“Every sovereign nation has the right to legislate its own debt terms, and the coming currency re-alignments and debt write-downs will be much more than mere ‘haircuts.’ There is no point in devaluing, unless ‘to excess’ – that is, by enough to actually change trade and production patterns.
That is why Franklin Roosevelt devalued the US dollar by 41% against gold in 1933, raising its official price from $20 to $35 an ounce. And to avoid raising the U. S. debt burden proportionally, he annulled the ‘gold clause’ indexing payment of bank loans to the price of gold. This is where the political fight will occur today – over the payment of debt in currencies that are devalued.”
Michael Hudson, The Coming European Debt Wars
“Whatever truths or fables you may find in a thousand books, it is all a tower of Babel, unless love holds it together.”
Johann Wolfgang Von Goethe
I liked this quote from Michael Hudson today, although the beginning of the very first sentence is patently not supported by history. Few sovereign nations have the ‘right’ to legislate their own debt terms to their external creditors, or even to issue their own fiat currency in any manner that they may choose without limitation, to the extent that they wish to have commerce with any other nations and groups not under their direct political control.
In this case, modern monetarists tend to conflate the power of exceptional ‘force’ and with the rights of any and all sovereigns. In other words, might can make right, but only in exceptional circumstances. A nation that is large and powerful enough certainly does have the ability to enforce some of its judgements, and not just those regarding debt and money, on the rest of the world, at least for some period of time that it is tolerated.
This post was published at Jesses Crossroads Cafe on 21 SEPTEMBER 2016.
Follow on Twitter
Recent Comments