in default, according to Reinhart and Rogoff.

The biggest emerging-markets defaults in the past 15 years illustrate the cycle of contagion that typically marks sovereign debt crises.

Russian Restructuring

Russia halted payments on $40 billion of local debt in 1998 after oil, its main export, plunged 42 percent amid a global economic slowdown triggered by the Asian financial crisis. By the time it devalued the ruble and defaulted that August, the government had drained about half its foreign reserves and made an unsuccessful bid to increase the $22.6 billion international aid package it had received.

Russia’s debt restructuring prompted investors to pull out of emerging markets, plunging Argentina into recession. By December 2001, when the South American country halted payments on $95 billion of bonds, the economy had contracted three successive years, cutting into tax revenue and pushing foreign reserves down to almost a six-year low.

Those defaults took place because events had rendered the nations insolvent, something that doesn’t apply to the U.S., said the LSE’s Ritschl.

“The only situation that really parallels the U.S. situation at present is the U.S. situation,” he said. “There’s really no doubt about the solvency of the U.S. Treasury.”

2 thoughts on “U.S. May Join Germany Of 1933 In Pantheon Of Defaults (Bloomberg, Oct 14, 2013)

  1. The Versailles treaty of 1919 put such onerous debt and fines on Germany, there was no way for them to ever pay it. It was done by a mean spirited, angry group of world leaders who wanted to keep Germany down forever. I had an original copy of this treaty, and read it carefully. It pretty well assured there would be another world war. Germany could not have an army, Germany could not do all kinds of things…….it was amazing to me they passed it. No wonder Woodrow Wilson was so sick about it.
    When Hitler refused to pay any more of these fees, he was acting in accordance with the wishes of the German people who were sick of the endless fines and prosecutions by the rest of the world.
    That is not the case at all in the US. The corrupt leaders we have are not following any of the wishes of the people, they are lining the pockets of the greedy guts, nothing more. They don’t care if they destroy this nation or not……they are amoral and ought to be fired and tried for working directly against the best interests of the American people.
    The two situations do not compare at all.

  2. Swiss Bank Accounts. 2014.

    Is your monies safe in these accounts —- definitely NOT.
    Would you get your money back if every body decided to withdraw all their accounts – NO WAY.
    Economic Experts say that there would only enough money to repay 50% of their clients.
    Are you going to be in the 50% — that loose your money.– Get it out NOW.

    2012 — – June. — Published in Anglo INFO .Geneva.— USA Trust Fund Investors were sent false and fraudulent documents by Pictet Bank.Switzerland. in order to collect large fees. ( Like MADOFF) —Even after the SEC in the USA uncovered the fraud Pictet continued to charge fees and drain whatever was left in these accounts. Estimated that $90,000,000 million lost in this Pictet Ponzi scheme.

    2012 – – – July. — De – Spiegel. — states – Pictet Bank uses a letterbox company in
    Panama and a tax loophole involving investments in London to gain
    German millionaires as clients.

    2012 – – – August —- German Opposition Leader accuses Swiss Banks of “organised crime.”

    All the fines that crooked Swiss banks have incurred in the last few years exceeds £75.Billion.
    It is also calculated that the secrecy ” agreements” with regards to tax evation by their clients will cost the banks another £450 Billion.

    The banks are panicking — the are quickly restructuring their banks —- from partnerships —
    to ” LIMITED COMPANIES.” —– this will probably mean that in the future — they could
    pay you only 10% of your monies ” if you are one of the lucky ones” —- and it be legal.

    Sods —– Law.
    January.—- 2014.

    For almost two decades we have strived to get justice for the injustice we have suffered at the hands of a world renowned bank— PICTET & CIE. BANK.

    Two yorkshiremen both running their own small family businesses trying to resolve the problem by taking all the correct legal procedures to recover their monies.

    The matter was raised in Parliament – twice– the FSA investigated the matter concluding that PICTET had rogues operating in their London Bank — but the rogues had left —saying no one left to prosecute.??? —– so there.

    We then approached the Financial Ombudsman Service. (FOS) — our case was dealt with by seven different people —- then our numerous E-Mails were ignored — nobody would speak to us ——-so there.

    We then asked the SFO ( Serious Fraud Office.) to investigate our case —- the criteria of our case ticked all their boxes. — we were instructed not to send them any documents/evidence.—— in fact they wrote to us advising us to go to the Citizen’s Advice Bureau.(CAB.)

    Richard Alderman the SFO boss —- who responded to our letter was the same man who would not investigate the “ Madoff” scandal or the “Libor” fiasco.
    The MP’s committee —- said he was sloppy— and the SFO was run like “ Fred Karno’s Circus” ——- so there.

    Our M.P. approached our local Chief Constable to investigate—– he was called—- Sir Norman Bettison— Chief Constable of West Yorkshire Police —- a force that made “ Dad’s Army” look like the S.A.S. They were inept – corrupt —malicious — from top to bottom. We were criminally dealt with by the Forces Solicitor—- the Head of the Economic Crime Unit —-and the Chief Constable —– so there.

    We were then advised to pass our complaint against West Yorkshire Police to the I.P.C.C. – which we did — they advised us to make our complaint to —- the West Yorkshire Police — we did with reluctance — all we got was abuse and obfuscation. —– so there.

    Sir Norman Bettison —- The Forces solicitor— and the Head of the Economic Crime —- have all been removed from their posts and facing criminal allegations.
    —— so there.

    We even sought justice through the Courts — culminating in a visit to the Court of Appeal-London.— On leaving the Courts of Appeal that day our barrister a “rising star” informed us — that if that was Justice then you can keep it. He quit the law and moved to Canada —– so there.

    A few years later we learned that one of the judges in our case at the Court of Appeal was related to a senior executive of the Pictet Bank —–so there.

    Pictet & Cie .Bank — voted private bank of the year 2013.
    Ivan Pictet —- Voted banker of the year 2012. —- the senior partner — lied on numerous occasions and had documents destroyed — also said genuine documents were forgeries. —– so there.

    Ivan Pictet in Oct. 2013 —- Given the Legion of Honour — but saying that —- honours were given to Hitler — Eichmann — Mussolini —Franco — he’s in fitting company. —-so there.

    MONTY RAPHAEL.Q.C. — Peters & Peters.London. They were the banks lawyers.
    Monty Raphael.Q.C. along with Ivan Pictet withheld crucial documents requested by the High Court —- the FSA —- and the police Fraud Squad. —-so there.

    Monty Raphael.Q.C. became an Honorary Queens Counsellor in March. 2012.
    Monty Raphael.Q.C. became a Master of the Bench in Nov.2012.
    An expert in Fraud —the Doyen of Fraud Lawyers. —– so there.

    This says a lot about Banks — the consensus of opinion is that they are highly paid “crooks” —- no wonder they voted Ivan Pictet banker of the year.

    Full Story.—- “google or Yahoo”

    Insert.

    Ivan Pictet.Banker.
    Monty Raphael.Q.C.
    Ivan Pictet/Monty Raphael.

    Update — Jan. 30.th 2014.

    Pictet & Cie Bank —- List of Crimes.

    1996 —– F.S.A— Breach in London.

    2003 —– F.S.A. — States rogues operating in Pictet’s London office. Ivan Pictet states that documents were forgeries but were later proved to be genuine in the British Courts. He had documents destroyed in their London office –hoping to hide the crimes.

    2007 .- – – The Securities and Exchange Surveillance issued a recommendation that the Prime Minister and The Commissioner of the FSA to take disciplinary action against Pictet Asset Management – Japan Ltd.

    2008 .– Dec. – Pictet Bank state – ” We have never chosen any funds linked to Madoff.

    2011 – – – Madoff Trustees sue Pictet & Cie. Bank for $156 Million.

    2011- – – Pictet & Cie Bank abetted a Bribery Scheme – Oil company sues Pictet for $350Million

    2012 – – – April – Geneva Bank Pictet used in Offshore Tax Scheme. ( USA.)

    2012 — – June. — Published in Anglo INFO .Geneva.— USA Trust Fund Investors were sent false and fraudulent documents by Pictet Bank in order to collect large fees. ( Like MADOFF)
    Even after the SEC in the USA uncovered the fraud Pictet continued to charge fees and drain whatever was left in these accounts. Estimated that $90 million lost in this Pictet Ponzi scheme.

    2012 – – – July. — De – Spiegel. — states – Pictet Bank uses a letterbox company in Panama and a tax loophole involving investments in London to gain German millionaires as clients.

    2012 – – – August —- German Opposition Leader accuses Swiss Banks of “organised crime.”

    2013 — Jan.— Swiss MP’ table motion to freeze Tiab Mahmud’s assets of ” criminal origins”
    held in Swiss banks – $18 million held in 5 accounts at Pictet & Cie. Bank. Bahamas.

    Ironically the Pictet & Cie.Bank partners are bigger criminals than the criminals who have accounts in the their bank.

    The bank is now seeking to re-structure — to cut the partners liability – hoping to off load their decades of criminal responsibilty – and move onwards to carry out new crimes. The Germans are right — the bankers should go to prison if found guilty of financial crimes..

    Both Ivan Pictet and Monty Raphael.Q.C. conspired to withhold crucial documents requested by the High Court – the FSA — and the Police Fraud Squad.

    Written Parliamentary Questions received by the table office ..

    (1) To ask the secretary of state what steps he is taking to ensure that Swiss Banks such as Pictet & Cie do not evade criminal prosecution under EU law even when the illegal act is committed by a London based subsidiary.

    (2)To ask the secretary of state what steps he is taking to protect the rights of UK citizens who seek redress following criminal activities by Swiss banks with subsidiary offices located in London.

    Quote. ( America’s Top Lawyer .)
    You can be the richest man in the world with the best lawyers that money can buy but you cannot win against a man who has got nothing left to lose and is telling the truth.

    *** We note that there has been a sharp increase in Peters & Peters partners leaving to go to other practices. Moving does not alleviate them of any responsibility from any illegalities that may have occurred at Peters & Peters during their partnership tenure. From 1999 onwards.

    The consensus of opinion is the Pictet & Cie should be prosecuted , and that their U.K. banking licence should be taken away.

    Their Solicitors at Peters & Peters .London “ struck off and prosecuted..”

    *** Started campaign — June 6th.2008.
    5years —- approx 10 .5 million e-mails – – – but still no writs, injunctions or threats of litigation – – – WHY – – – because it is all true.

    *** . The bigger they are — the harder they fall.!!! In America —- they would have all been in prison for the last seven years.

    Feb 2013,— Pictet & Cie Bank Partners remove their unlimited liability.They realise that all their personal wealth is at risk , the people they have conned might want their money back.

    Full Story.***
    . ” Google ” or ” Yahoo” .

    Insert– ( Charles Pictet. Banker.
    Insert– ( Ivan Pictet.Banker.
    Insert– ( Jacques de Saussure.Banker.
    Insert– ( Nicolas Pictet. Banker.
    Insert– ( Jean-Francois Demole.Banker.
    Insert — ( Philippe Bertherat. Banker.
    Insert– ( Renaud de Planta. Banker.

    Update. Jan. 24th. 2014.

    Over the last three years we posted the following on hundreds of sites . —

    *** Were currently waiting for the West Yorkshire Police ;-
    (1) Chief Constable . Sir Norman Bettison
    (2) Forces Solicitor. Mike Percival.
    (3) Head of Economic Crime Unit. Det Chief Inspector. Steven Taylor.
    -to see if they continue to cover up this case like the FSA. – “ watch this space.”

    **** We can now state that all the above have been removed from their posts. All three facing criminal allegations.
    **** These three senior police officials assisted in covering up the crimes carried out by Pictet & Cie Bank and it’s lawyers.

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