John Ward April 9, 2012 Uncategorized

SUPERCEDING SOVEREIGNTY, Episode 3,082

There is a crackerjack piece at the Golem XIV website this morning.

It’s about the aptly named Vulture Funds, how they deliberately buy defaulted nation bonds…and then sue the nation involved to get their money.

But chiefly, the Golem piece is an excellent example of informed speculation without recourse to conspiracy theory. It might also explain why 95% of Argentine debt is held outside the country…at the BICS.

Hat-tip to Slogger Casso for drawing my attention to it. 15/10 for Golem*

*This is of course a leveraged score for Golem, as part of the ESM firewalled amputation bazooka-firepower project currently taking place two miles below Brussels Airport.

See the newly updated and clarified ‘About’ page here

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1

Bankrupt Taxpayer on April 9, 2012 at 7:53 pm

@Jwoo: Yeahbut, through abandonment of regulatory oversight, lenders were allowed to offer loans above the 100% value of the property. Add the fall in values and banks have got a bad smelling loanbook. It was all avoidable. IMO, many people who hand in their keys and walk away due to negative equity, are exposing their real intention for buying the property in the first place.

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Viking Jack on April 9, 2012 at 7:36 pm

@ Caratacus

It wouldn’t surprise me in the slightest if this modus operandi is about to come into frequent effect in the none too distant future. It certainly seems that a start is being made in Greece – see JW’s post above. What was that saying again about acorns and oak trees!

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Jwoo on April 9, 2012 at 6:11 pm

Weren’t most of the loans to property owners and thus guaranteed to be honoured, or the lender would foreclose?

As has been pointed out here before, if the property is seized and then sold for less than the loan, the debtor still owes the balance. Failure to pay merely guarantees blacklist. In the Uk at least. No disincentive there for reckless lending.

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Bankrupt Taxpayer on April 9, 2012 at 5:32 pm

@supafeckinmingster: Maybe. I tend to think that lending criteria were reduced (you know, the points based checkbox system they often use). This was a direct result of government abandoning regulatory oversight and it probably partially explains why government stepped in with bailouts when it all went bellyup: govt was heavily to blame for the crises.

Apart from that, you’re probably right but one cannot ignore that all loans begin with the borrower asking for money.

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Bankrupt Taxpayer on April 9, 2012 at 4:53 pm

@Paul.J: LOL. I expect nothing different from a socialist.

Doubtless you dismiss great thinkers like Ludwig von Mises just as easily. How about our very own Daniel Hannan? and America’s Ron Paul? Do all these people also have “some funny ideas”?

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Bankrupt Taxpayer on April 9, 2012 at 4:45 pm

Börjesson: Much of what you describe happening in the US also applies to the UK and many others. Namely, that parties of the Right have had little or no choice but to adopt Left policies or face electoral oblivion.
Likewise, when they get into office don’t repeal all the anti-liberty laws introduced by their predecessors and even add a few of their own.

The UK’s Labour Party systematically abused the Welfare system for decades and used it as a taxpayer-funded slush fund to buy votes. They created a whole generation who now have *rights* to live off the State (ie other taxpayers). That was never an accident and most certainly was not to make society “fairer” or “more just” as Labour repeat ad nauseum. This highly respected report http://flyto.zapto.org/Misc/TimMorgan-project-armageddon,-report-007.pdf explains the poison that our last Labour Govt injected into the nation at all levels – economically and socially. None of it accidental. See also this recent Telegraph article: http:##flyto.zapto.org/Misc/DT-Gordon-Brown’s-poisonous-legacy-lives-on.pdf (replace ## with //).

Regarding the US Republican Party…IMHO America is pretty close to being a corporate fascist state (the brother of political fascism), where politicians and corporate execs are virtually interchangeable. Whereas under the rule of Il Duche in Italy and Hitler in Germany the Govt controlled the corporates, in America it’s the other way round. But that doesn’t make the current Rep Party a Right party because the Dems are little different: they’re all in hock to big money. As many Americans will tell you “they’re all the same.”

“I’ll concede that Right may have meant those things sometime long ago, but not anymore.”

You’re probably right insofar as political practice applies. But the crucial point I was trying to make is that Right ideology *does still exist in this world*, and there are quite a few people who believe in it and want it to be implemented in the UK etc. EG: Daniel Hannan is just one UK politician (an MEP) who passionately supports Austrian school economics and a smaller State. In the US there is Ron Paul pushing the same ideas.
These people are true Right thinkers, not the nonsense Rep & Dem Parties.

This may also be of interest to you: http:##flyto.zapto.org/Misc/Mises-The-Vampire-Economy-Italy,Germany-and-US.pdf (replace ## with //) but it may contradict your current belief system ;-)

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Paul.J on April 9, 2012 at 4:15 pm

You’re absolutelly correct there Caratacus.
Perhaps it says a lot about the both of us, but if the choice is between a couple of wet jobs and national penury, I know which one I’d prefer.

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Paul.J on April 9, 2012 at 4:11 pm

Borjesson, BT has some funny ideas, but his hearts in the right place more often than not.
Talking sense about politics tends to confuse him a bit. Most of us have tried, and good luck to you, but i’m not sure you’ll get anywhere.

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supafeckinmingster on April 9, 2012 at 2:51 pm

BT: ” Banks do not lend to anyone who doesn’t ask.”

But banks did have a habit of lending to people that they knew would have had difficulty repaying the debt, of at least should have known. That’s irresponsible lending by any measure.

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Börjesson on April 9, 2012 at 2:47 pm

BT:

“But there most definitely does exist a Right ideology. It’s characterised by: small govt, sound finances, a belief in effectively regulated free markets, individualism, taking responsibility for one’s own actions and the Rule of Law etc etc.”

By that definition, the Republicans in the US would also be Left, which they’re most definitely not. I’ll concede that Right may have meant those things sometime long ago, but not anymore.

These days, the difference between Left or Right, in my view, is mainly about private or publicly run utilities, the level of social security, and the tax rates. Both sides are equally in favour of (or unable to do anything about) big government, equally contemptuous of civil liberties and equally prone to interfere in the so-called “free market”. And as regards sound finances, some governments adhere to that while others (a majority, sadly) don’t; but whether they do or not has nothing to do with if they’re Left or Right, but rather with specific national circumstances.

Here in Sweden, for instance, it was the Social Democrat government under Göran Persson who, following the crisis in the 1990s, got public spending under control through harsh and impopular measures and instituted överskottsmålet, the surplus target. This mandates that the government should always run a budget surplus of approx one percent per year – on average over an economic cycle. (This allows for extra spending in troubled years, but requires that this is compensated by extra saving when times get better.) All governments since, both the Leftist ones until 2006 and the Rightist ones 2006-2010 and currently, have religiously upheld this target.

I guess by your definition, just about the only Right politician anywhere would be Ron Paul. But isn’t he rather a Libertarian?

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Bankrupt Taxpayer on April 9, 2012 at 1:56 pm

@InTeleGent: Sorry, my bad, I’m not German. Yes, the CDU, not CSU. I need to refesh my knowledge of German politics ;-) Either way, my main point remains: it doesn’t really matter what they call themselves, they all practice variations of socialist economics.

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Bankrupt Taxpayer on April 9, 2012 at 1:49 pm

@Börjesson: “The whole left-or-right dichotomy is mostly false, as there is little practical (but plenty of rhetorical) difference between them.”

I agree with your use of the term practical difference because most political parties across Europe have drifted to the Left and practice socialist economics nowadays, including those who claim to be conservative (eg The UK Tory led coalition and Merkels CSU).
But there most definitely does exist a Right ideology. It’s characterised by: small govt, sound finances, a belief in effectively regulated free markets, individualism, taking responsibility for one’s own actions and the Rule of Law etc etc. All things that socialists and other totalitarians despise.

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InTeleGent on April 9, 2012 at 1:45 pm

B.T let’s get the facts right before we disagree on their meaning.
1. Merkel is chair of the CDU (not the CDU’s Bavarian sister party, the CSU). .
2. She’s in bed – coalition – with the FDP whose economic policies, in the party’s current formation, are the nearest approximation that Germany has to offer as a low-tax, low-spend neo-con party.
3. That she might like to bed down with the Greens is an open question: as an opportunist non-ideollgue, Merkel will share sheets with whomever gives her a Bundestag majority. That’s unlikely to be the Free Democrats come 2013 elections – based on current opinion polls that put the FDP way below the 5% threshold.

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Bankrupt Taxpayer on April 9, 2012 at 1:32 pm

@DomesticExtremist: Yeahbut…banks are not political empires. They lend to people who ask[*] to borrow (sovereign govts/corporates/individuals etc). The crises that our Government has created (and the EU) is to relieve the lenders and borrowers of responsibility for their own actions and passed the buck onto innocent savers and taxpayers. The only lesson this will teach anybody is that govts cannot be trusted.

[*] = anyone who verbally asks or completes an applicaton form etc.

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shaftedagain on April 9, 2012 at 1:00 pm

If there was Mis-selling then there could be a legal argument, if not, it was the buyers ignorance or greed that got them in to the mess they are in but as usual, everyone plays the blame-game card .

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shaftedagain on April 9, 2012 at 12:54 pm

“There’s a reason they begged you – it works (on the average).
”

The final decision is with the borrower, no means no, I don’t want your loan .

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Börjesson on April 9, 2012 at 12:47 pm

MarkyMark:

It has nothing to do with “socialists” (which I take to be a generic term for left-wing politicians). The whole left-or-right dichotomy is mostly false, as there is little practical (but plenty of rhetorical) difference between them. It’s just another way of controlling the gullible masses, by pretending their vote makes a difference.

If your government spends more than it earns, then it doesn’t matter if that money is used for welfare, warfare or other stuff; you’ll still go bust sooner or later. Similarly, if the government does spend within its means, then “socialist” policies may be perfectly adequate for determining how to spend your surplus. There are plenty of examples of both left-wing and right-wing governments who are overspending, and also a few examples of both left-wing and right-wing ones who aren’t.

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Bankrupt Taxpayer on April 9, 2012 at 12:15 pm

@MarkyMark: In the context of my comment, sovereign and government are interchangeable terms. And of course, govts are usually made up of politicians (save Italy & Greece of late!). If I understand correctly your question, I’d say no. Whatever they may call themselves (eg Merkel is leader of the German CSU which is ostensibly a conservative party), they all practice variations of socialist economics and persue big government. In Merkel’s case, she’s also in bed with the Greens which are most certainly a Left party.

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DomesticExtremist on April 9, 2012 at 12:07 pm

There’s a reason they begged you – it works (on the average).
Same old game on which empires are built – extend excessive credit, wait for default.

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Bankrupt Taxpayer on April 9, 2012 at 12:00 pm

Given that the EU is a giant socialist construct run by – not one but – two unelected Presidents (the ex-Maoist Barroso and the garden gnome Rompuy), nothing will surprise me. Siege economies is what socialism always resorts to when its gross mismanagement of economies ends in disaster. Think of the days of Harold Wilson and Dennis Healey in Britain…but we never learnt the lesson and elected Blair & Brown.

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MarkyMark on April 9, 2012 at 11:57 am

“As we now see in the EZ, sovereigns are worst of all at doing this”

Well, I think that needs narrowing down a bit. ‘Sovereigns’ are controlled by governments, which in turn are controlled by politicians, albeit with their own ‘debts’ to banks, trade unions, whoever. Credit where credit is due (parden the pun): Is there any government in Europe that is not in ruinous debt that was caused by so-called socialists?

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Bankrupt Taxpayer on April 9, 2012 at 11:53 am

@Arunas: “I think that the irresponsible borrowing is a result of irresponsible lending…”

Oh! Can you explain how I have never got myself into bad debt at any time in my life, despite countless banks begging me to borrow?

NB: Banks do not lend to anyone who doesn’t ask.

And when it comes to sovereigns, the lending markets are entitled to expect that the sovereign asking for money has its finances under control and the borrowings will be repaid in accordance with conditions agreed at the time.

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rothammer on April 9, 2012 at 11:20 am

Caratacus – Your solution is totally logical under our present Neo-Liberal rules. It has no social or moral rules, it’s based on dog eat dog. Anthropology tells us that humans evolved as a social group animal in which the tribe is the social form and when your tribe is being threatened by an external force, as is the case for most social groups now except the small elite who control capital, it is reasonable to defend yourself rather than be destroyed. What surprises me is that your thoughts have not been put into action by those groups that are being squeezed beyond the pain barrier.

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Mattej on April 9, 2012 at 10:48 am

Or allow someone like the EU to introduce the for you!

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Arunas on April 9, 2012 at 10:24 am

One could argue that the nations that spend beyond what they earn have sold their sovereignty to those banks and those nations that earned enough to lend. This is simplitic and isn’t an acceptable moral proposition in my view; I think that the irresponsible borrowing is a result of irresponsible lending; and those lending to sovereign insteat of investing in growth and business shall share the loss (and share the fruits: think of healthy, educated workforce funded by those loans). Only universal, simultaneous sovereign default can wipe the slate clean an allow moving forward. The states should stop borrowing once and for all and start living from the tax receipts.
That is not possible due to the bondholders wielding way too much political power in the sovereign institutions; in other words, the system is too corrupt to right itself. This only leaves one solution: popular uprising, i.e. a civil war, a revolution. It is a horrible prospect the human cost of which is unthinkable. But I do not see any other way out of the current quagmire.

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Bankrupt Taxpayer on April 9, 2012 at 10:17 am

Quite soon you’ll need to introduce import controls, price controls and wage controls. Isolation, impoverishment and deterioration of public services soon follow. Welcome to socialism.

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Barbara Richards (@Zoompad) on April 9, 2012 at 10:01 am

I think something similar, on a small scale, has been going on with the council houses. They hassle poor and disabled people to buy the council house they live in, then, when the poor person cant keep up with the payments they swoop in any take the persons home making them homeless, and that way they grab valuble property. Its really wicked, but I know poor and disabled people are having the hard sell treatment to get them to buy homes they just cant afford.

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Mattej on April 9, 2012 at 9:44 am

you speak as if socialism was never a valid way of living, social responsibility must be an apt way to live.
The answer for bankrupt sovereigns whose debt is held by socially detrimental agencies, is to no longer allow their currency to be traded so that the monies/debt has to be invested in that country. A second currency would have to be used for international trading, as is already the case for oil, ie $US, and profits from the investment of the debt that has been invested in the country could be used to buy what is actually needed, rather than speculative assets. The whole reason for money is to enable trade, not sit in vaults or be stashed away.

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Caratacus on April 9, 2012 at 9:33 am

In the increasingly lawless times to which we all appear to be headed (and the various governments started it so they can scarcely moan if it gets out of hand), if I were at the head of a particular government under threat from a Vulture Fund or some such and I held no brief for the finer feelings of others, I would be rather tempted to employ the services of a specialist professional to bring an early and terminal end to the career of the Fund’s CE. And whomever steps into his shoes if a change of policy direction were not immediately announced. Terrible, yes, but in political and financial terms a very wise and sound investment – and one in which all governments invest from time to time.

I realise this possibly says more about me than the subject matter in hand, but I rather fear we may see more of this sort of thing in the future. Wars have been started for less …

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Bankrupt Taxpayer on April 9, 2012 at 9:23 am

“SUPERCEDING SOVEREIGNTY” hhmmm.
Golem’s horrid thought is too conspiratorial for me to follow.
But insofar as his example of Peru is concerned; there are far too many people in this world: sovereigns, corporates, private individuals, who take on irresponsible levels of debt which they have little or no way of ever repaying, and when the chickens come home to roost, run out shouting “mummy mummy”. As we now see in the EZ, sovereigns are worst of all at doing this. And in the UK we have Zirp which seems specifically designed to reduce repayment tensions on over-borrowed mortgagees.The greatest sadness is that these debts are being pushed up the line and ultimately falling on *innocent* taxpayers and savers etc. This is pure evidence of the drip-drip drift towards socialism that’s going on in front of our eyes. Morally, there is no earthly reason why I should be responsible for paying someone else’s mortgage. Red Labour under Gordon Brown – and now Blue Labour – see it differently.

On Peru, the various events that followed were a direct consequence of that irresponsible sovereign behaviour. We should not forget that. The ‘vultures’ were simply sending a message to Peru that “you cannot escape your debts”. Maybe Peru will learn from it…maybe not, they’re a Left Govt trying desperately to wreck their society by way of socialism.

If we are to move towards a world where people are responsible for their actions, these over-borrowed entities must be held to account, else nothing will change. This is what happened in Peru and now in the EZ…Greece et al. The so-called vulture funds are simply cleaning up the mess created by others. Due to the high level of risk they’re taking, they expect to receive big rewards if successful. I’ve little doubt that the term ‘vulture funds’ was coined by the Left to give creditors a bad name.

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Mudplugger on April 9, 2012 at 8:51 am

Angela Merkel arrived at Athens Airport…..
Immigration Officer, “Nationality?”
Merkel, “German”
Immigration Officer, “Occupation?”
Merkel, “No, just a weekend break this time”.

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John Ward – Superceding Sovereignty – Episode 3,082 – 9 April 2012 | Lucas 2012 Infos on April 9, 2012 at 8:51 am

[…] is a crackerjack piece at the Golem XIV website this […]

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tembo11 on April 9, 2012 at 8:37 am

If the ECB could do it what is to stop other “Soverigns” doing the same

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Albeback on April 9, 2012 at 8:20 am

Link to article is malformed. Here it is: http://www.golemxiv.co.uk/2012/04/vulturecrats/

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