• Steve H. Hanke
    05/04/2016 - 08:00
    Authored by Steve H. Hanke of The Johns Hopkins University. Follow him on Twitter @Steve_Hanke. A few weeks ago, the Monetary Authority of Singapore (MAS) sprang a surprise. It announced that a...

Portugal Considers Paying Public Workers In Treasury Bills Instead Of Cash

Tyler Durden's picture


As reported late on Friday, just as the market closed, the Portuguese constitutional court decided that several provisions of the country's 2013 budget were not constitutional. According to the high court, cuts in wages and pensions of public employees were unfair (there's that word again) because they targeted only the public sector. The court rejected plans to cut one of the 14 paychecks that public workers usually get each year and to slash 6.4% from pensions for retirees.  This coincided with the government warning that the court's decision would put into question the country's ability to fulfill its €78 billion international bailout program, which in turn would send bondholders of Portuguese sovereign debt scrambling for the exits as suddenly the country may find itself in the ECB's "dunce" corner, with Draghi preparing to pull a "Berlusconi" on a government which can't even whip its judicial branch in line. However, of more immediate concern is how will the government now plug a hole of up to €1.3 billion in its €5.3 billion 2013 budget. A solution has, luckily, presented itself: bypass the unconstitutional provisions by paying government workers not in cash, but in government bills!

From the WSJ:

The Portuguese government is considering a plan to pay public workers and pensioners one month of their salary in treasury bills rather than cash after a high court ruled out wage cuts, a person familiar with the situation said Sunday.


"This is one of the ideas being considered," the person said.


By paying one month of salary in T-bills to public workers and pensioners, the government would save an estimated €1.1 billion in expenses, narrowing the budget gap significantly.

Incidentally, this plan makes perfect sense: with every central bank openly monetizing its debt, it has effectively made debt and cash equivalent.

Now if only Portuguese public workers had access to the same shadow transformation pathways and government bond repo collateralization opportunities afforded to the big banks, then every bill thus obtained would be able to serve as a source of nearly infinite rehypothecation potential, and thus, a DIY fractional reserve banking system provided to every individual.

Coming next: the full convertibility of Spanish Spiderman towels backed by the full faith and credit of the Rajoy kickback scandal, and fully convertible into chorizo.

All joking aside, the fact that this absurd option is even being contemplated shows just how deep into the rabbit hole event horizon the modern completely insolvent financial system has traversed. 

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Sun, 04/07/2013 - 12:22 | 3418533 Abraxas
Abraxas's picture

It's as good as money. Honest.

Sun, 04/07/2013 - 12:26 | 3418550 swissaustrian
swissaustrian's picture

And so another country is forced to search for alternatives to the Euro. First Cyprus created a defacto B-grade Euro, now Portugal pays bureaucrats in bills.

Slowmotion dissolution of the EMU, bitchez!

Sun, 04/07/2013 - 12:30 | 3418568 nmewn
nmewn's picture

Of course the judges & court system (being public workers and all) will now get paid in worthless government scrip too? ;-)

Sun, 04/07/2013 - 12:49 | 3418608 Atlas_shrugging
Atlas_shrugging's picture

What's wrong with this idea?  I save thousands each and every year simply by using my AMEX instead of cash.  Any knucklehead could have figured this out.

Sun, 04/07/2013 - 13:19 | 3418709 kaiserhoff
kaiserhoff's picture

I like it.

Flip them a can of soup and some soda crackers now and then.

Let them see how the other half lives.

Sun, 04/07/2013 - 14:28 | 3418886 Sudden Debt
Sudden Debt's picture

Kruger would be so proud.
When you go into debt, you're actually saving money....
I don't think I'm going to teach that to my kids...

Today we had some friends over and we where talking about everything and also personal finances for the future.
They asked how much we had... and they just didn't believe it!
The pure fact that people can and do save money was totally unbelievable to them!
As it turned out... they just didn't have anything. They even told me they just took another loan just to go on vacation this summer... a loan... to go on vacation... how nuts is that...
People take loans... take extensions on that loan and so on... they just pay the interest...
He told me that they paid "only" 400 euro a month on interest... no mention of actually downpaying the loan. 400 IN INTEREST!!! WTF!!!
And than they have there loan for the house... and still... they keep 3 cars. 2 Beemers and a Land rover! And they're actually broke!
These people just live for the show!
And when the day comes that they reach their debtceiling... it's over... dbet slaves just for the interest...

Sun, 04/07/2013 - 16:55 | 3419367 Auntie Lo
Auntie Lo's picture

I also know folks who borrow for everything. They also take out enough life insurance on each of them to pay off all the debt. The survivor wins! as long as nothing happens in the interim.

Sun, 04/07/2013 - 18:58 | 3419887 StychoKiller
StychoKiller's picture

Man, I hope you also told them how many gunz you have to protect all of that...

Mon, 04/08/2013 - 02:35 | 3420948 Sudden Debt
Sudden Debt's picture

I don't tell to everybody I store it in PM's :)

I just told them the euro value like it was cash in the bank.


Mon, 04/08/2013 - 02:56 | 3420961 CheapBastard
CheapBastard's picture

Good points, SD. When I look around I see most people buying (or living in ) zero down houses, driving zero down cars, with zero retirement plans and zero savings using their credit cards to buy stuff they don't need.


It's no wonder EBT'ers, medicaid'ers, Section 8'ers and free cell phone users are the fastest growing section of our nation.

Sun, 04/07/2013 - 12:57 | 3418637 disabledvet
disabledvet's picture

this is what California did for a spell...and unfortunately this piece is not looking at the plumbing here so it's missing "the Inside Game" to the "so called joke." California was FORCED to stop paying its employees in IOU's because Bank America refused to accept it as legal tender. "so now we have this novel approach." using Government debt itself as a paycheck. hmmm. first off "never underestimate man's ingenuity at getting around paying cold hard cash." goes to show you how valuable that "hypinflated asset" is actually. second though there is a not so philosophical question here of "what is debt" that is being put forth...both here on this blog and in Portugal. If you say "really cheap money" you are WRONG. This is very EXPENSIVE money...depending on the form and manner in which it is done. my first thought is "can this debt be traced?" (they were called "bearer bonds" back in the 80's...long since illegal unfortunately.) if this paycheck is untraceable then you have one BIG UP on cash money. it's a "lien" as it were vis a vis the Government as well. Portugal has a MASSIVE amount of gold reserves. "is that part of the lien?" comes to mind. and can Portugal print their own euro's? or better yet...is Portugal about to leave the euro and introduce convertibility to their money? with Swiss banking laws no shredded it seems to me the "coast is clear" (so to speak) for "someplace in Western Europe where capital is NOT stolen." If such an action has the backing of the Spanish Government then "tiny little Portugal" indeed could be the Mouse that Roars. "the rules of the Game have been set" courtesy of Cyprus. "economics as war by other means" seems to be the plan. PAYING in debt seems a rather interesting choice. Doesn't paying people in your debt say "they have an awful lot of confidence the value of their debt"? stay tuned...

Sun, 04/07/2013 - 15:34 | 3419110 thisandthat
thisandthat's picture

You're deluded about Portuguese gold; first, it's in the US, which means it probably doesn't exist any more...; second, it wouldn't do jack shit - it's 382 tons, not 5000, so it couldn't even pay 10% of the debt...

Sun, 04/07/2013 - 19:02 | 3419903 StychoKiller
StychoKiller's picture

Hmm, if Au goes to $50,000/Toz, what then?

Mon, 04/08/2013 - 02:32 | 3420945 thisandthat
thisandthat's picture

I'll grin :)

Mon, 04/08/2013 - 13:50 | 3422625 auric1234
auric1234's picture

Just divide total amount of fiat/debt by total amount of gold, then reprice gold appropiately and pay the debt by all the gold in vault.

Redenomination, bitchez.


Sun, 04/07/2013 - 19:00 | 3419897 StychoKiller
StychoKiller's picture

Euroz == FIAT munny, Govt Bills == ?  I fail to see the difference for the Portugese.

Sun, 04/07/2013 - 12:39 | 3418601 max2205
max2205's picture

Next is payment in the form of toenails

Sun, 04/07/2013 - 13:27 | 3418727 paddy0761
paddy0761's picture

the Dude abides.

Sun, 04/07/2013 - 14:21 | 3418872 knukles
knukles's picture

I already tried that once.
It didn't work.
Then I got into rehab...

Sun, 04/07/2013 - 15:18 | 3419059 Iconoclast
Iconoclast's picture

I'd disagree, the euro is as 'strong' as the usd, gbp, jpy, etc..in point of fact the euro could afford a bernanke style shredding causing it to rank parity with the dollar and still be circa 20% above its low and give a great assist to exports. Many currencies and central banks are in a race to the bottom in mutually assured destruction, the EU zone is no 'special case'.

Sun, 04/07/2013 - 22:57 | 3420633 monkeyshine
monkeyshine's picture

But it seems there is a special case - government workers. Be they in the EU, or California where one civil servant is set to retire with well over $400,000 in annual retirement benefits for life.  What kind of court finds a ruling unconstitutional because it is "unfair"?  How is fair constitutionally protected?  If it is not fair to cut paychecks of government workers, then it must also not be fair to cut government services to the public.  Would not then public strikes be illegal by the same logic? Where is our resident scholar in the Portugese Constitution to help sort this out?

Sun, 04/07/2013 - 12:30 | 3418561 Banksters
Banksters's picture

Rehn: big bank depositors could bear cost of bank failure The collapse continues.   Perhaps the masses will get it when their labor is rewarded with used toilet paper. I'm not holding my breath, though.

Sun, 04/07/2013 - 12:32 | 3418573 cossack55
cossack55's picture

With all that used TP around you may wish to consider holding your breath.

Sun, 04/07/2013 - 12:29 | 3418564 cossack55
cossack55's picture

So.....this means I can pay a credit card bill with a bill from a different card?  Can I pay my mortgage with my car payment coupon?  I like this and nothing can go wrong.

Sun, 04/07/2013 - 14:03 | 3418815 cosmictrainwreck
cosmictrainwreck's picture

kinda like Fed buying UST? (well, almost) I don't see where fundamentally US is any healthier - just not as visible

Sun, 04/07/2013 - 16:44 | 3419328 Sudden Debt
Sudden Debt's picture

yep, and when they send you a forclosure note... well... you can finally retire in style...

Sun, 04/07/2013 - 12:30 | 3418566 Arisu
Arisu's picture

Nicholas Andre: What is this? What is this? Where's all the money?
Lloyd: That's as good as money, sir. Those are I.O.U.'s. Go ahead and add it up, every cent's accounted for. Look, see this? That's a car. 275 thou. Might wanna hang onto that one.

Sun, 04/07/2013 - 17:12 | 3419412 mind_imminst
mind_imminst's picture

Awesome quote Arisu. I always use that scene when I explain to someone how th US Social Security system works.

Sun, 04/07/2013 - 12:44 | 3418597 Kaiser Sousa
Kaiser Sousa's picture

the time is fast approaching when i for reasons outlined in the following from Sinclair will have to leave this community... although i take issue with his insistance on predicting $3500 a oz for Gold along a undefined timeline, and his inablitity to acknowledge Silver as the undisputed other form of real money, i share this with you all cause i believe u know what he, and i know is cleary right around the corner....cheers and forgive me for hijacking to a degree the comment section..

"1. The operation to depress the gold price since the high was limited in time and is now behind us in terms of maximum pain for the bulls.

2. You must exit the system immediately because the Financial Nazis struck in Cyprus and now are moving directly towards you. This is simple fact, which if you ignore will be akin to the rise of the Nazis in Germany for those that knew they should, but never made the decision to leave that system.

The saddest fact is that many of you have thrown away your gold share and bullion insurances to the enriched Bankster bullies. You will now pay no attention to the need to exit the system. It is as if you are moths attracted to the flame of danger, and a sloth in that you are too lazy to take the actions required to protect yourselves. If you do not pay attention to this interview you are going to sacrifice all you have worked to accomplish in your lives. Most certainly those that are planning any form of retirement are right now dancing on the head of a needle.

Here are a few most important actions you, in my opinion, must take.

Government sponsored retirement tax preferential retirement programs must realize that one of the IMF plans in Cyprus was to nationalize all retirement programs. That means steal your retirement funds and assets, replacing them with some form of future paper assuming Cyprus returns to solvency.

You must, in my opinion, face whatever tax consequences there are and close your retirement programs. You are in clear and present danger of confiscation for questionable paper of whatever you hold in these type accounts. In a financial sense you are exactly what the ghettos in Germany and Poland were when they knew they should run but found any excuse possible not to do what was logically screaming at them to take action.

I am screaming at you from every pulpit I can find, with no personal benefit that you must take various actions and take them now. The fact the IMF, a major international body, had the audacity to demand that Cyprus nationalize all it pensioners and confiscate large percentages of the account values should be like a flashbulb going off in your eye to wake you from your sheeple slumber.

Bite the bullet. 
Pay the tax. 
Get your assets back. 
Get out of the system.

The next action you must take is to get as far away from social media, and the use of credit cards for everything because you are painting a picture for the tax collectors that are going to go ballistic in their effort to collect your money from you in order to create revenue for governments going broke, or who are already hiding the fact they are broke.

It might take some effort, but stop your kids from informing the world of everything you and they have done on their social media. Computer based comparisons of family income to family activities will spur punitive audits when the apparent expenses are greater than the combined declared income.

The revenues services of every country are cranking up their computer search programs to grab information. You must stop so freely providing information, and maybe bragging on social media to make others think your lives are better than they really are. You must turn off the switch on your children use of social media if they are still under your authority. You must suggest to your emancipated children that they are foolish in informing the world of every little thing that do in search of 1000 friends on social media that would not really give a damn if they had a problem.

As an example of the new high tech snoops you are feeding with your credit cards and social media, research the following article.

IRS High-Tech Tools Track Your Digital Footprints – Yahoo! Finance

– Charting and analyzing social media such as Facebook 
– Targeting audits by matching tax filings to social media or electronic payments 
– Tracking individual Internet addresses and emailing patterns 
– Sorting data in 32,000 categories of metadata and 1 million unique "attributes" 
– Machine learning across "neural" networks 
– Statistical and agent-based modeling 
– Relationship analysis based on Social Security numbers and other personal identifiers

Click here to read the full article…

You must eliminate to the greatest degree possible all the agents between you and your assets.

There is no question that leaving assets in street name with your brokers and bankers is a financial death wish. The preferred way of holding shares of stocks has always been in your own name as physical certificates. The second best method, but much better than street name, is to hold your shares in Direct Registration. Do not expect your banks, brokers or companies you are invested in to make it easy to get out of their system. They will fight you all the way, but you have to insist on your rights regardless of their refusal or false dire warning of negative circumstances when you succeed in demanding your rights. Most of it exaggerations of what is really minutia when it comes to protecting yourselves.

Large credit balances in the form of banking accounts in CDs or in pure cash is now holding up a red blanket for the fighting confection bull of governments seeking your assets to hold off their financial collapse from their own spending sins of decades.

We can discuss in open forum, face to face or in writing later what to do with your assets but right now, as Braveheart cried, they must have FREEDOM from the system. There is much more that needs to be done, but what you have here is what should be called first priority. This should be viewed as call to action. I have not been too much off the mark on calling the developments not only of the past 12 years, but for the entirety of my successful career of more than 50 years in finance.

You ignore me at your own severe personal risk."


Sun, 04/07/2013 - 13:14 | 3418689 CrashisOptimistic
CrashisOptimistic's picture

No one reads anything longer than 3 paragraphs in a ZH comment.

Sun, 04/07/2013 - 18:50 | 3419863 klockwerks
klockwerks's picture

Wrong crash, read the whole thing and darn well worth it

Sun, 04/07/2013 - 14:05 | 3418823 it aint paranoi...
it aint paranoia if they really are out too harm you's picture

First, BIG thumbs up for your avatar, Kaiser Sousa... one of my favorite: the character and the movie.

I am 52 years old and certainly do no social media (except rare comments on an obscure website that sems to have evolved from being an investment/ economic site at first).  I don't "get it", the social media thing. If I have something to say to you, I'll call.  I don't even text.  Granted the gov't gets all the calls. I still want less than two dozen people to "know me" in any real sense.  I exclude family and co-workers from most of this...they don't share my world view at all.  With that long caveat revealing my lack of knowledge on the subject-

Why not use the social media as a ruse.  Don't put anything on the media that is true, but purpose yourself to paint the picture you WANT them to see.  Those that truly know you will love it.  Those that don't know you- who cares? Use only public computers to view the web, especially ZH.  Paint yourself as the indebted idiot that told their man-child who lives downstairs to borrow $100,000 for his education and how terrible it is that the demopublicans won't pay it off.  You get the idea.  It may not fool the higher intel parts of the gov't, but certainly should throw off the dogs of the taxman.

Maybe I'm overthinking this. 


Sun, 04/07/2013 - 17:02 | 3419387 espirit
espirit's picture

If you have ever worked for .gov, you'd realize you have no secrets.  Your social media ruse might fool some telemarketers, but .gov? - no way.

Ever use a credit, debit, or any form of payment other then cash?  Make a utility / phone / mortgage / car / other / payment with a check?  It's all logged. 

Your personal file may be megs or gigs, it's up to you.

Sun, 04/07/2013 - 12:40 | 3418602 midtowng
midtowng's picture

I don't see why they shouldn't pay their workers in mortgage-backed securities instead.

Sun, 04/07/2013 - 12:47 | 3418620 Winston Churchill
Winston Churchill's picture

Face or real NPV on those MBS..

Only the fed pays full price for worthless crap.

Should be 10 cents on the dollar.Can you say "backdoor bailout".

Sun, 04/07/2013 - 13:22 | 3418713 disabledvet
disabledvet's picture

clever "right back at ya'." in other words "there's a lot more worthless scrip you can pay people in...why the good stuff?" hmmmm. http://portuguese-american-journal.com/evora-new-significant-gold-deposi... this meeting just happened http://portuguese-american-journal.com/finance-minister-vitor-gaspar-goe... plus you've got a "good old fashioned labor action" http://portuguese-american-journal.com/travel-tap-air-portugal-to-strike... interestingly all the gold is "Nazi gold"..."controversial" they call it. i look forward to the interview with said gold to see how it responds. my plan is to start soft with "zee gold" but them "nail 'im with the haymaker" maybe 3/4 of the way through. something along the lines of "well, you know what they've been saying don't you?" and the gold replying "hmmm? what?" and then...KABAM!..."that you're controversial Mr. Gold Bar." i look forward to some type of emotional response of course...

Sun, 04/07/2013 - 13:34 | 3418748 noless
noless's picture

weren't you saying you were watching cyprus closely, like, a couple weeks before the bank holiday?

Sun, 04/07/2013 - 14:10 | 3418836 it aint paranoi...
it aint paranoia if they really are out too harm you's picture

Some guy named gresham should do a theory on that.

Sun, 04/07/2013 - 14:38 | 3418921 thisandthat
thisandthat's picture


all the gold is "Nazi gold"

LOL and where did you get that, genius? Obviously some gold came from Germany, since, as a neutral country (and, though pro-axis, to the benefit of the allies), it would either deal with both or none (which would be irrealistic, for a country dependent on foreign resources), to hold true to the neutrality status. But, hey, surely that makes for a great headline...

Btw, some trivia on that, according to the late father of previous prime-minister, "if you're going to deal with someone, do it with the Germans; at least they pay..." - his father dealt with tungsten; Germans bought a lot of it, then (so much, it's known here not by its usual name (tungsténio), but by the german name (volfrâmio)), but so did the British, and, apparently, these were "harder" to collect from (my guess is they'd topped out imperial looting by then, and couldn't find new serfs to collect from in time, unlike the germans...).


Anyway, and FOR THOSE WONDERING, this is nothing new, IT HAS BEEN DONE BEFORE, back in the 80s, then by a socialist government, and also under IMF's "ruling".

Mon, 04/08/2013 - 14:00 | 3422665 auric1234
auric1234's picture

MBS are worth more than gov't bonds. Gov't bonds are irredeemable paper -- pure junk-- whereas with MBS at least you get some real estate (which is overvalued, but at least it's worth something).


Sun, 04/07/2013 - 12:22 | 3418540 blindman
blindman's picture

there ya go, it is on !

Sun, 04/07/2013 - 12:23 | 3418541 Theta_Burn
Theta_Burn's picture

Better than Puka shells i guess....

Sun, 04/07/2013 - 12:24 | 3418542 resurger
resurger's picture



Sun, 04/07/2013 - 12:23 | 3418543 realtick
realtick's picture

'We cannot pay a bill, you can only discharge a debt."


Sun, 04/07/2013 - 12:32 | 3418544 Smegley Wanxalot
Smegley Wanxalot's picture

Absurd, yeah kinda, but I have no problem with letting the public workers directly endure the true diminished value of their lacking output after we in the private sector have had to suffer and subsidize it for so long.


The other option is bitcoins minted in Lisbon: Lisbitcoins. Let's see how well they trade.

Sun, 04/07/2013 - 12:36 | 3418586 blindman
Sun, 04/07/2013 - 12:36 | 3418588 Melin
Melin's picture

Public worker is an oxymoron and a misnomer. 

Government worker is a better name for those pitted against private purses.  It's still an oxymoron but only the truly faithful believe they were ever there to benefit the fictitious "public."

Sun, 04/07/2013 - 13:14 | 3418692 kaiserhoff
kaiserhoff's picture

A friend in DC, who was employed by the government, referred to her colleagues as "desk occupiers."

Even that was generous.

Sun, 04/07/2013 - 14:07 | 3418827 orez65
orez65's picture

Another term for government workers: turkey farm.

Sun, 04/07/2013 - 12:28 | 3418548 Debugas
Debugas's picture

yeah if you cant print euro but need to pay your bills you can create currency on the fly - print your own IOUs

That is de-facto Portugal leaving the euro. Soon we will have a bunch of local currencies in the form of all sorts of IOUs and these are viable alternative to the euro

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