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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css1971's picture

Came to exactly the same conclusion.

Muppet Pimp's picture

Give them cowrie shells and let them eat cake

bugs_'s picture

we'll pay them in zero coupon 100 year notes

resurger's picture

With Zero Discount rate!

css1971's picture

You may think it's absurd, but it's effectively the introduction of a local, national government created currency by Portugal. i.e. they're leaving the EuroZone.

It'd fly because they will accept them in return for tax.

thisandthat's picture

Isn't all government issued currency, a treasury bond by other name (or vice-versa)?

css1971's picture

Well they're all bits of paper with writing and numbers on them, issued by a government. You can believe what you want to believe about their worth.

thisandthat's picture

Exactly - what's your dollar's worth?

GoldRetriever's picture

Soon Europe will be referred to as the "You're Owed Zone."

Satan's picture

I'll see your T-Bills and raise you 4 Spider-Man towels!

toys for tits's picture

I guess Satan is on board with Portugal's new plan.

Satan's picture

It's the souls of their unborn children I'm after.

WhiteNight123129's picture

Portugal has openly decided to get its segniorage back, by-passing in that sense teh ECB and Merkel.

What this moves means is very important.

The segniorage was transferred to the ECB and Merkel and the periphery country lost their printing press while Merkel is not letting the ECB print outright (LTRO is collateral lending).


If Portugal was issuing gov bonds and then the central bank of Portugal would buy those bonds against newly printted cash, the Gov is getting new cash to spend (segnioriage).

By letting government bonds and bills be used directly as a form of payment it is somewhat equivalent.

The origin of the greenback is a the third issuance of green bills during the civil war. Initially the first two issuances were redeemable in Government bonds which were redeemable in gold. The third issuance was a non interest bearing receipt redeemable in ~nothing ~!


thisandthat's picture

And how would you like to pay for it, Sir? Bond, Treasury Bond...

thisandthat's picture

Beach towels as the new currency?

I'll see your Spider-Man towels, and raise you the 500 € note towels: http://image.made-in-china.com/2f0j00IjgtUPmKJacz/30x60inch-500-Euro-Ful...

StychoKiller's picture

Ooo, too rich for my blood...

Bearwagon's picture

That should show everybody who's boss!

ElvisDog's picture

I have this argument with my liberal friends all the time. Courts and legislatures can mandate whatever they want, but if there is no money to pay for it what do the "mandates" really mean. I usually get blank stares or sputterings (or they just get mad). Why doesn't the court mandate an 100% in pension payments or free unicorns for everyone while they're at it?

HD's picture

Well...I wouldn't say no to a free unicorn - but I'd prefer a large winged pegasus if it's all the same.

kaiserhoff's picture

That would come in handy for fertilizing the north 80.  Keep me posted on your progress. 

You and me, kid;)

Bobportlandor's picture

They educated the kid, the same kids they expect to pay for their over bloated retirement.

They stuck their nose into ever-ones else s business.

They took the bribes

They miss allocated money.

They wasted my tax dollars

They made their bed, and f'ed us all.

orez65's picture

My own experience when discussing economics with liberals:

1. Anger
2. Disbelief
3. The deer in the headlights look
4. Refusal to discuss nuclear power.

The Abstraction of Justice's picture

And they wonder why bitcoins are soaring in value.

ElvisDog's picture

Karl Denninger has a good take on bitcoins and the trust that some people have in it. Do you really think in an age where there is no rule of law and pervasive government spying on everything that our dear leaders are going to leave bitcoin alone? Investing in bitcoins will be treated like counterfeiting at some point. At least gold and silver coins are real, tangible goods. Bitcoins are a series of zeros and ones that are supposed to represent wealth.

The Abstraction of Justice's picture

As I said before you need express safety in terms relative, rather than absolute.

ebworthen's picture

Relative sense:  Today Bitcoins are safe and their growth in value is parabolic.

Absolute: This could end overnight, and no way for you to stop it.

I wish Bitcoiner's the best, really, fight the machine; I just fear you may be riding on the Hindenburg - and I like you.

The Abstraction of Justice's picture

Ah but mind, I have a silver parachute.

The Abstraction of Justice's picture

Ah but mind, I have a silver parachute.

CrashisOptimistic's picture

As has been pointed out over and over again, gold and silver are not real.  Their value is inside your head.  As for a government taking action against bitcoins, the LAST thing a govt will do is try to confiscate gold because they have a better option.

Gold will not be confiscated.  Rather, transactions with it will be taxed at 70%.  You buy food with it?  70%.  You buy anything with it?  70%.  You think you can buy things and not pay?  You will never know if your counterparty is IRS.  And perhaps most important of all, within a week of the 70% imposition, market for it will disappear and quoted value will be 0.  So don't swagger about having a gun to shoot people who try to get you to pay the 70%.  You won't even have a published price anymore.

Only one thing has value.  Calories.  Anything but farmland is imaginary.

ElvisDog's picture

Farmland? Farmland is the easiest thing to confiscate, because you can't hide it and you can't take it with you. Assuming the government does what you say and taxes gold transactions at 70%, do you honestly believe they will leave your privately-owned farmland alone?? They will simply raise your property tax on farmland to 90% of its assessed value, or just cut to the chase and confiscate it directly in the interest of national security. If holders of gold/silver are naive, holders of farmland are idiots (to think they can hold on to it).

One word for the relative value of gold versus farmland - "Rhodesia"

Lednbrass's picture

And as in Zimbabwe/Rhodesia- who would work it? Land is not taxed at the federal level, it is a State/Local thing.

Any attempt to confiscate farmland would result in oturight attacks on Federal officials, and State/Local law enforcement is not going to side with the Federal government.  That would certainly ignite the powder keg.

orez65's picture

Bitcoin: the poster boy for a Ponzi Scheme.

How can people be so stupid??!!

GoldRetriever's picture

The new currency for Portugese public workers - The "Lisbond."

Racer's picture

Well Treasuries are IOUs the same as toilet paper, er, Euros, dollars or any other paper money based on nothing but a vague promise to pay the bearer

Dewey Cheatum Howe's picture

I'm sure Obama and the boys in goobermint as salivating at the lip hoping this trial balloon actually works.

Though here I think they will do it in a more subtle manner which is implement a new treasury dollar backed by government debt and no hard assets as an alternate to the Federal Reserve note payed to Federal employees. Goobermint bucks that have better purchasing power than the devalued to nothing Federal Reserve dollars competing in the same decimated economy. Since the great divider is destroying America by class warfare why not take it to the next step which is mother goobermint money against the sheep's money. Helps extend the scam longer since the goobermint people will all accept it rather than do the right thing.

I'm sure they will try some permutation on this scam and use the laws and courts to force acceptance of them in the market for transactions. Probably use socialist coercion tactics to force businesses to accept them.

HD's picture

10 or 30 year T-bills? Who the hell would wait for them to mature when they need to pay their bills now?

Dewey Cheatum Howe's picture

I have some thoughts on how to do it but I don't want to give them any concrete examples that might actually work. Remember you are dealing with socialists (passive aggressive nazi control freaks), the end goal is productive human capital ownership by the choosen select few. Remember you are not equal to them only a resource to be controlled, why do you think personnel are handled by a human resource department. Language my friend language always gives away true intentions.

Why not a human being department.

definitions everyone else can put together the real intentions based on language.



a : the quality or state of having existence


b (1) : something conceivable as existing

   (2) : something that actually exists

   (3) : the totality of existing things




a : a source of supply or support : an available means —usually used in plural

b : a natural source of wealth or revenue —often used in plural c : a natural feature or phenomenon that enhances the quality of human life


That is what you are to them but they make sure you don't think of yourself as the same. Chew on that idea kids. Who are the real producers and wealth generators.

Dewey Cheatum Howe's picture

I can see them forcing compliance at zero interest by using taxes as the carrot for businesses to accept the bills. Make the effective tax rates so fucking high that only the monopolies can exist then offer incentives like lower business tax rates / payroll taxes for those that accept the bills for goods and services.

Basically it is an S&M monetary system. The goobermint is the dominatrix and you are the unwilling slave. The amount of flogging from the goobermint mistress is proportional to how masochistic and depraved the slave wants to be. 

thisandthat's picture

No idea, it isn't even official, but last time (86, I think) was 6 months.

css1971's picture

Obama doesn't need to. He can have pallets of dollars printed at will.

Portugal can't simply print Euros... Which is like the whole problem of the Euro Zone. The traditional mechanism for getting rid of too much sovereign debt is inflation. The euro was set up in such a way that this isn't ... easy ... to do.

"Probably use socialist coercion tactics to force businesses to accept them."

It's called taxation. You just say "we'll also accept these in lieu of Euros" and you got yourself a viable local currency.

What's interesting about this is it uses Euros (scarce) as backing for the local currency (Portugese Government Bonds). If done well it could prevent a Greek/Spanish style depression while Euros are scarce in the region.

Something similar was done in the 1930s by a small town in Austria (Wörgl) to prevent the depression from causing suffering.

Dewey Cheatum Howe's picture

On a local level it could work but you still have debt to pay off at a global level. If you don't have enough hard assets or things of equivalent value to pay that debt off, you as a sovereign nation unless you have enough guns to force a debt forgiveness/repayment terms are finished. You've essentially become nothing more than a debt slave owned by the credit holding master.

css1971's picture

That debt's never getting paid off. The holders are completely delusional if they think it is.

For example, take a look at the US total debt chart for the last 40 years. An almost perfect exponential curve upwards. None of that has ever been paid off, it simply gets rolled over and "grows".


The blip at the top? That's the bit they're desperately trying to get back on to the exponential growth trend again.

So basically sovereign creditors are already getting 1 of two things:

  1. A haircut.
    1. A straightforward explicit default on all or some of their holding.
  2. A haircut.
    1. Through inflation, an effective default on some or all of the debt by paying it in devalued currency.

I don't see all that much difference with the existing system except it's government employees who're going to be the holders.

observer007's picture

Bundesbank Plans Deposit Haircuts For Bank Customers

In an interview today  the President of the Bundesbank announces plans for deposit haircuts for bank customers in case a financiel institution goes bankrupt. 


MeelionDollerBogus's picture

password required, no copy in any search engine cache I can find

got another one?

andyupnorth's picture

Same proposals in 2010 for the UK and the U.S., and the same proposals in 2013 for Canada.

I'm beginning to see a pattern...