More on Sovereign Default

The following is taken from several posts I made here. 

DB: If the Eurocrats are raising a generation that simply does not believe in regulatory democracy because they have seen it doesn't work, then where does that leave the great federal experiment?

BM: Sovereign defaults - not merely via inflation; not merely by minor reductions in social programs. Real write-offs; true debt restructuring. This will be all that is left if some version of regulatory democracy is to survive, as defaults will be necessary to continue the social benefits that pacify the people.

I view it as part of an overall package - one that can extend the system for an unknown period of time:

1)      The politicians stick it to the bankers and the rapacious rich by defaulting on the bonds and confiscating the uninsured portion of deposits, while protecting the bank accounts of the regular guy.

2)      The politicians state that this is part of an overall solution - means testing for various social benefits, later retirement age, higher taxes for all - especially the rich, etc.

3)      This could be sold to the masses because they see the rich getting skewered (on the surface, of course, as in reality the non-elite rich also benefit greatly from the continuance of regulatory democracy).

Do I see it as a permanent solution?  No, certainly not.  Could it buy a few decades? Sure, why not?

Soon enough, the sovereigns will be able to borrow again; they have the system set up to do so, and a sovereign entity - backed with legalized force and no debt on the books - makes for a great creditor.

The loss of faith in regulatory democracy by the masses is likely the worst outcome for the elite - and faith will be lost if the social promises are completely broken. I cannot come up with any better way in which they will be able to extend the situation, and therefore maintain the faith, until they come up with a new system.

It is clear they do not have something new yet to replace the current system - if they did, they would have unveiled it by now; the world is ready to welcome a savior. The elite need to play for time.

My guess is that carbon taxes tied to global warming was intended to be the "new." A new global tax to usher in a new global currency. Sadly for the elite, that scam blew up almost exactly when the current financial system did. I suspect they have been juggling chain saws ever since.

Instead of a total default, what if the default is limited to central bank holdings and other cross-government holdings?  What do the elite care if central banks take a bookkeeping hit?  Is there even any consequence to a central bank going bankrupt if the legislative branch allows the bank to continue to operate? 

The assets of the elite are tied up in real things - land, gold, income producing investments, etc. As long as the structure remains in place, what difference does a write off of debt owed to the central bank make to them?

They want the structure to remain in place, over and above any other objective. It is the structure that is the source of their control. It is the control that is the source of their ability to skim wealth from the rest of us.