Comments on: Funny money

By: dsquared

dsquared — Fri, 10 Dec 2004 09:58:06 +0000

Chris is right that this is a fairly scabrous dodge on the part of the German state to get out of paying up, although I tend to think that anyone who bought Weimar Republic bonds in 1926 ought to have had an idea that something might go wrong. Keynes would certainly not have been long these bonds for the account of King’s College.

By: Andrew Boucher

Andrew Boucher — Fri, 10 Dec 2004 06:24:05 +0000

nick: I think the strategy could be more subtle. It could be first to have the SE banks buy bonds from the government agencies and then let these default.

By: nick

nick — Fri, 10 Dec 2004 03:12:43 +0000

Ah, the State. They issue a bond saying the bondholder was entitled to such and such, and now they won’t pay up. Don’t try that at home. Sections of the right-wing media are already muttering about defaulting on T-bills sold to those evil SE Asian bankers. Expect that muttering to increase in volume over the next few years.

By: Mrs Tilton

Mrs Tilton — Fri, 10 Dec 2004 01:32:07 +0000

It’s illegal to bet on inflation? Am I missing something? Nope, you’re not. Or rather, if you are going to bet on inflation and hope to have the bet deemed enforceable, you’d better choose your words carefully.

By: a different chris

a different chris — Fri, 10 Dec 2004 00:54:45 +0000

>prove that yours were honestly gotten and held Ah, the State. They issue a bond saying the bondholder was entitled to such and such, and now they won’t pay up. Don’t try that at home. It seems to me that the burden is on the Issuer to prove that the weren’t “honestly gotten.” But: to do that would mean identifying the real owner of the bonds. And: if they did identify that person Then: he/she or his inheritors would, ahem, be entitled to the money! Maybe, like Jason, I’m missing something?

By: Jason McCullough

Jason McCullough — Thu, 09 Dec 2004 23:44:50 +0000

“German courts have, in the past, refused to enforce debt contracts that indexed interest to the pay of German civil servants, on the grounds that the contracts violated public policy by expressing distrust in the soundness of the deutsche Mark.” It’s illegal to bet on inflation? Am I missing something?

By: Mrs Tilton

Mrs Tilton — Thu, 09 Dec 2004 23:10:01 +0000

It’s just not true that the German courts would enforce a judgement of this kind from a court in Tampa, Florida Not not true either; just very unlikely. If you want to know the circumstances under which a German court will recognise the judgement of a foreign court, it’s all there in the ZPO. That ordre publique bit, if nothing else, is likely to whap the strawberry farmer in the crutch. German courts have, in the past, refused to enforce debt contracts that indexed interest to the pay of German civil servants, on the grounds that the contracts violated public policy by expressing distrust in the soundness of the deutsche Mark. As for the New York courts, well; I’d want to take a very close look at what provisions of the bond, if any, purport to waive sovereign immunity. Best success to the farmer, but my guess is that he is now the proud owner of paper that would look very impressive framed and hung on the wall of his den.

By: dsquared

dsquared — Thu, 09 Dec 2004 20:54:23 +0000

It was Sraffa rather than his college, and IIRC he bought the Japanese government bonds immediately after the war rather than relying on successor states. These bonds did exist, and the German government does, in principle, recognise them as liabilities. But in order to get paid, you would have to prove that yours were honestly gotten and held, and not among the vast amounts of stolen ones. The chances of doing so are very slim, and you would almost certainly have to prove your case in a German court rather than an American one. It’s just not true that the German courts would enforce a judgement of this kind from a court in Tampa, Florida; it’s doubtful that the New York courts would, which might be a better bet if you were hoping to attach any German sovereign assets. My guess is that this guy’s been made the victim of a con game; there was a brokerage in the 1990s that was hawking these bonds around Florida and which got shut down by the SEC. I suspect that the bonds themselves weren’t destroyed and now somebody else is having a go.