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Carmen Reinhart: "No Doubt. Our Pensions Are Screwed."

Tyler Durden's picture




 

"The crisis isn't over yet," warns Carmen Reinhart, "not in the US and not in Europe." Known for her deep understanding that 'it's never different this time', the Harvard economist drops the truth grenade a number of times in this excellent Der Spiegel interview. Sweeping away the sound and fury of a self-serving Federal Reserve or BoJ, she chides, "no central bank will admit it is keeping rates low to help governments out of their debt crises. But in fact they are bending over backwards to help governments to finance their deficits," and guess what, "this is nothing new in history."

After World War II, all countries that had a big debt overhang relied on financial repression to avoid an explicit default. After the war, governments imposed interest rate ceilings for government bonds; but, nowadays, she explains, "monetary policy is doing the job. And with high unemployment and low inflation that doesn't even look suspicious. Only when inflation picks up, which is ultimately going to happen, will it become obvious that central banks have become subservient to governments."

Nations "seldom just grow themselves out of debt," as so many believe is possible, "you need a combination of austerity, so that you don't add further to the pile of debt, and higher inflation, which is effectively a subtle form of taxation," with the consequence that people are going to lose their savings. Reinhart succinctly summarizes, "no doubt, our pensions are screwed."

 

This will take 3 minutes to read - read it. Understand what she is saying.

Via Der Spiegel,

... governments are incapable of reducing their debts and that central banks are now stepping up to resolve the crisis themselves. In the end, she argues, everyday savers will pay the price.

...

SPIEGEL: Ms. Reinhart, central banks around the world are flooding the markets with cheap money in order to spur economies and support governments. Are these institutions losing their independence? 

Reinhart: No central bank will admit it is keeping rates low to help governments out of their debt crises. But in fact they are bending over backwards to help governments to finance their deficits. This is nothing new in history. After World War II, there was a long phase in which central banks were subservient to governments. It has only been since the 1970s that they have become politically more independent. The pendulum seems to be swinging back as a result of the financial crisis.

SPIEGEL: Is that true of the European Central Bank as well?

Reinhart: Less than for other central banks, but yes. And the crisis isn't over yet -- not in the United States and not in Europe.

SPIEGEL: But the danger of such a central bank policy is already well known: It can lead to high inflation.

Reinhart: True. But it is certainly more difficult for a central banker to raise interest rates with a debt to gross domestic product ratio of over 100 percent than it is when this ratio stands at 39 percent. Therefore, I believe the shift towards less independence of monetary policy is not just a temporary change.

SPIEGEL: As a historian who knows the potential long-term consequences very well, doesn't such short-sighted decision-making frighten you?

Reinhart: I am not opposing this change, I am just stating it. You have to deal with the debt overhang one way or the other because the high debt levels are an impediment to growth, they paralyze the financial system and the credit process. One way to cope with this is to write off part of the debt.

SPIEGEL: You mean some kind of haircut?

Reinhart: Yes. But we are in an environment where politicians are very reluctant to do write-offs. So what happens is that money is transferred from savers to borrowers via negative interest rates.

SPIEGEL: In other words: When the inflation rate is higher than the interest rates paid on the markets, the debts shrink as if by magic. The downside, though, is that this applies to the savings of normal people.

Reinhart: The technical term for this is financial repression. After World War II, all countries that had a big debt overhang relied on financial repression to avoid an explicit default. After the war, governments imposed interest rate ceilings for government bonds. Nowadays they have more sophisticated means.

SPIEGEL: Which means?

Reinhart: Monetary policy is doing the job. And with high unemployment and low inflation that doesn't even look suspicious. Only when inflation picks up, which is ultimately going to happen, will it become obvious that central banks have become subservient to governments.

SPIEGEL: Do you think it is wrong for Europe to focus on austerity measures with inflation at such a low level?

Reinhart: No. Restructuring, inflation und financial repression are not substitutes for austerity. All these measures reduce your existing stock of debt. Unless you do austerity you keep adding to the debt. There is no either-or. You need a combination of both to bring down debt to a sustainable level.

SPIEGEL: Is the new trend in monetary policies a good way of tackling debt problems?

Reinhart: There are no silver bullets. If central banks try to accommodate and buy debt, there are risks associated with it. Somewhere down the road you are going to wind up with higher inflation. That is a safe bet -- even in Japan …

SPIEGEL: … which is currently dealing with the opposite phenomenon: deflation with sinking prices.

Reinhart: A further risk of such policies is that efforts to save will be delayed.

SPIEGEL: So what should be done?

Reinhart: The best way of dealing with a debt overhang is to never get into one. Once you have one, what can you do? You can pray for higher growth, but good luck! Historically it doesn't happen -- you seldom just grow yourself out of debt. You need a combination of austerity, so that you don't add further to the pile of debt, and higher inflation, which is effectively a subtle form of taxation …

SPIEGEL: … with the consequence that people are going to lose their savings?

Reinhart: No doubt, pensions are screwed. Governments have a lot of leverage on what kinds of assets pension funds hold. In France, for example, public pension funds have shifted money from shares (on the stock market) to government bonds. Not because their returns are great, but because it is more expedient for the government. Pension funds, domestic banks and insurance companies are the most captive audiences, because governments can just change the rules of the game.

SPIEGEL: We have seen 50 years of peace and democracy in Europe, but also 50 years of rising debt. Are democracies incapable of setting a budget and sticking to it?

Reinhart: No, but after World War II austerity was easier to pursue, because you had a younger population and therefore less entitlements. Furthermore, military expenditure was easier to reduce. So, the build-up in debt we have seen since the crisis is very rare. Usually you get that kind of build-up when there is a war.

SPIEGEL: But is it not a declaration of bankruptcy for democracy if central bankers, who haven't even been elected, have to step in to fix the problem in the end?

Reinhart: I think the biggest mistake that European policy-makers are now making is not to put debt restructuring more explicitly on the table.

SPIEGEL: Are you referring to Greece?

Reinhart: Greece has had its restructuring, that's history. But look at Ireland and Spain. Private senior bank debt has not been written off, despite the fact that underlying asset prices in those countries have collapsed and are still collapsing.

SPIEGEL: So closures of some banks would be helpful?

Reinhart: What is sacrosanct about bank debt?

SPIEGEL: Well, the bankruptcy of banks can have a considerable effect on the financial system.

Reinhart: Let me be a little blunter: A haircut is a transfer from the creditor to the borrower. Who would get hit by a haircut? French banks, German banks, Dutch banks -- banks from the creditor countries. So you can see why this is politically torched. This is why it is not done, it's a redistribution. But ultimately it is going to happen, because the level of debt is too high.

SPIEGEL: The United States is very highly indebted as well.

Reinhart: Yes, but who are the large holders of government bonds? Foreign central banks. You think the Bank of China is going to be repaid? The US doesn't have to default explicitly. If you have negative real interest rates, the effect on the creditors is the same. That is also a transfer from China, South Korea, Brazil and other creditors to the US.

SPIEGEL: And what happens if the creditors don't continue to play along and the interest rates on American government bonds climb? Do you see the danger of a debt crisis in the US?

Reinhart: Why do we have such low interest rates? The Federal Reserve Bank is prepared to continue buying record levels of debt as long as the unemployment situation isn't satisfying. And China's central bank will also continue to buy treasuries, because they don't want the renminbi to appreciate.

SPIEGEL: That sounds like a perpetual motion …

Reinhart: ... of course it is!

 

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Thu, 04/11/2013 - 22:16 | 3439304 Bingfa
Bingfa's picture

I hear many stories about Bitcoin that I can't find on the web...and I look...It's a well kept secret

Large Corp's don't want you to know how big a role Hackers play, but it's huge. It's a field day

 

Thu, 04/11/2013 - 22:12 | 3439298 FeralSerf
FeralSerf's picture

Cause and effect and free will are mutually exclusive.

Thu, 04/11/2013 - 21:56 | 3439234 Blano
Blano's picture

Holy cow, wow!!!!

Thu, 04/11/2013 - 22:16 | 3439305 DirkDiggler11
DirkDiggler11's picture

Uh ohhh, it's NY State, you'll have to leave your AR15 behind, not that you would need it in such a fine neighborhood anyway. The best part, only .7 miles to the Chippemdales bar from this fine "fixer-upper" "project" home.

Leaves me with just one question, which is worse, a politician, a lawyer, or a Real-a-whore ????

Thu, 04/11/2013 - 22:18 | 3439308 Croesus
Croesus's picture

Christ, what a bargain.....surprised it hasn't sold yet! I may have to have a talk with my banker, and see if I can't use my Bitcoins as collateral for a loan, seeing as they're just like Gold and all.

 

Thu, 04/11/2013 - 23:44 | 3439488 Hulk
Hulk's picture

...

Thu, 04/11/2013 - 21:24 | 3439142 100pcDredge
100pcDredge's picture

Perpetual motion... might be impossible. Due to a lack of energy and frictional reserve banking.

Thu, 04/11/2013 - 21:24 | 3439145 ekm
ekm's picture

You must be able of discerning between ANALYSIS and CONCLUSION.

Different conclusions could be drawn from the same analysis.

 

Her analysis is spot on, her conclusion is incorrect IMO. It can't continue forever.

Thu, 04/11/2013 - 21:27 | 3439154 fonzannoon
fonzannoon's picture

agreed ekm

"

SPIEGEL: That sounds like a perpetual motion …

Reinhart: ... of course it is!

total bullshit

Thu, 04/11/2013 - 21:29 | 3439161 ekm
ekm's picture

Analysis vs conclusion. Simple philosophy.

Her husband was a central banker, she's got a lot of intelligence, but that's about it.

Thu, 04/11/2013 - 21:45 | 3439195 Bingfa
Bingfa's picture

They are coming after everything

Because they can....It's actually pretty simple

Thu, 04/11/2013 - 21:48 | 3439211 ekm
ekm's picture

Correct, but it's like going to rob the house of a poor person. There's nothing.

 

The derivative holes are so numerous, that there's no money amount the universe could plug those holes.

Thu, 04/11/2013 - 21:33 | 3439149 Ned Zeppelin
Ned Zeppelin's picture

Did Carmen forget the part that the printing technique also "incidentally" enriches the elites while performing this noble task of enabling governments to run deficits? Gee, if you give that some thought you can start to figure out whose interests are actually being served, and I'll help you out, the primary goal of QE is not to assist the government in deficit spending.

The lie here is that QE is done to spur the economy, to help unemployment, etc. Amusing.

By spewing this nonsense, Reinhart proves she is a paid shill for the CBs and the banks. What merde.

Thu, 04/11/2013 - 22:02 | 3439259 MiltonFriedmans...
MiltonFriedmansNightmare's picture

Exactly, the governments are not calling the shots. That is left to the bankster elites who encourage governments to run deficits for obvious reasons. The answer is reset, but that involves the military coming to the rescue of the taxpayer, which IMO, is not likely to happen.

Thu, 04/11/2013 - 22:09 | 3439288 FeralSerf
FeralSerf's picture

There needed to be some modifications to the standard print and buy government debt so the 1% wouldn't be subject to the inflation tax.  The inflationary loss to savings is primarily borne by the middle class.

Thu, 04/11/2013 - 22:56 | 3439400 Debt Slave
Debt Slave's picture

She does indeed prove so. Banks make money on debt interest. What else is there?

Thu, 04/11/2013 - 21:46 | 3439207 moneybots
moneybots's picture

"Reinhart: The best way of dealing with a debt overhang is to never get into one. Once you have one, what can you do?"

 

Alan Greenspan knew not to get into a debt overhang.  He wrote that 1920's (cheap credit) policy lead into the Great Depression, b ack in the 1960's. 

 

HE THEN DELIBERATELY DOUBLED DOWN ON THAT POLICY when he ran the FED. 

 

conservatives talk about personal responsibility, but when it comes to practicing what they preach, they  are a bunch of lying frauds.

Thu, 04/11/2013 - 22:04 | 3439263 FeralSerf
FeralSerf's picture

Alan Greenspan was not a conservative.

Thu, 04/11/2013 - 21:52 | 3439208 lynnybee
lynnybee's picture

would our pensions be screwed if Wall St. & the City hadn't engaged in looting the pension funds with worthless paper !?   what role does Wall St. & the City fraud have to do with "No Doubt, Our Pensions are Screwed" ?     why is Wall St. fraud so conveniently forgotten about.    what about that bond fraud & bank fraud ?    PROSECUTIONS, PLZ !

 

Thu, 04/11/2013 - 21:50 | 3439218 Sofa King
Sofa King's picture

Got something in the mail from a listed fortune100 company I used to work for telling me I can cash out my pension. I'm 25 years away from starting to collect. Now lets see pay taxes on a lump sum plus a 10% penalty or risk it and wait 25 years.

I'll let ya'll help me decide: thumbs up I cash out, thumbs down I hang on until I hear on the news that I get nothing.

Voting is now open...

Thu, 04/11/2013 - 22:01 | 3439254 ekm
ekm's picture

25 years from now we'll have a different system.

Anybody with a pension will get screwed.

 

Thu, 04/11/2013 - 22:02 | 3439258 fonzannoon
fonzannoon's picture

25?

Ugh.

Thu, 04/11/2013 - 22:06 | 3439268 ekm
ekm's picture

I didn't mean after 25 yrs. I meant that in 25 years the new system would be well established.

Thu, 04/11/2013 - 22:26 | 3439333 DirkDiggler11
DirkDiggler11's picture

I hear from a few ex-employees of the fortune 100 company that I work for that they have been made the same offer. The ex employees as well as myself are covered under a defined benefit pension where the company must contribute and make up any shortfalls should the investments of the pension fund underperform on any given year. New employees come in under a defined contribution pension plan. The company contributes X anoint annually and if it underperforms any given year tough luck to you buddy. Your old company simply wants to get off the hook from their pension obligation to you. Given you still have 25 years to start collecting, I would not let the bastards off the hook and would let it ride. If not, cash out and buy ammo, guns, silver and gold, in that order, followed by a nice 5th of the liquor of your choice.

Thu, 04/11/2013 - 23:31 | 3439468 Winston of Oceania
Winston of Oceania's picture

Wonder what the tax rate will be in 25? Lots more than 10% penalty and the current rate you can bet your ass.

Fri, 04/12/2013 - 00:39 | 3439625 PlausibleDenial
PlausibleDenial's picture

Set up  a c-corp.  pay a thousand or so for a plan document for your new self directed profit sharing plan then borrow up to 50K out to do what you want... pay it back or not.....  Alternatively, take a look at IRS code section 72T regariding SEPP plans.  Fucking 25 years??? Get you money now.... Fucking 25 years... yeah right.

Thu, 04/11/2013 - 21:55 | 3439230 moneybots
moneybots's picture

"Listen, and understand. That DotGov is out there. It can't be bargained with. It can't be reasoned with. It doesn't feel pity, or remorse, or fear. And it absolutely will not stop, ever, until you are dead."

 

I was listening to Medved today for a bit.  He said the overwhelming reason people voted for Obama was that "he cared about people like me."

Thu, 04/11/2013 - 22:05 | 3439272 MiltonFriedmans...
MiltonFriedmansNightmare's picture

Pretty fucking pathetic, but absolutely true.

Fri, 04/12/2013 - 06:02 | 3439912 Disenchanted
Disenchanted's picture

 

 

re:

I was listening to Medved today for a bit.

 

Wow! Now there's someone who will lead you down the garden path. Keep on listening to the neocon gospel, they'll solve everything. 

 

Medved was born into a Jewish family in Philadelphia, Pennsylvania, the son of Renate (Hirsch) and David Bernard Medved, a Navy veteran and scientist.[1][3] He was raised in San Diego, California, where his father worked for the defense contractor Convair and later for NASA. Medved attended Palisades High School when the family moved to Los Angeles, California. He entered Yale University, located in New Haven, Connecticut, as a 16-year-old undergraduate, and graduated with honors in 1969, and then entered Yale Law School.

 

 

radio talk show host Rush Limbaugh interviewed Medved and then asked Medved to guest-host his talk show. Medved went on to serve as a regular guest-host for Limbaugh on close to 30 occasions.[citation needed] In 1996, Medved was offered his own local show on a major Seattle radio station.

 

For me personally, there's five strikes on Medved in that brief snippet from his Wiki bio.

 

re: "reason people voted for Obama was that "he cared about people like me.""


No (D) or (R) President gives a shit about you...or me. Any politician in the present status quo(of either party) who tells you they do, is lying. I don't need some prissy Yale educated idiot like Medved to inform me of that fact.

Thu, 04/11/2013 - 22:07 | 3439274 mendigo
mendigo's picture

Perpetual until one day it ceases
The rest of the world will not eat us shit forever.
As long as they accept greenbacks they willneed to recycle them.
Maybe its because I an not knowledgeable enough but this lady seems like an apologist for the status quo - "not to worry this is not the first time".

Thu, 04/11/2013 - 22:21 | 3439319 khakuda
khakuda's picture

Bernanke and Greenspan helped the debt cancer grow ever larger and now there are no good choices. The problem is that the overall credit market debt of $50 some odd trillion continues to rise. Without austerity, she is right that you never get there. You can not inflate away debt if you keep adding more.

Thu, 04/11/2013 - 22:22 | 3439320 moneybots
moneybots's picture

"Reinhart: What is sacrosanct about bank debt?

SPIEGEL: Well, the bankruptcy of banks can have a considerable effect on the financial system."

 

AND WHAT ABOUT THE BANKRUPTCY OF SAVERS- THAT HAS A CONSIDERABLE EFFECT ON THE FINANCIAL SYSTEM.

 

i CAN'T CONSUME IF I HAVE NO MONEY.

Thu, 04/11/2013 - 22:31 | 3439347 moneybots
moneybots's picture

"Alan Greenspan was not a conservative."

 

Conservatives are not conservative.

Thu, 04/11/2013 - 22:34 | 3439353 jomama
jomama's picture

lol, 'pensions'.

i won't see jack fucking shit handed to me by the time i reach 'retirement age'.

i'm fairly certain i'll be working until the day i die.

Thu, 04/11/2013 - 22:36 | 3439357 magne13
magne13's picture

Hey Carmen, please tell me where you think inflation will come from? 120m Americans out of work, 48m on food stamps, 1.2T student loan debt, 11T mort debt, I can go on and on.  Good luck with inflation when nobody has any money, velocity of money is zero and we have 80T in derivatives non net to dig us further into the theft of any future GDP earnings, so no inflation is not a threat, nor will it ever be in the near future, we have lived off of leverage and stolen so far into the future that there is no longer any near term GDP to steal from, thats why QE will be indefinite and inflation will be negative, Japan was the beginning of how excess gets purged and the entire globe will be under this weight for a long long time.  I am not sure why we nobody can see how Japan is and was the pattern that we are all going to have to follow.  The only way out is truly global war and destruction to reset the system, that is how it was, how it will always be and it is just a matter of time now

Thu, 04/11/2013 - 22:37 | 3439358 magne13
magne13's picture

Hey Carmen, please tell me where you think inflation will come from? 120m Americans out of work, 48m on food stamps, 1.2T student loan debt, 11T mort debt, I can go on and on.  Good luck with inflation when nobody has any money, velocity of money is zero and we have 80T in derivatives non net to dig us further into the theft of any future GDP earnings, so no inflation is not a threat, nor will it ever be in the near future, we have lived off of leverage and stolen so far into the future that there is no longer any near term GDP to steal from, thats why QE will be indefinite and inflation will be negative, Japan was the beginning of how excess gets purged and the entire globe will be under this weight for a long long time.  I am not sure why we nobody can see how Japan is and was the pattern that we are all going to have to follow.  The only way out is truly global war and destruction to reset the system, that is how it was, how it will always be and it is just a matter of time now

Thu, 04/11/2013 - 23:58 | 3439545 TrustbutVerify
TrustbutVerify's picture

Weren't people out of work during the german inflation of the 1930s? 

Fri, 04/12/2013 - 00:52 | 3439656 toys for tits
toys for tits's picture

Actually right before the hyper-inflation kicked in, unemployment was very low, much less than 5%.

Fri, 04/12/2013 - 04:59 | 3439881 css1971
css1971's picture

You seem to think America is isolated. It isn't. The USD is in the unique situation of being the world reserve currency so everybody uses it to buy stuff. Until they don't. Then you can have them all back.

 

Thu, 04/11/2013 - 22:42 | 3439371 Debt Slave
Debt Slave's picture

"Only when inflation picks up, which is ultimately going to happen, will it become obvious that central banks have become subservient to governments."

Incorrect. The government is subservient to the private central bank. Everyone should know this.

Especially in American politics, it should be obvious that they who control the money are in control of the nation and it's laws. The buffoons in Washington D.C. control neither.

Thu, 04/11/2013 - 23:15 | 3439398 Aquarius
Aquarius's picture

 

I have written that it is a matter of maximum entropy which has been reached, particularly with the USA. As the global affairs are commensurate with that of an 'open system', but now more nearing a 'closed system' the USA is in a panic to offset its impending state 'thermodynamic equilibrium', which is its demise, by flaying and striking out to frack the World through desperate and destructive aggression so that resources that do not ordinarily belong to the USA, can be broken up, scavenged, stolen and controlled. It's survival depends on this activity in fact, to be successful whilst under the current mindset of its "leadership".

This "leadership" is not in control. 'Critical Mass' is now, and has been for some years, in control and the USA is unknowingly now feeding on itself - as all the Western Nations. The sovereign intelligentsia mindset represented by Western governments caused this crisis; Where this same intelligentsia is not of the caliber to solve the crisis. The end is just becoming more visable, but there are none so blind as those who will not see.

Looking ahead to Biden's inspired (sic) "New World Order", the theory of Entropic Thermodynamics clearly predicts that a single World order headed by the Western (USA) mindset of today, will destroy the World; it will burn the center.This is Entropy at work; a Universal Principle.

One must ask just what represents today's global "leadership" and the answer is clearly and indisputably, the highest Order of the Banking and Finance System. Is is not startling clear that this "leadership sector is ingesting all the World's resources, which includes all assets, productivity, commodities, monetary fiat, etc? This is "negative entropy", "free energy", or "exergy" that is being sacrificed to the altar of the Banking Gods. This is the end because it is finite - under this mindset regime of limited and barbarian "leadership". And they want it all and I say, that all will not be enough.

Look at the state of corruption of the US "leadership" today. Look at the vile and utter complete corruption of the EU leadership and the rest of the Western World of sovereign bankrupts. This is nought but self cannibalism - this is eating yourself from the inside out. The West has become cancerous. The question is, just how long before all the patients in the hospital die - of cancer.

"Leadership" is not in control. Natural forces are in control.

The Goddess Kali is in control.

 

To be, or not to be... http://verbewarp.blogspot.com.au/2013/04/to-be-or-not-to-be.html

Ho hum

Thu, 04/11/2013 - 22:58 | 3439402 Future Jim
Future Jim's picture

Sounds like someone is trying to throw us off the scent by telling us some truth while slipping in comments like

"central banks have become subservient to governments"

That doesn't even pass the smell test.

Thu, 04/11/2013 - 23:01 | 3439412 rhinoblitzing
rhinoblitzing's picture

Notice Nothing on all the bankers lined up waiting to get in to the White House this morning.

Did I miss it? No articles or comments seen on ZH...

 

Thu, 04/11/2013 - 23:07 | 3439422 kchrisc
kchrisc's picture

While this guy's comments may seem to be "truth," his comments are only partially accurate.

In particular this gem: "Only when inflation picks up, which is ultimately going to happen, will it become obvious that central banks have become subservient to governments." Anyone that believes that the central banks are subservient to governments can buy this bridge I have for sale in Brooklyn.

The banksters are propping up their own Ponzi schemes and the governments are being told what to do so as to keep the deficits financed and the music playing. Notice the TBTF and TBTJ, MFGlobal and Corzine and the rehypo to infinity that has been revealed here at Zerohedge.

No, the central banks are in the driver's seat at 150 MPH and have just past the "bridge out" sign--hang on.     hujel

Thu, 04/11/2013 - 23:08 | 3439425 pbppbp
pbppbp's picture

"central banks have become subservient to governments."

I know she went to Harvard, but I'm pretty sure she got that one backwards.

Thu, 04/11/2013 - 23:12 | 3439432 thisandthat
thisandthat's picture

Nonsense! What can she possibly know?

Ladies and Gentlemen, former Portuguese prime-minister José Sócrates on Sovereign Debt, aka...

Paying the debt is a childish idea


My view is this: for countries such as Portugal, such as Spain, the idea that we have... that "now we must pay the debt!" is a childish idea! Countries' debts - you study it in economics, that's what I studied, for... time (sic) - are, by definition, eternal; debts are to be managed - this is how I studied it... Of course, we shouldn't let debt grow too much, since that burdens, later on, the servicing. However, for a country such as Portugal, it's absolutely essential - for its modernization, for its development - to have financing - whether for modernizing its infrastructures, whether for the modernization of its policies, whether for the growth of its economy! That's how I see things, but anyway... this a very technical debate.

Later he claimed he meant "the full immediate payment of the debt"...

Full "lecture" (in Portuguese, introduction in French) at a conference held by Poitiers University in Paris, Nov. 2011 - poster in the background says "The world needs free spirits"...

A few other notable gems from another conference in France, in 2010, by invitation of the French government and with attendance of the political "elite" of the day (Sarkozy, Fillon...): "Debt averted crisis"; "Debt saved the world from an economic catastrophe"; "Now we are in a position to recover economically, because States had the courage to increase deficits and debt " - well, that he did... he doubled public debt in the 6 years he was in office...

Fri, 04/12/2013 - 00:55 | 3439662 toys for tits
toys for tits's picture

Looks like Bono is going to have to start a new campaign for debt forgiveness, this time not just for third-world countries.

Thu, 04/11/2013 - 23:28 | 3439456 Yes_Questions
Yes_Questions's picture

 

 

Ok, Iceland with no Nukes, Carrier Groups, etc. told the creditors to pound sand.

J6PK with some basic wits stops paying per his contracts.

 

Both, with just a little savy, move on and are better for it.

 

This Charade has gone on long enough.  DEFAULT is not something to avoid at all costs.  

 

Haircut on the creditors?  Be thankful.  Hair grows back.

Thu, 04/11/2013 - 23:41 | 3439491 ebworthen
ebworthen's picture

Glad this is being put out in Der Spiegel; I hope the German Citizens are paying attention.

Thu, 04/11/2013 - 23:52 | 3439519 Croesus
Croesus's picture

@ ebworthen:

You may find this of interest:

http://americanfreepress.net/?p=9636

 

 

Thu, 04/11/2013 - 23:51 | 3439524 IamtheREALmario
IamtheREALmario's picture

None of what this Carmen woman makes any sense. It sounds plausible to someone who is clueless, but it does not make logical sense. There is no way to reduce debt the way she says. There is no way to increase employment the way she says. Yes, the central banks print as much money as the governments want, but that in no way makes the banks subsrvient to the government. The hand that gives is always above the hand that recieves.

My guess is that she knows it and is lying.

Fri, 04/12/2013 - 00:07 | 3439569 cherry picker
cherry picker's picture

That is the problem with over educated types who delve in non provable economic theories and psychology.

They don't have hard and fast rules like physics, so they clutter up the simple things with a veneer of lingo no one can understand in order to make themselves feel important and fool the masses into thinking they are important.

It is best to ignore them.

Fri, 04/12/2013 - 01:07 | 3439686 The Heart
The Heart's picture

"It is best to ignore them."

Maybe not all of them.

"The minute the fed stops, the whole environment changes, the confidence changes, the psychology changes and the bubble is revealed, this is the greatest bubble yet." - David Stockman

http://www.youtube.com/watch?v=uF9UJh8bU70

"That sounds like a perpetual motion …"

...until the fat lady stops singing, or some sort of False Flag Event is blamed for the planned and well timed crash of the dead banks.

Coming soon to a theater near you soon.

Thu, 04/11/2013 - 23:52 | 3439525 kito
kito's picture

Carmen is just reiterating dalios beautiful deleveraging theory on reigning in debt so the cycle can start anew...neither believe there will be a currency crisis...neither believe there will be a collapse....they both believe that the austerity/printing/restructuring combo will be the path to eventual prosperity.......so no worries....the sheep get sheared....but hey.....its what's needed........

Thu, 04/11/2013 - 23:55 | 3439536 TrustbutVerify
TrustbutVerify's picture

In years to come we'll realize debt was the weapon used to bring on collectivism. 

Fri, 04/12/2013 - 00:00 | 3439553 bnbdnb
bnbdnb's picture

How come no reporters ever ask the central bank nazi baffoons if they know what failure looks like?

Fri, 04/12/2013 - 00:00 | 3439554 steve from virginia
steve from virginia's picture

 

 

 

 

Reinhart = another GOP tool:

 

"Nations "seldom just grow themselves out of debt," as so many believe is possible, "you need a combination of austerity, so that you don't add further to the pile of debt, and higher inflation, which is effectively a subtle form of taxation," with the consequence that people are going to lose their savings. Reinhart succinctly summarizes, "no doubt, our pensions are screwed."

 

"Nations seldom ... grow themselves out of debt" ... nations never grow themselves out of debt, they refinance their debts in larger amounts @ lower rates.

 

"you need a combination of austerity, so that you don't add further to the pile of debt" .... which does not work at all b/c the debt pile remains the same while the ability to repay declines ... the effect is a real increase in debt. This idiocy is enough to torpedo Reinhart right there.

 

"higher inflation, which is effectively a subtle form of taxation," ... what higher inflation? Even as public sector balance sheets expand the private sector's collapse faster! Repayment costs are gallopoing past than the worth of the remaining debts! Reinhart cannot see what is at the end of her nose! This is deflation! Where there are claims being exercised there is system collapse and credit freeze/liquidity shortfalls. See: 'EU' and even 'Japan'.

 

"the consequence that people are going to lose their savings. Reinhart succinctly summarizes, "no doubt, our pensions are screwed." ... Gee! Thank you very much for the opinion ... a welcome mat for the Wall Street sharks to swim in and steal.

 

Since theft is inevitable we may as well put a good face on it, right?

Fri, 04/12/2013 - 00:02 | 3439559 Lmo Mutton
Lmo Mutton's picture

I plan to retire at 104.

They should have it worked out by then right??

Fri, 04/12/2013 - 00:11 | 3439573 GreatUncle
GreatUncle's picture

MY QUESTION IF EVER GIVEN THE OPPERTUNITY to these economists Krugman especially.

Have we not been enduring QE under the concealement of bank leverage on loans since the 70's and before?

1. QE through leverage of banks. (since the 70's concealement failed to contain it)

2. QE direct from central banks.  (since 2008 and direct intervention failed to contain it)

3. Depositers savings cuts. **** WARNING **** Will fail to contain it.

and 4. will be sold to you as a benefit through inflation because the previous failed.

Fri, 04/12/2013 - 00:20 | 3439590 foodstampbarry
foodstampbarry's picture

The baby boomers require a certain standard of living - Pay up bitchez

Fri, 04/12/2013 - 00:28 | 3439592 Croesus
Croesus's picture

And Bitcoin continues to tank

http://www.businessinsider.com/mt-gox-reopens-after-bitcoin-trading-halt...

PS> Looks like Mt. Gox is Down....again.

 

Fri, 04/12/2013 - 04:54 | 3439879 The Abstraction...
The Abstraction of Justice's picture

http://www.youtube.com/watch?v=kNocKxKd8-I

 

Puts both PM and bitcoin into context. This will still be worth something when all else is dust.

Fri, 04/12/2013 - 00:57 | 3439667 ShakaZulu
ShakaZulu's picture

You don't need pensions once the war starts.  So many bones will be everywhere that there will be no place to bury them.  And very few left to dig the holes.

Fri, 04/12/2013 - 01:02 | 3439677 Golden_Rule
Golden_Rule's picture

Reinhart: Monetary policy is doing the job. And with high unemployment and low inflation that doesn't even look suspicious. Only when inflation picks up, which is ultimately going to happen, will it become obvious that central banks have become subservient to governments.

 

Only made it this far before I shit my pants....  :back2reading:

Fri, 04/12/2013 - 01:23 | 3439701 alfbell
alfbell's picture

 

 

Well, I've got some gold and silver. I've liquidated all my assets. My cash is making 12%+ in first trust deeds. I've almost got all my debt paid off. Don't own a house or any real estate. I'm a renter. Both cars are free and clear. Guess I'm in the best shape I can be in for whichever way this goes (INF vs DEF). I tend to think we'll go the way of Japan... fighting deflation and a slow to no growth phase for a long time. Low wages, high unemployment and zero velocity won't allow INF.

Fri, 04/12/2013 - 02:59 | 3439799 Setarcos
Setarcos's picture

Ha F-ing Ha!!!

"central banks have become subservient to governments"

What planet does this stupid woman live on?

Wall Str/Banksters own governments.

Fri, 04/12/2013 - 04:47 | 3439875 The Abstraction...
The Abstraction of Justice's picture

And the Rotschild-Sasoons own the banksters.

Fri, 04/12/2013 - 03:09 | 3439809 Quarky Gluon
Quarky Gluon's picture

"SPIEGEL: We have seen 50 years of peace and democracy in Europe, but also 50 years of rising debt. Are democracies incapable of setting a budget and sticking to it?"

What democracies?  I believe, instead, we have seen 50 years of republics in Europe. Ironically, there hasn't been a true democracy in Europe since they tried it in Greece over 2000 years ago.  If the people actually had a voice I don't think they ever would have gotten themselves into such an irresponsible indebted mess as is now the case in most of the western world.  The only reason this problem ever occurred is because the so-called representatives in office are not re-presenting the people like they are supposed to but are, rather, re-presenting the interests of bankers and other special interests that give out big campaign contributions and other crony perks.

 

Fri, 04/12/2013 - 03:17 | 3439815 green888
green888's picture

The banks have an agreement not to transfer pensions between them in the UK

Fri, 04/12/2013 - 03:53 | 3439845 The Reich
The Reich's picture

So, where's the news?

Fri, 04/12/2013 - 04:10 | 3439856 Floodmaster
Floodmaster's picture

I Love My Job Too Much to Retire

Fri, 04/12/2013 - 04:45 | 3439874 The Abstraction...
The Abstraction of Justice's picture

Maybe soon you will fall too ill to work.

Fri, 04/12/2013 - 08:44 | 3440159 kurt
kurt's picture

Eventually even old whores get too ugly to fuck.

Fri, 04/12/2013 - 05:06 | 3439886 kurt
kurt's picture

"NO DOUBT"  --- I smell Dick Cheney

"OUR"   --- Psyop intent to built commonality ie we're all in the same boat

"PENSIONS"  --- New buzzword substitute for Social Security (a contract and promise that WILL be fulfilled)

"ARE SCREWED" --- An ongoing project to take YOUR money being prepared, in the media first, to condition your mind.

Fri, 04/12/2013 - 05:51 | 3439906 Go Tribe
Go Tribe's picture

The money quote:

Reinhart: No doubt, pensions are screwed. Governments have a lot of leverage on what kinds of assets pension funds hold. In France, for example, public pension funds have shifted money from shares (on the stock market) to government bonds. Not because their returns are great, but because it is more expedient for the government. Pension funds, domestic banks and insurance companies are the most captive audiences, because governments can just change the rules of the game.

We're nothing but a buncha ankle-grabbers.

Fri, 04/12/2013 - 07:26 | 3439995 blindman
blindman's picture

she's talking Harvard crap, the language they use
for the debt serfs to keep us dumb and hungry and
debt dependent and working for the bankers, speculators
and other con artists. the banks own everything that
isn't nailed down, and that too, and now they want
the "government" to be the repository for their frauds
and crimes which are astronomical rather than have those
crimes be prosecuted or wiped out(default).
in a kleptocracy the crimes must be sustained, the gains
pocketed and the losses distributed fairly among the victims.
that is how wall street envisions the proper functioning of
government.

Fri, 04/12/2013 - 06:05 | 3439915 Bicycle Repairman
Bicycle Repairman's picture

It's clear that savings are being targetted.  Pensions that typically have an underlying assumption of 8% return on assets are doomed.  The thing is, after all that destruction, what will you have?  The same system run by the same people?  So that the same process can be repeated again?

Giving up your savings and retirement will not fix anything.  It just buys the miscreants more time.  Every day that passes without talk of reform means a harder road.

Perestroika.  I have to say it in Russian, because we don't even have a word for it in English.

Fri, 04/12/2013 - 06:47 | 3439954 harumscarum
harumscarum's picture

I can never understand the refusal of people in general to look at their various pension investments. When I ask, eyes glaze over. It's like nobody knows and don't want to know. Like it will get better "in the long run".

Fri, 04/12/2013 - 07:11 | 3439982 blindman
blindman's picture

@".. central banks subservient to government. .."
shriek ! and baloney. and all the pension money goes
directly to wall street and back into the further debt
generation for the banks and wall st. and the government
to spend or securitize to further increase debt/credit/funny
money.
Portugal proposes paying government workers in treasury notes.
these presumed to be worthless as they are not issued by the central
bank system and do not represent a debt that that system can hypothecate
directly. the portuguese bond market could be choked to death but that
doesn't assist the creditors and "vigilantes".
.
the debt crisis is the private fortunes of the world. the central banks
exist to create these fortunes, not to assist the governments. is the ecb
subservient to Greece or Portugal or Cyprus or Ireland? really.
in 2008 when Paulson put the thing to congress to bail out the banks,
the ones that own the central bank, was the central bank subservient to
the government?
the central bank is a commensurate or parasitic form that rides on the back
of the people and the government, its nature appearing differently in
altering parts of the business cycle.
the final power that has been given to the people is to repudiate
fraudulently induced debts at no cost to them other than total loss
of the value of their "money" as it represents the system of debt that
has enabled and enslaved them in the first place.
the real government is the math of the money and the resources available
and that government is partially invariable and partially of convenience
and fictitious.
haircut = scalping, perpetual Ponzi ends in scalping. that is not an economics
argument but a revelation of the nature of the basic unit of finance,
a debt note. I don't see how there is any other resolution given the
governance of the structure of the fiat money system. everyone ultimately
loses everything that is represented by or translated into that language and
certain great fortunes are converted into absolutely nothing over night.
as real as it all seems, one might recall, there is a great degree of
imagination and fiction, speculation, at the heart of our thinking.
fear and greed makes for a very psychopathic time spent on earth.
perhaps there is something else?

Fri, 04/12/2013 - 07:34 | 3440004 blindman
blindman's picture

11 April 2013
Gold Daily and Silver Weekly Charts - Metals Hold Up While Miners Trounced Again
.
"Every president needs to deal with the permanent government of the country, and the permanent government of the country is Wall Street oligarchs and corporate plutocrats and the questions becomes what is the relationship between that president and Wall Street."

Cornel West

"Fraus est celare fraudem. It is a fraud to conceal a fraud...And the regulators may wish to consider that when they continually turn a blind eye to glaring instances of market manipulation they foster a climate of lawlessness that opens the door for widespread fraud amongst normally law abiding market participants. It becomes a competition in larceny and a moveable feast of fraud. “Poverty wants, but greed wants everything, and more.” Customers run for safety, from one place to another, not sure what or whom they can trust."

Jesse, MF Global: The Issue Is Fraud and the Cover Up

“Our government teaches the whole people by its example. If the government becomes the lawbreaker, it breeds contempt for law; it invites every man to become a law unto himself; it invites anarchy.”

Louis D. Brandeis
.
http://jessescrossroadscafe.blogspot.com/

Fri, 04/12/2013 - 07:36 | 3440008 blindman
blindman's picture

be there intellectual apologists for great heists?
yes, there be such persons.

Fri, 04/12/2013 - 08:12 | 3440056 Downtoolong
Downtoolong's picture

It's happening everywhere already. They're doing it carefully in ways that the victims are least likely to notice the severity of the impact. Two years ago, Chris Christie railroaded a new law through the NJ state legislature to cancel all future COLA increases for state pensioners. Never mind that this was a basic violation of contract law, which may still be challenged in a higher federal court. But, what most retirees didn’t appreciate was how this amounted to a 30% haircut in the NPV of their expected future retirement income. To most of them it just felt like a 1-2% reduction in the purchasing power of their benefits that year.  

Fri, 04/12/2013 - 08:21 | 3440076 rsnoble
rsnoble's picture

Well off to the courthouse this am hand them a real estate tax check for $4200.  Would be nice to fund my own retirement.  They have a dozen gals downstairs that do nothing but collect $ all day, and an entire 2nd floor of people that hand out bills.

Fri, 04/12/2013 - 08:27 | 3440083 rsnoble
rsnoble's picture

BTW i've told everyone from the beginning that public employees will be the last to go.  They're the only group that has the power to enforce their paycheck.  Don't want to pay your taxes? No problem we'll just sell your house.

They don't understand simple math.  30% of the population has been downsized or 100% screwed and the gov't just keeps rolling along as if nothing has changed and refuses to downsize and instead insists on growth if nothing else.

This poor town has a slum surrounding the newly remodeled multi-million courthouse, and brand new multi-million 'justice' center to imprison the poor, it is just pathetic. 

 

Fri, 04/12/2013 - 09:16 | 3440308 smacker
smacker's picture

 

Lest we forget (because it was not explicitly stated in that interview), there are three groups of people who are directly responsible for this debt crises and destruction of Western economies:

1. the political elites

2. the political elites

3. the political elites

Everybody else involved is a consequence of political elite policy.

Current political regimes have collectively failed their nations. Time for change - big time.

Fri, 04/12/2013 - 10:02 | 3440492 shovelhead
shovelhead's picture

I find it comforting to know that I may be fighting a retired police chief for that last can of Alpo on the supermaket shelf.

Vive Egalitaire.

Fri, 04/12/2013 - 16:09 | 3442543 yellowsub
yellowsub's picture

Of course we can continue to pay every gov't employee's six figure pensions and medical for life...

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