Sovereign Debt Default: The Free Market Answer

sovereign defaults








By:  Nick Russo     November 1, 2015

Perpetual Debt Slavery Is Not A Solution To Our Debt Problems


The Problem:  Creating Money-Out Of Nothing-Through Debt  

The Solution:  Reduction of Debt Through Sovereign Insolvency and Bank Lending Reform

The United States of America has a long developed body of bankruptcy law which provides for the right of entities to declare insolvency, default on their burdensome debt, and start a new financial future without the constraints of the previous debt owed.  The requirements for an entity to declare insolvency is simply that no illegalities were committed when acquiring the debt and that the entity has made an effort to repay to the best of its ability.  Insolvency does not mean you totally avoid paying debts.  Under bankruptcy or insolvency law, both parties accept that they will incur a loss.  The amount of loss incurred by the debtor and creditor is negotiated and is based on the assets of the insolvent entity.  The entity’s assets are qualified and then required by the bankruptcy courts to be liquidated. However, some critical assets may be protected and are untouchable to the creditors.  The purpose of this body of law is to provide an organized means for a default on debt to take place.  This organized process allows creditors to maximize the amount of capital recovered, while simultaneously allowing the insolvent entity to get relief from debt which it could never repay.

Without this protection, perpetual debt slavery would be a common reality.  Businesses and Individuals, would be required to pay off debt and accumulated interest forever. Thus, the gains of business risk and individual labor would be forever handed over to the banks.  This situation creates debt slaves and severely restrains the productivity of the country in which it takes place.  When a significant portion of individual and/or business income goes only to debt payments, less money is then available to purchase goods, to save, to invest in productive capacity, and all the other activities which create a healthy economy.  Most developed nations have recognized that this destructive scenario is not in the best interest of the nation or its people.  Insolvency law provided a mechanism for relief.  There must be available, a path to becoming productive again and this is achieved by eliminating the restraints of burdensome debt.

Just as with individuals, Sovereign Nation’s must also not be forced into debt slavery by international financial institutions.  Sovereignty is maintained by nation-states retaining the ability to default on debt.  Financial Institutions are private entities.  Private entities have no authority to override the sovereignty of any Nation.


The Greek Example:

International banks in partnership with elements within the Greek government used financial methods to intentionally disguise the amount of debt Greece had on its balance sheet. This illegal financial manipulation was implemented by international banks and Greek politicians for the purpose of meeting the financial requirements necessary for Greece’s acceptance into the European Union.  These same financial manipulations led to Greece’s debt levels skyrocketing and forced the nation into insolvency.   When the country could not pay the debts, the banks took control of the country.

Arlene McCarthy, vice-president of the European parliament’s economic and monetary affairs committee.

It appears that Goldman Sachs have colluded with past Greek governments to reduce the appearance of Greece’s debt for short-term gain, while in reality making it worse than ever…These deals have increased costs for Greek taxpayers and left a mess behind for Greece’s citizens and the Eurozone.


International Banking strategy according to Joseph Stiglitz, ex-chief economist of the World Bank, Nobel Prize Winner in Economics, and ex-member of the U.S. President’s Counsel of Economic Advisors

The IMF riot is painfully predictable. When a nation is, ‘down and out, [the IMF] squeezes the last drop of blood out of them. They turn up the heat until, finally, the whole cauldron blows up.. – as when the IMF eliminated food and fuel subsidies for the poor in Indonesia in 1998. Indonesia exploded into riots. The IMF riots (and by riots I mean peaceful demonstrations dispersed by bullets, tanks and tear gas) cause new flights of capital and government bankruptcies. This economic arson has its bright side – for foreigners, who can then pick off remaining assets at fire sale prices.



International Banks use this formula-The IMF Riot– to take over Sovereign Nations:

1.  Incentivize and/or deceive members of a sovereign government into signing burdensome loans which are collateralize by the critical infrastructure of the nation-including the tax revenues of the citizens.  The loans are illegal and odious because of the banks and the politician’s foreknowledge that this debt can never possibly be repaid based on the nation’s revenue streams.  Fraud against The Citizens is committed by knowingly entering into legal contracts which can never by honored.

2. The nation has now been burdened with extremely high levels of hidden debt. However, the intent of the international bank, through opaque balance sheet manipulation, is to disguise the true debt level of the nation. This manipulation makes it appear that the financial health or solvency of the nation is better than it is.   Furthermore, it is now known with certainty that at some point in the future the client nation will no longer be able to service their debt.  A ticking financial time bomb has been intentionally created through fraud; with the banks waiting to pick up the pieces at pennies-on-the-dollar.

3. When the client nation attempts to declare insolvency and default on the odious loans, the international banks and other private interests owning the debt take immediate control of the collateral- the nation’s critical infrastructure.  The private financial institutions declare that finance laws must be honored and no debt default will be allowed.  The banks then force the sovereign government into accepting even more debt in order to continue making payments. To pay the burdensome debt levels, the nation is forced to institute austerity plans (fewer services, more taxes) on its citizens who were criminally signed on to the debt from the beginning.  These austerity plans initially cause rioting which collapses asset prices even further. The people are now captured and have no recourse.  The international banks and other private interests have now effectively gained control of the nation.  Control, which international banks seized from the citizens’ Sovereign Government.

Reality suggests Greece’s financial calamity was caused both by the Greek politicians lack of fiscal discipline AND financial fraud on the part of international banks-primarily Goldman Sachs.  This same scheme has been executed on countless nations worldwide.  Corporate/Government partnership in FRAUD.  Corporate power merging with government power at the expense of individual citizen IS FASCISM-there is no more accurate description.

The talking points in the media promulgate the idea that a nation’s financial meltdown is always due to lack of governmental discipline and that the free market is the answer.  The mindset is: if a nation takes loans, they are obligated to pay them-no matter what.  However, this is not consistent with the common law of the world.  Oftentimes debt is issued by a private bank with foreknowledge that their client can not possibly repay the debt. In this circumstance when the client does default, the bank must live with its “risk taking” behavior, suffer the consequences, and write off the bad debt.

However, when banks are forced to write-off bad debt it has the direct effect of decreasing equity on their balance sheet.  Another way of describing the effect of writing-off bad debt is that it decreases the wealth of the banks owners.  And therein lies the reason why governments and banks never want to allow sovereign defaults.  They always respond by issuing even more debt.  Loans are bank assets which increase bankers wealth.  Defaults and their subsequent write offs are liabilities which decrease banker wealth.

It turns out that the free market IS the answer, but one must recognize that part of the free market dynamic is the assumed risk of the lenders. Loans are voluntary business transactions between two parties-each assuming some risk.  Every business activity, including Banking, contains risk.  A business’s profit is the payment it receives for taking these risks.

Banks take on business risk when they increase a client’s debt level. Debt creates leverage which magnifies profits AND losses. When a client’s over-leveraged financial position leads to them not being able to repay the debt, the result is a debt default.  The bank voluntarily took on the risk of a possible debt default when it issued the loan(s).  Therefore, private banks must accept as part of the free market dynamic the possibility of client insolvency and their debt instrument or “asset” becoming worthless.  This is the normal business risk of a bank.

Insolvency is part of the free market dynamic.  Insolvency is the CHECK and balance on the wild issuance of debt to unworthy clients.  Financial institutions who irresponsibly issue debt Fail when their unworthy clients go bankrupt.

In our current environment, banks are ALWAYS bailed out so that their wild issuance of debt is NEVER penalize.  In fact, the banks behavior is rewarded by the issuance of even more debt.  This phenomenon has led to the financialization of the entire globe.  This global financialization is a strategic policy which LEADS TO THE END OF NATIONAL SOVEREIGNTY and of individual citizens paying the true costs.  Furthermore, this strategy leads to Banks eventually Owning Everything.

The formula for international banks owning the world is simple:  keep issuing debt out of thin air, continue to have their clients become insolvent, prohibit default through their relationships with bureaucrats, and then seize the real collateral. 

Nations are not conquered by invading military forces.  Today, modern conquerors wear the finest custom suits and are called Bankers.