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Greece May Pay Wages And Pensions In IOUs
Earlier today we said the following about the Greek government’s rapidly deteriorating cash situation:
So it’s either pay salaries and pensions or pay the IMF which is tragically ironic because Athens has already gone the route of plundering pensions to make payments to its creditors, the only difference is that now, instead of “borrowing” money from the public coffers and hoping to pay it back in the interim before anyone actually gets shorted, you’re talking about simply not paying people at all (or paying people with IOUs which would be the hilarious rough equivalent of conducting repos with individual citizens) which needless to say could turn into an untenable social and political issue virtually overnight, not to mention the fact that if the government defaults you would almost certainly see the imposition of capital controls in order to stem the inevitable deposit flight. Athens owes nearly €2 billion in public sector wages and pensions at the end of the month.
For anyone who thought we were joking when we suggested Athens may look to pay government employees with IOUs, we were not, nor were we kidding when we said such a move by the Greek government would almost immediately plunge the country into a state of extreme instability which would likely be characterized by mass protests, bank runs, and then capital controls to stop the bank runs. While we certainly hope, for the sake of the poor Greek populace, that this eventuality does not play out, here’s Capital Economics to explain what an IOU scenario would entail:
The Greek crisis has reached a new crunch point amid signs that the Eurogroup will not grant desperately needed financial aid after next week’s meeting. Greece might resort to IOUs and/or capital controls to avoid a disorderly default and keep the banks afloat for now. But such measures would offer a temporary solution at best and could be the first steps towards a euro-zone exit.
Assuming that a deal is not reached next week, there are a couple of routes that the Greek Government might take to avert disaster in the short term. First, it could issue IOUs to pay public sector workers and pensioners and free up money to repay its debts. But this could cause economic chaos if fears that the IOUs would never be paid sparked riots or public sector employees simply refused to work.
And that’s exactly what would happen. Greeks have labored under the threat of economic collapse for years and surely being paid with an IOU issued by a government who just turned over your paycheck to the IMF which is set to disburse $2.4 billion in aid to Ukraine at just about the exact same time Greece would officially go into default (remember there’s a 30-day lag, Greece will likely fall short in early May, and the second tranche of aid is set to be delivered to Ukraine in June) would be the final insult and we imagine that all of those public sector workers who refuse to work would use their time off to express, in one way or another, their extreme displeasure at their socialist ‘savior’ Syriza.
Here’s more from Capital Economics:
Even if Greek people accepted IOUs, they could only function for a very short period. Before long, those receiving incomes in IOUs could only afford to pay their taxes through the same medium. And given that the Government’s international creditors would not accept IOUs as repayment, this would still lead to a debt default. Effectively, the IOUs would become a parallel currency whose value was deemed lower than that of a normal euro. This would be akin to a euro-zone exit.
It’s worth taking a moment to reflect on that absurd chain of events. By paying citizens in IOUs, Athens would be virtually ensuring that it would remain insolvent because even as the Greek government isn’t the most efficient tax collector in the world, some taxes are better than no taxes, and the latter is what you would have if Greeks began to hand in their IOUs in place of euro-denominated tax payments and we suspect that Capital Economics is correct when they say that the IMF would not be amenable to accepting sticky notes from Varoufakis that say “a little short right now, will pay you when able” especially given the fact that Greece is already issuing the rough equivalent of those in the form of Greek T-bills which are sitting on the books of the very same Greek banks which, in the event the IOU solution is pursued, will be besieged by the very same citizens to whom the IOUs are issued.
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Or, put more simply:
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Game over ... reset button?
http://hedgeaccordingly.com/2015/04/nomura-wonders-if-its-game-over-for-greece-game-theory-approach-not-working.htmlOne general strike, coming right up for Greece.
A dollar bill is an IOU of the Federal Reserve, and is shown as a liability on its books. When we use it to buy something, we are actually transferring an obligation of the Fed to the seller. These third-party IOUs are regularly used as a medium of exchange in the private sector. They pass from buyer to seller without a second thought about their real nature.
Considering the Euro is nothing more than an IOU, I take it that the Greeks are finally going to use their printer to print Euro.
Send the government IOUs to pay your taxes. The fiat circle-jerk is complete.
All fiat are IOUs
A liability of the Central Bank, paying no interest with no maturity.
Worst kind of IOU imaginable!
Why dont the Greeks pay their debts to the Krauts with IFUs I fuck you notes of promise to pay.
The Greeks should be stoning their politicians in the streets. The fuckers raided the pension funds and anything not nailed down and gave it to the IMF and ECB. The default will be exceptionally tough because they will have no cash on hand as they transit to the new system. Which is what the ECB fucks intended. They want mass starvation and unrest in the period post default.
Tomorrow's another day.... a Golden Dawn
What's the problem here? Other third world nation banana republics--like California--have paid their employees in IOUs before and everything worked out just fine.
I am Chumbawamba.
Chumba what have you done to the chat ?! You broke it with your profanity lol.
Heil Euro!
Please note: Greece does not pay anyone with anything. The Greek government, like all governments, pays with IOUs that the citizens must honor.
Greek public workers SHOULD be paid in IOUs, since they don't really work for a living.
Ooooo e money I got to pay (as it will get past on to me) interest etc on just cause that shit grows on the dollar itself until the dollar becomes valueless a whole nother way?
Fuck! Rapebotbuck
The only problem with the government issuing IOU's is that their promises aren't worth anything. A personal IOU has consequences. You fail to meet your obligations - you find a way to work it out. Overextend yourself on a casino bet? Offer your watch and the ring your mother's given you. Fail to pay at a restaurant? Wash dishes for a night and they'll let you off the hook. Screw someone over? Suck a dick (pardon my French) and be even. Your individual consequence has one implication - if you don't meet the contractual obligation, you gotta come up with an alternative value proposition.
But the moment a government offers IOU's immediately you equate it to a total default and know you're screwed. Why? Because you know the bureaucrats aren't worth shit, have no valuable skills and have anything to offer aside from the central bank IOU's they typically confiscate off other people under the threat of force.
So yes, it is a crisis - a crisis of confidence and credibility that they have none of to begin with.
Have you ever looked at a note before? All of the "money" is IOUs. The legal definiton of 'bill' or 'note' comes from the law of negotiable instruments. Truth be told they only blush a little when sometimes they have to issue a new kind of IOU in a hurry like Greece is doing now. But in all seriousness, IOUs are not the exception, IOUs are the rule.
Yes, all money is IOU. I know that. What I'm saying is that an obligation in the hands of a private individual means a different thing compared to an obligation held by the government. You mess up and you're expected to find another way to make it work. A government fails and oopsy-daisy! I'm just gonna go and take my family to a private island somewhere and have the next cocksucker figure it out.
I always say to every politician offering things like cheap housing: "Here's your hard hat and a pair of steel toe boots. Go build a house and then give it away!"
They don't do any actual work, so IOU's handled by them regardless of whether it's issued by them or the bank, don't mean the same thing as an exact same IOU handled by the population.
As it is brough up here - if Greece writes notes to pay pensions, they'll likely make it illegal to pay taxes using those same notes. Same paper held by them carries completley different meaning before it passes onto the public.
There is nothing new under the sun but no all the IOU's are the same.
In Argentina (about 2000), Goverment and Provinces printed IOU's called PATACONES. In many shop windows you could read what kind of patacones that shop accepted. But one peso was a better IOU than one patacon, for example you could pay taxes with pesos but not with patacones.
In Ancient Rome, during the 3th Century, people were paid with bronze coins (except soldiers and civil sevants that were paid wiith debased gold or silver coins), but taxes should have paid with bars of gold with proof purity. The State even didn't accepted its own gold coins as a mean of payment, because they knowed well they were debased (that's the one of the ways the State uses to enslave his citizenry).
The US Gov has been issuing IOUs since the FDR default in 1933, and hasn't paid out on any of them in 82 years now.
Obama envies this iou system and can't wait to send out Socialist Security IOUs along with his 2nd amendment destroying firearm collection taskforce. Thanks comrade
Isn't fdr hillaries gaga?
Reading twht fdr stuff here the other day
All I could think Hillary so fdr
and that was her thang fdr
She wrote her what ever paper in fdr.
That he is the prez of prez'; besides her of course.
Yea hurry everyone stick ur head up hillaries puppet butt for the good of the world.
Isn't currency an IOU? I guess some IOU's are more equaler than others.
Or what AlaricBalth said.
More 'money' than others, is the correct way of looking at it.
Or 'moneyness' as Doug Noland puts it.
How could this possibly be any different than being paid with American Currency?
All legal tender is an I.O.U. Debt based issuance from a broke Central Bank.
Am I missing something here?
We will gladly pay you Tuesday,
for our ouzo bash tonight.
Didn't California do this a few years back?
Some of the mining companies issued script to their workers as payment. The problem is that there will be little in Greece to buy with it, no company store to take it.
As long as Euro is available it will drive out the IOU and euro will be the only acceptable means of payment. It would be self defeating for the IOU to be acceptable as payment of amounts owed to government. That will probably remain euro only.
That problem can be solved by simply bringing out the men with guns and forcing people to accept IOUs in stores.
Yup and not so ling ago... I remember it being chatted about ... Yea think so as I remember but man all kinds if nasty stuff went down financially in Cali .... From politicians threatening to send in the gangs as they bankrupted the place just stealing tons and tons of cash
@windigo
What's the difference between IOUs and the Drachma?
Idiots, idiots everywhere...
Go after the rich Greeks and burn down the Greek National Bank which has been buying Greek debt denominated in Euros all this time.
It's their own people and their own banks that screwed em'
What's the difference between IOU's and socialism?
As long as the IOUs are accepted for payment of taxes there would be no difference between IOUs and Drachmas.
I bet they even have a picture of a famous Greek person on them.
Greeks- since they're going to pretend to pay you, feel free to pretend to work. Show up tomorrow, have a donut, drink some coffee and DO NOTHING. This assumes you ever did anything in the first place, but I digress.
Your government is WORTHLESS. They've sold you out and now the money is all gone, too. YOU will need to collapse the system yourselves. The only way the blood suckers will leave is when you stop giving them your blood. You must make it a more attractive choice for them to leave than to stay.
Good luck. You'll need it. Because what comes next is the guns and tear gas (and midnight raids by police in masks of anyone the government deems threatening to them).
The only message the bankers will understand is firing squads. The Greeks should round up the fucks and execute them.
I think they have made improper arrangements. it's the bankers who are supposed to get the IOUS. They print money out of thin air so should be fine with an IOU
Thay will be called VarouFaxes
Will need more zeroes.
Pretty soon every worker and pensioner the world over will get IOU's, and told to be thankful.
Greece is just a microcosm of the global debt central bank financial engineering kleptoligarchy ponzi.
What if the situation(s) across the globe get so bad they all start paying IOU's...and really so bad, that the IOU's must be paid back in Silver or Gold ONLY !
One can hope for a Silver lining on the race to the bottom.
(of course, they will never pay back in real money, but they will be made to grovel this way....)
When does the hyper-inflation set in ?
This arrangement is appropriate...the Public Sector Employees pretend to work, and the Government pretends to pay them.
This arrangement is appropriate...the Public Sector Employees pretend to work, and the Government pretends to pay them.
do you ever wonder what our stack of IOUs looks like? this is what our debt including unfunded liabilities looked like some years ago... its a lot taller now
https://usatsneakhype.files.wordpress.com/2012/08/usd-122_trillion_dollars-122000000000000_usd3.jpeg?w=620&h=1065
and still stackin'
(yes, those are stacks of 100 IOU bills to scale)
Just call me when Mikonos is eight pfennig on the Euro. I can't stay locked up in velvet Biebers and Bel Aire real estate forever! My gardener just went back to Jalisco because his beloved cactus died!
HAHAHAHAHAHAHAHA
So ya just can't hide the debt in fiat currencies anymore so you now create fiat IOU's!
The value represents a fiat currency value so not based on any hard asset and the debt is an extension of the fiat currency like the shadow banking system and derivatives globally.
Comparing Greece to the Ukraine it's only fair if the USA is going to backstop Ukraine bonds that Russia backstops Greece :-) What gets me though is the Ukraine backstop is going to be based on the global fiat currency = the dollar that is really no different to Greece shelling out IOU's with nominal euro worth.
You couldn't make this shit up you really couldn't so here it is a roll of toilet paper, I am going to write 1 euro on each sheet okay. The sum of euros in the world went up by a roll of toilet paper euros and again no asset to support it.
Yanis and Tsipras are taking every dime they can find and moving it to the EU bankers who they actually serve and see as their employer. Every dime that does not belong to the elite that is. Yanis wants to use tourists to spy for Greece to find common tax cheats, what has he done to collect back taxes from the rich?
The Greek public will protest some but it is doubtful they will revolt with sufficient force. Once the common Greek is so desperate, hungry and trying to survive the week they will be too weak to fight while Tsipras holds fire sales of Greece national assets themselves. Russia is just a diversion for the sheep as they baa baa mild protests.
The people might get so hungry they may end up biting the asses of the politicans.
I thought sovergn paper play money WAS an IOU?
If you think this is new, you should look inot what Congress has done to your SS....
Same thing bros.
Squid
My bet is a law is passed that doesn't allow the IOU's to be used to pay taxes. Also, just issue Drachma's as the IOU's and save yourself a step for next month! This has to be the end for this shit. That being said, WHY doesn't the Greek Gov't care enough about paying it's citizens before the IMF that it would go this route? Idiots and pussies.
If you want the currency to fail, then yes by all means stipulate that it will not be accepted for payment of taxes.
Pay salaries or pay IMF? What kind of fucking choice is that? Sounds like it's time to nuke the fucking imf to me.
California tried this but BofA refused to accept it as money.
Lasted about two weeks.
Obviously once treasury debt became acceptable again then Cali was freed from this nightmare and indeed has one of the biggest public pensions in the world if not the biggest now.
Right now I don't think Greece will be so lucky but we'll see.
The IMF will start staking claims on resources in my view as well.
The money in the greek government pension funds came from the loot that the democratically-elected greek politicians defrauded and stole, er uh I mean "borrowed", from the lenders and bond holders.
Returning the stolen loot to the lenders and bond holders is called justice, admittedly a rare occurrence, which may contribute to explaining why it is so difficult for so many to comprehend.
Sure but since when does that get you the cookie? Since when do pirates care about the welfare of "lenders" or "bond holders". I really took Tsirpas and V. for a different breed
Let me explain it to you in plain English.
When you steal from the motherfucking moneychanger counterfitters and use their paper to buy yourself and your people some happy days, it is not really theft now is it?
What the moneychangers cannot stand is anyone trying to outdo them and pissing on them.
All this fiat they create is bullcrap ficticious currency and its acceptance enforced by a group of complicit thugs.
Let me explain it to YOU in plain English.
You wrote:
"When you steal from the motherfucking moneychanger counterfitters and use their paper to buy yourself and your people some happy days, it is not really theft now is it?"
A lot of the money that the greeks stole came from BONDS, not bank loans, that they sold to people who are not your ideologically hated "motherfucking moneychanger counterfitters", eg people who actually legally earned and saved income to provide for retirement, eg pension funds and individual investors.
W T F !!! No jobs, no pensions, no welfare for freeloaders, no money. Just curl up and die motherfuckers.
IOUs work. The Terminator did it here in California until the FEDs shut him down for issuing his own currency.
The gay hairdresser's legs are shaking.
Time to go back to the salon.
i wonder if there's a Greek equivalent to spike lee. Could do a do the right thing sequel there in the hot greek summer, pressure building as the temp rises, and the IOUs accumulate until it all comes crashing down.
So let me get this straight...
If we pay public sector "workers" with IOUs, they will refuse to "work"?
Are you guys thinking what I'm thinking?
To really pull this off, the Greek Gov would need to issue bonds in the IOU-based currency.
Then, when the Greek elite vacuum up the IOUs from the plebs, it gives the elites an alternative to paying taxes - they can buy IOU-denominated bonds instead (which pays interest in IOUs).
Edit: And then the Greek Gov can recycle the IOUs they collected from the elites back into the economy again. Ta dah, a nice virtuous cycle.
Edit2: And if you want to unleash the animal spirits (of the wolves), create a central bank that provides liquidity in the form of IOUs. Then the wolves can create their bubbles and the Greek Gov can use that as a tax base. Of course, this means wolves will create a loser class that is indebted in IOUs. So if you don't want that, then simply skip the central bank.
Edit3: the last laugh will be when Euro countries open up account balances in Greek IOUs for trading purposes with the Greeks.
The only way to make it work is to 'back' the IOUs with a valueable tangible...like Gold or Silver or land.
Not that the backed IOUs would ever be paid off.
I'm just saying nobody sane would accept the IOUs without a Gold or Silver backing.
We are getting close to the final Ponzi...the Gold Backed IOU with some future payout...out there.
Actually, it will never work. They have reached a point where they are unable to repay their debts no matter what they use and what it is back by.
The US is in the same situtation. The only difference is the US dollar is still the worlds currency reserve and has the top military to back it. When that ends, then we have a reset.
In case you missed it, this is how all chartal-based currencies work, including the US dollar.
This is text book Revolution 101, the turning of the intellectuals, new government, a multitude of factions in the new government wanting it to fail because they have their own idea for government. Revolutions never go backwards, and if they are sealed off they explode in violence... and our world is in the Age of Revolution. What is the revolt against? The Linear Thought/Theory of Western Civilization that is failing in our cyclical world. Linear thought is magnifiicent to build a business, but it is a disaster as the basis of government. It not only creates debt slavery for the vast majority of its citizens, but by doing so it denies the economic potential of those billions of citizens. It is this denial of wealth creation which eventually causes all fail and billions must pay the price and die an early death. It is called the Statist State where the govt rules over the people. Yet the only solution is for the people to rule over their govt; this is called Liberty and peace and wealth are its wage. Today, we either embrace Liberty, or we will die within the tyrannical Statist State.
SERFS UP AMERICA!
This is text book Revolution 101, the turning of the intellectuals, a new government, a multitude of factions in the new government wanting it to fail because they have their own idea for government. Revolutions never go backwards, and if they are sealed off they explode in violence... and our world is in the Age of Revolution. What is the revolt against? The Linear Thought/Theory of Western Civilization that is failing in our cyclical world. Linear thought is magnifiicent to build a business, but it is a disaster as the basis of government. It not only creates debt slavery for the vast majority of its citizens, but by doing so it denies the economic potential of those billions of citizens. It is this denial of wealth creation which eventually causes systemic failure, a debt that billions must pay; the price is to starve, see loved ones die around you, and you an early death. It is called the Statist State where the govt rules over the people. Yet the only solution is for the people to rule over their govt; this is called Liberty and peace and wealth are its wage. Today, we either embrace Liberty, or we will die within the tyrannical Statist State. It is a simple choice.
SERFS UP AMERICA!
Varoufakis was talking about this IOU idea in 2013:
https://www.youtube.com/watch?v=A3uNIgDmqwI&feature=youtu.be&t=1h30m52s
Another idea:
the problem with money is that it can be appropriated by private persons. It becomes a form of personal power and then a fetish desire. People mobilise their lives around searching for this money even when nobody knows that it is. So we’ve got to change the monetary system - either tax away any surpluses people are beginning to get or come up with a monetary system which dissolves and cannot be stored, like air miles.
http://www.redpepper.org.uk/david-harvey-interview-the-importance-of-pos...
Greece already has a lot of outstanding WOEs
We Owe Everyone.
And public workers should stay home and hand the gouverment an IOU (some work) back.
Money in general is an IOU contract
the real question is if the particular IOU is worth something - is the party reliable and intends to or can be forced to pay back (perform some work or provide some services in return of the IOU)
in case of USD the party is the most of the world who agree to perform some work in exchange of the USD
in case of Greece IOUs the party would be solely the greek government and some of the greek population (and proly only under police forcing them to work for those IOUs)
I thought that all bank notes were IOU's to start with. Wouldn't IOU an IOU just be another form of hypothecation?
hypothecation kind of suggests there is a collateral pledged
In case of IOU there is no collateral but just a promise to pay back later
Actually what backs it is the work (slavery of the population). That is the collateral. That is why a high national debt is IMO evil. It is selling out future generations into slavery and they didn't even get any say on it.
I can't wait for my first IOU for my SS retirement.
Sarc
A perfect solution! Creating a new currency without explicitly saying so. As long as they make it clear that their IOUs (call them Drachma) will be accepted as payment for taxes at par with the Euro, it will trade at par with the Euro. The best part will be that no one other than the government will be able to create these IOUs. They can even make it a cryptocurrency to ensure that banks are excluded from the loop.
Agreed. Technically it should be sufficient to state that the banks don't have the power to print the IOUs. That way it would be illegal for them to counterfeit them. [In contrast to virtually everyplace else, where banks legally counterfeit the local currency.] So in this type of governance, the banks would be relegated to operating just like savings and loans.
Now if you don't trust the banks to not countefeit the IOUs, then by all means use crypto techniques :-).
Next please..... https://www.youtube.com/watch?v=Zvl9N9GdraQ
That is then how I would pay my taxes: in IOU
So it's clear now that Syriza had No Plan. The pre-election promises they made had to be based on some cunning scheme and/or nudge and wink from Brussels or alternatively they just said what was needed to win the election with no expectation of sorting things out. Cynicism on an unparalled scale.
And when the tax bill comes in, I'll give them those IOU's right back!