Greece just defaulted. Again. No surprise - the country has been in default half the time since 1820. Curiously, Greece is also the first recorded sovereign defaulted as Art Cashin notes in his piece today. He also reminds us that the UK's plans to return the 100 Year bond are nothing new. In fact, the Consol, or the UK perpetual, was around in the 1700's. Things did not work out very well back then...
From UBS Financial Services
How Do You Get To Default? Practice! Practice! Practice! - As you may have guessed, I appreciate putting a historical perspective on world events. So, I was intrigued to pick up the latest report from John O’Meara and Michael Keating over at Inner Harbor Advisors. Here’s how they opened the report:
There's More than One Way to Repay a Debt
The Greek government invoked a retroactive collective action clause last week forcing private bondholders to accept a compulsory restructuring, thus triggering credit default swaps on Greek sovereign debt. In other words, Greece has defaulted. Again. Greece has been in default approximately 50% of the time since 1820. Greece is also the home of the oldest recorded sovereign default in history, dating back to the 4th century B.C. when 10 of 13 Greek city-states stopped payments on their loans from the Temple of Apollo at Delos. Eventually those loans experienced an 80% writedown, not much different from where current Greek bonds are trading. In fairness, the Greeks were probably not the first nation to default. Knowing human nature and the nature of states themselves, we expect the first ever default occurred pretty soon after the first ever sovereign debt was issued. The Greeks at Delos happened to be more diligent about recording these things. Also, since the rise of fiat currencies, nations have tended to follow the model of another of the ancient Greeks, Dionysius I of Syracuse, when it comes to handling fiscal crises. Finding himself deeply in debt to his own citizens, Dionysius demanded his creditors bring in coinage equal to what they were currently owed. At which point he promptly took the coins, stamped the number "2" on them and returned the coins to their owners. All debts thus satisfactorily paid. Satisfactory to Dionysius anyway.
Talk about a bad FICO background. A hat tip is also due to John Mauldin and Grant Williams who also touched on the Temple of Apollo incident.
I Think They Should Check With Captain Bligh - Hoping to seize on the opportunity of historically low rates, the British Government is considering the issuance of a perpetual bond (no fixed maturity). The last time they did that was in the early 1700’s. (The South Sea Bubble. Mutiny on the Bounty. Breadfruit trees and such.)
It did not go well.
The South Sea Bubble bankrupted half the nation, including Isaac Newton, the greatest mind of his time - or maybe anytime. They wound up putting the Chancellor of the Exchequer into the Tower of London in chains. Maybe a 100 year bond would be long enough.
