The new IMF proposal led with Christine Lagarde: Debt cuts for over-indebted states are to be performed more effectively in future by defaulting on retirement accounts held in life insurance, mutual funds and other types of pension schemes, or arbitrarily extending debt perpetually so you cannot redeem.
The new IMF paper describes in great detail exactly how to now allow the private sector, which has invested in government bonds, to be expropriated to pay for the national debts of the socialist governments.
The IMF working paper from December 2013 states boldly:
“The distinction between external debt and domestic debt can be quite important. Domestic debt issued in domestic currency typically offers a far wider range of partial default options than does foreign currency–denominated external debt. Financial repression has already been mentioned; governments can stuff debt into local pension funds and insurance companies, forcing them through regulation to accept far lower rates of return than they might otherwise demand.”
Already in October 2013, the International Monetary Fund (IMF), suggested the Euro Crisis should be handled by raising taxes.
The IMF lobbied for a property tax in Europe that should be imposed where there are no such taxes.
The IMF has advocated for a general “debt tax” in the amount of 10 percent for each household in the Eurozone, which also has only modest savings.
The money people have saved, the IMF maintains should be used for debt service by sheer force.
To reduce the enormous national debt, they maintain that government has the right to directly usurp the savings of citizens. Whether saving money, securities or real estate, about ten percent could be expropriated. This is the IMF view.
Because the government debt of the euro countries has increased a total of well over 90 percent of gross domestic product, they suggest that the people should sacrifice their savings for the benefit of the state.
Socialism is no longer to help the poor against the rich, but to help the government against the people. The definition has changed.
In January 2014, the Bundesbank joined the IMF project focusing on a “wealth tax”. In its monthly report they had announced:
“In the exceptional situation of an imminent state bankruptcy a one-time capital levy could but cheaper cut than the then still relevant options”
if higher taxes or drastic limitations of government spending did not meet, or could not be implemented.
In the latest June 2014 working paper of the IMF, they have set forth yet another scheme – extending maturity;
So you bought a 2 year note?
Well, the IMF possible solution would be to simply extend the maturity.
Your 2 year note now become 20 year bond.
They do not default, you just can never redeem.
Possible remedy. The preliminary ideas in this paper would introduce greater flexibility into the 2002 framework by providing the Fund with a broader range of potential policy responses in the context of sovereign debt distress, while addressing the concerns that motivated the 2002 framework.
Specifically, in circumstances where a member has lost market access and debt is considered sustainable, but not with high probability, the Fund would be able to provide exceptional access on the basis of a debt operation that involves an extension of maturities (normally without any reduction of principal or interest).
Such a “reprofiling” operation, coupled with the implementation of a credible adjustment program, would be designed to improve the prospect of securing sustainability and regaining market access, without having to meet the criterion of restoring debt sustainability with high probability.
Now the June 2014 report has a new, far-reaching proposal.
This shows how lawyers think in technical definitions of words. There is no actual default if they extend the maturity.
You could buy 30-day paper in the middle of a crisis and suddenly find under the IMF that 30 day note is converted to 30 year bond at the same rate!?
More from Martin Armstrong post here