Brad Setser

Brad Setser: Follow the Money

Print Print Email Email Share Share Cite Cite
Style: MLA APA Chicago Close

loading...

The money is flowing out even faster than it flowed in …

by Brad Setser
October 31, 2008

At least for Russia. And probably for a host of emerging economies.

Russia’s reserves fell by over $30 billion during the third week of October — tumbling from $515.7b on October 17 to $484.7b on October 24. Roughly $15 billion of the fall reflects the fall in the dollar value of Russia’s euros and pounds. But about $15 billion reflects Russian intervention in the currency market, as well as the drain on Russia’s reserves associated with the loans Russia’s government is making to Russian banks and firms seeking foreign exchange to repay their foreign currency debts.

A $15 billion weekly outflow is rather large.

$15 billion is as much as the IMF committed to lend Russia back in 1998. And the IMF actually only disbursed a third of that total.

The most the IMF ever actually lent out to a single country in the past was roughly $30 billion (to Brazil, in 2002-03). At the current rate, Russia will run through that much in two weeks.

The pace of decline in Russia’s reserves is partially a function of the fact that Russia had so many reserves back in July. Countries with less money in the bank tend to husband their scarce resources rather than spend them liberally. A lot Russia’s reserve buildup reflected private inflows rather than the oil surplus, so in some sense Russia’s government is just facilitating the reversal of those flows. In the process, of course, the Russian state is helping out some of Russia’s biggest businessmen. Russia’s state will likely end up controlling a broader swath of Russia’s economy at the end of the “deleveraging” process.

But the pace of decline in Russia’s reserves is also evidence of the scale of the reversal in capital flows to emerging economies — and the pace of the current outflow.

More money is probably leaving Russia than is leaving other countries, as Russia has some uniquely Russian vulnerabilities that other emerging economies lack. But even if Russia is at one end of the distribution, it certainly isn’t atypical …

42 Comments

  • Posted by DJC

    Here’s the “inescapable reality – Now that the global debt bubble has burst, all the world’s leaders and all their radical new measures can’t” contain, let alone undue, all the damage. They can’t “turn back the clock or reverse decades” of excess and greed. “They cannot repeal the law of gravity or prevent investors from selling. Even as they sweep piles of bad debts under the carpet with bailouts and buyouts, mountains of new debts will go bad – another flood of mortgages that can’t be paid, a new raft of credit cards falling behind, an avalanche of companies defaulting on their bonds.”

    No matter how many billions they throw at the problem, “trillions more in wealth will be wiped out in market declines. For a while longer, our leaders may try to play their last cards in a herculean effort to stop the fall.” They may commit good money to save bad. “Inject more money into bankrupt banks, broken brokerage firms, endangered insurers and any company they deem essential to the economy.”

    It won’t work. “It will be a blood transfusion with a failing heartbeat.” Soon enough they’d better learn that “it’s impossible to save the entire world.”

    http://baltimorechronicle.com/2008/103108Lendman.shtml

  • Posted by fatbrick

    “as Russia has some uniquely Russian vulnerabilities that other emerging economies lack.”

    Everyone is unique. Russia has huge natural resource reserve, which can help them weather all crisis if used smartly. Short run capital outflow is not a big deal. The commodity prices will go up again. This time it won’t need a decade.

  • Posted by DJC

    Much greater than America’s subprime lending. The latest Bank of International Settlements data aren’t encouraging. They show Western European banks in trouble. With the most exposure “to the emerging market bubble, now bursting with spectacular effect.”

    The amount involved is huge. Around three-fourths of “the total $4.7 trillion in cross-border bank loans to Eastern Europe and Latin America.” Iceland was at the leading edge of the problem. Hungary and other states may follow. In a Paul Krugman New York Times op-ed, he discussed currency crises and said he “never anticipated anything like what’s happening now.”

    Europe is now reeling under stress. Heavily pressured by emerging market debt. The Eastern bloc borrowed heavily in dollars, euros and Swiss francs. Some in Hungary and Latvia in Yen. An unpublished 2006 IMF report warned about their most dangerous excesses in the world. Nothing was done to curb them, and finally its authors “had their moment of vindication as Eastern Europe went haywire.” It hit Hungary, Romania and put Russia “in the eye of the storm, despite its energy wealth. The cost of insuring Russian sovereign debt (through CDSs) surged to 1200 basis points last week.” More than Iceland “before Gotterdammerung struck Reykjavik.”

    With oil prices plunging, markets no longer believe that Russian state spending is viable, and the fear is that peripheral contagion will invade the eurozone’s core.

    http://baltimorechronicle.com/2008/103108Lendman.shtml

  • Posted by Cedric Regula

    Here’s an article that came out today, which is why I’m posting it, and it quantifies what Russia plus everyone else is trying to “backstop”.

    ============================
    “Everyone has now gotten used to the idea that we’re “deleveraging.” But what do we think that means? We think it means that banks, consumers, companies, and the government have to cut down their debt a bit.

    Actually, more than a bit.

    Unless it’s different this time, banks, consumers, companies, and the government need to cut their debt by more than half–to about $20-$25 trillion from the current $51 trillion. That’s a lot of buying power that is going to go “poof.”
    ……………………
    http://finance.yahoo.com/tech-ticker/article/104704/What-Does-%27Deleveraging%27-Really-Mean-Cutting-Our-Addiction-to-Debt?tickers=%5Edji,%5Egspc,tlt,PTTAX,SHY,IEI

  • Posted by DJC

    The Chinese banking sector owns scant amounts of toxic assets and uses their own capital to fuel internal growth. China is not insulated from the global crisis and will feel it in slower growth. Still expected to be impressively high although certain to drop from its 9.9% in the first nine months of 2008. Down from 12% last year. Amidst a deepening global slump. It’s helped by strong domestic demand and its exports. Up an impressive 21.5% over last year.

    The gloabl slump has affected China’s toy manufacturers. China’s customs agency reported that 52.7% of them shut down in the first seven months of 2008. Mass layoffs resulted. Other industries are also affected. Textiles, shoes, clothing, home appliances and electronics because of slumping Western markets. Millions of workers are at risk and why China announced an economic stimulus plan to keep growth as high as possible. A targeted minimum 8%. If achieved will be impressive by any standard.

    A potential glimmer of light amidst a dismal global outlook with China determined to keep it that way although there’s no assurance it can. The reason its stock market slumped like most others. However, it may rebound sooner given the government’s commitment to big infrastructure spending increases. With its “embarrassment of riches” according to The Economist. Growing “at a staggering rate” says its Intelligence Unit. Its huge $1.75 trillion in foreign currency reserves. Likely to top $2 trillion by yearend. That can be used for roads, airports, nuclear power plants, hydro power stations, and more. To create new jobs for laid off workers. As many as possible.

    Even in today’s climate, China’s star is rising. In the US, it’s growing dim.

    http://baltimorechronicle.com/2008/103108Lendman.shtml

  • Posted by Howard Richman

    DJC,

    You wrote “China announced an economic stimulus plan to keep growth as high as possible. A targeted minimum 8%. If achieved will be impressive by any standard.”

    The Chinese government is dreaming. About 50% of chinese GDP is investment spending. When investment collapses, the Chinese recession will be quite deep.

    By the way, you forgot to mention that export subsidies are part of the current Chinese policy mix.

    Howard Richman
    http://www.tradeandtaxes.blogspot.com

  • Posted by Twofish

    DJC: It won’t work. “It will be a blood transfusion with a failing heartbeat.” Soon enough they’d better learn that “it’s impossible to save the entire world.”

    I for one find it to be honorable to be part of the fire brigade than a naysayer that says what is being done is impossible.

    Even if what you are doing ends up being useless, it’s unconscionable not to try to fix things, and saying in advance that its useless, implies more knowledge than exists.

  • Posted by Twofish

    Richman: The Chinese government is dreaming. About 50% of chinese GDP is investment spending. When investment collapses, the Chinese recession will be quite deep.

    What makes you think that investment will collapse? If all else fails, massive government infrastructure spending will work. China spent its way out of the 1990′s by building highways. Now its time to modernize the railroads which are still quite ancient. Also you can spend billions getting rid of all of the power plants from the 1950′s and replacing them with new ones.

  • Posted by Cedric Regula

    I just can’t resist the topic of power plants. And like Brad, I think I know all I want to know about coal.

    Here’s the Chinese nuke program. They do make reactors and turbine generators, so I don’t think there is much in it for Russia as far as equipment sales. But Russia has a lot of uranium.

    China could use grid expansion too. In rural areas they still do home cooking and heating with coal. If a electric grid was available, this problem could go away. But they are also looking at cleaner portable solutions like propane, etc… that’s probably cheaper right now.

    And most industrial uses for coal can be replaced by things like electric blast furnaces, etc…

    And they do have all those highways they built, and a fast developing automotive industry. It would be smart to get some use out of that. In South Africa, a small local car company just launched an all electric car. 5 seat compact that gets 120 miles on a charge and sells for $24,000. Operating cost lower than a gas car. If they can do it, China can do it.

    “The Future of Nuclear Power, a 2003 study by a blue-ribbon commission headed by former CIA director John Deutch, concludes that by 2050 the PRC could require the equivalent of 200 full-scale nuke plants. A team of Chinese scientists advising the Beijing leadership puts the figure even higher: 300 gigawatts of nuclear output, not much less than the 350 gigawatts produced worldwide today.”

    Much longer article here:
    http://www.wired.com/wired/archive/12.09/china.html

  • Posted by Don the libertarian Democrat

    Is there any way to even estimate what the IMF might need to fulfill the two programs that they recently announced?

  • Posted by AC

    Brad — you often argue that the 2 trillion dollar reserves of China does not make any sense, and they will loose a lot on it. I think that the 500+ billion dollar Russian reserves was insanely too much, too. I think it will be healthy for them if the level of reserves go down to 1-200 billion. Oil prices will go up sooner than most would think, because investments will dry up, many new projects will be canceled, and the natural decline of the existing fields cannot be stopped.

    DJC — I agree with your link, that the basic origin of the current crisis is a debt problem. The banks and financial institutions simply hit the debt wall. The only cure of this problem is to generate more debt (the current debt can only be supported by more debt in the future, the same way as the current level of consumption can only be supported by more consumption in the future). Right now, only the financial sector has hit the debt wall, and the state, the ultimate savior is still there to help. And that is exactly what it does, generates a lot more debt. It is no wonder that the banks want to forgive some credit card debts right now. They expect that the government/fed/state will cover their losses anyway.

    The current financial problems is a dress rehearsal for what will come in a few years, in a much grander scale: when the whole economy, including the government/state will hit the debt wall. Currently the US private+public debt is around 40 trillion, and nobody thinks that this will have to be payed back (nobody could pay back it, anyway). Just like banks thought, that they won’t have to pay back their debt, because the “current debt is supported by more future debt” system would go on forever. It did not. When the government won’t be able to play the role of the ultimate savior, because it hits the debt wall itself, that will be the beginning of the end of the whole Ponzi scheme.

  • Posted by Howard Richman

    Twofish,

    I agree with you. If China engages in massive infrastructure spending, they could stay out of the global depression.

    Howard Richman
    http://www.tradeandtaxes.com

  • Posted by FG

    Twofish: I for one find it to be honorable to be part of the fire brigade than a naysayer that says what is being done is impossible.

    Only the fire brigade is doing the right thing. In this case I say letting adjustments happen is the right thing to do.
    - affordable housing is a good thing. Even for those that own a house: their next house will be cheaper.
    - people living within their means is a good thing.
    - people paying off debt is a good thing.
    - people who produce nothing not earning indecent amount of money is a good thing.
    - Americans learning a bit of humility is good too.

    Governments are fighting balance and trying to maintain the unsustainable. This is not just impossible, this is not good.

  • Posted by DJC

    Twofish: I for one find it to be honorable to be part of the fire brigade than a naysayer that says what is being done is impossible.

    DJC: Throwing good money after bad isn’t a solution. For instance, AIG was pledged an initial $85 billion from the Fed. Well that money is entirely vaporized. As of yesterday, AIG has burned through $143.8 billion from the Federal Reserve. AIG is now requesting another $135 billion. Amazing how the self-proclaimed “well-capitalized” corporation may easily destroy a quarter of a trillion dollars of capital. It’s time to pull the plug on any further taxpayer losses from the Federal Reserve’s monetization of AIG financial losses.

  • Posted by DJC

    Cedric Regula,

    The China State Council is pledging $300 billion for upgrading the railway infrastructure with a bullet train network. The current 75,000 km railway network will be expanded to 100,000 km. Currently, the Chinese railway network can only handle 30% of freight demand.

    China Nuclear Power Corp builds domestic nuclear reactors and some for export to Pakistan. But China also has purchased reactors from France, Russia, and China. The Tainwan [Jiangsu] nuclear power plant with two reactors was developed and built by Russia. A follow-up project includes two additional Russian-built reactors for the Tainwan complex and an uranium enrichment facility.

  • Posted by DJC

    Correction:

    China also has purchased reactors from France, Russia, and Canada.

  • Posted by Twofish

    DJC: China also has purchased reactors from France, Russia, and Canada.

    And the United States. China plans to buy 100 nuclear reactors from Westinghouse by 2020.

  • Posted by Twofish

    DJC: Throwing good money after bad isn’t a solution.

    What’s the alternative? If you shut down AIG at this point, then the dominoes start falling again, and lots of insurance policies start becoming insolvent.

    One way or another the bill has to be paid, and the question is the least painful way of paying it. The management of AIG has already been fired and replace with new people, and so what is happening now is less a “bailout” than an expensive “toxic waste cleanup.”

    Also it’s not surprising that AIG burned through all of that money as quickly as it did. Do you think that the Fed would have lent the money if it didn’t think it was necessary?

    DJC: It’s time to pull the plug on any further taxpayer losses from the Federal Reserve’s monetization of AIG financial losses.

    Too late. The Fed now owns 80% of AIG, if it doesn’t pump money into AIG and it folds, then the Fed is going to lose money anyhow. What you need to go in with a broom and lots of cash, and clean out the mess, and try to salvage what is salvageable.

    More or less what China did with its financial institutions and failing state owned enterprises.

  • Posted by FG

    Twofish: What’s the alternative?

    We are in this situation precisely because for decades people said “What’s the alternative?” and what is “the least painful way”?

    It went on until, now, the stability of the whole system is at stake. Is the solution to continue and do the same? Until the government itself in bankrupt?

    Seneca would say “Ducunt volentem fata, nolentem trahunt.”

  • Posted by Twofish

    FG: In this case I say letting adjustments happen is the right thing to do.

    And that is what is happening. The trouble is that “letting the market adjust” is not a government hands-off thing. The people that said that markets could function without heavy government intervention in the boom times, are equally and even more dangerously wrong when they say that you can have a market adjustment without government intervention and regulation in the bust times.

    The price of houses needs to go down another 30% or so, and government policy needs to be set up so that this can happen in an orderly way. The consequences of that:

    1) as long as people don’t loan money, no one is going to have cash to buy and sell houses,

    2) as long as banks have bad loans on their books, then they are going to be trying to postpone the day of reckoning. Bad loans need to be taking out ASAP and replaced with good capital,

    3) as long as people are highly underwater, they are not going to be selling. If you have a $500,000 mortgage on a $200,000 house, you aren’t going to want to sell the house, and you may not even be able to sell the house.

    All of this requires very active government intervention. If the government takes a hands-off policy then you have a repeat of the Great Depression.

  • Posted by gillies

    donkeys were harder to sell in the ballinasloe autumn horse fair (county galway, ireland.) i pass this on because the world is now so interconnected that ‘deleveraging’, or call it what you will, is so widespread that the effects of the slowdown are felt among people (irish travellers or ‘itinerants’ ) who do not even have bank accounts, let alone borrowings.

    the high end of the horse business in ireland is currently suffering for more easily discernible reasons.

    just as the titanic would have benefitted from more effective watertight compartment design – could it be that protectionism is what the world needs next ?

    it has been such a dirty word for so long that i hesitate to use it. but if bernanke went the helicopter route (see j d hamilton’s blog, econbrowser, on ‘deflation’ a couple of days ago.) there would be international reaction.

    the blog entry is the creed of a confessed helicopter believer.

    i am a helisceptic.

    what would the rest of the world do, how would it react, to the onset of the helicopter attack ? sit still and watch it on television ?

    put it this way : a lot of advice has been offered to china. so what would anyone advise as an effective chinese response to an attempt by america to reinflate it’s way out of debt ?

    and would it not be quicker and more certain to simply declare a default ?

  • Posted by Twofish

    FG: We are in this situation precisely because for decades people said “What’s the alternative?” and what is “the least painful way”?

    And over the last ten years, they got it wrong.

    FG: It went on until, now, the stability of the whole system is at stake.

    Economic systems are fundamentally unstable. You will never have a situation in which you end up with a perfect hands off system.

    FG: Is the solution to continue and do the same? Until the government itself in bankrupt?

    Bankruptcy is not the end of the world. The purpose of bankruptcy is precisely to rapidly wipe out debts and restructure economic relationships to preserve as much value as possible.

    That’s exactly what we are doing now. The purpose of bankruptcy is that if you provide a process by which companies that are hopelessly in debt can restructure themselves without having the world end, they are more likely to do it with the banking system.

    And the first thing that you do in any bankruptcy is to arrange for an emergency cash infusion to the bankrupt company.

    One basic problem here is I think Western notions of history in which history is a direction toward some sort of utopia. The Chinese view of history in which things happen in cycles, is probably much more accurate, and bankruptcies are part of the corporate life cycle.

  • Posted by gillies

    “All of this requires very active government intervention. If the government takes a hands-off policy then you have a repeat of the Great Depression.”

    true. but it is in the boom or ‘irrational exuberance’ phase that the pilot needs to take firm control in the cockpit – not in the final sickening tailspin phase.

  • Posted by Twofish

    gilles: true. but it is in the boom or ‘irrational exuberance’ phase that the pilot needs to take firm control in the cockpit – not in the final sickening tailspin phase.

    True, but we are no longer in the “irrational exuberance” phase. We are now in the “oh my god, we are all doomed” phase, in which case the purpose of government is to push things up rather than down.

    Eventually we will go back into irrational exuberance mode, and then back into tailspin mode and then into irrational exuberance mode, ad infinitum. The business cycle has been part of the economy for so long that I don’t think that it is possible or even desirable to try to end it, just manage it so that it doesn’t have too many bad effects.

    Yes it would be nice if we have some sort of revolution and then fix this problem once and for all. Trouble is that I have no good reason to think that the cure is going to be better than the disease or that the cure is even going to work at all.

  • Posted by marc weiner

    It is delusional to think the current governmental responses are being done for the “economy” or”to keep homeowners in their houses.” These are payoffs to individuals who skim [in sum] billions on “bonuses” from public corporations. Give me 135 billion {aig} and see how large a suitcase of cash I would deliver to your safety box of choice.

  • Posted by FG

    Twofish: Economic systems are fundamentally unstable.

    The situation is like forest fires:
    Normally forest fires happen on a regular basis but they are small and many trees survive them. If you try to suppress fires altogether however, combustible material accumulates, and when inevitably a fire happens, it is far more intense and the forest is destroyed.

    But forests do regrow.

    Twofish: Bankruptcy is not the end of the world.

    I’m ok with bankruptcy… if we let it happen.

    Twofish: Western notions of history in which history is a direction toward some sort of utopia.

    This difference comes from religions. Western (and middle eastern) religions (Christianity, Judaism, Islam) are rooted in the defense of “good” vs evil. Eastern religions (Taoism, Buddhism) know that “People hold the good to be good. There reside the error.” and “All life is sorrowful.”

    Consequently the west is bent on suppressing suffering (unemployment, poverty, and burning trees) and as a result, creates it. While the east accepts that forest fires do happen.

  • Posted by Cedric Regula

    “DJC: China also has purchased reactors from France, Russia, and Canada.

    Twofish:And the United States. China plans to buy 100 nuclear reactors from Westinghouse by 2020.”

    Sort of. But It won’t put much of a dent in the trade deficit. And we’ll keep shipping China those phony dollars instead.

    “An important factor for SNPTC in the contract was technology transfer. Westinghouse agreed to allow Chinese engineers to master the AP1000 technology, adapt it to a standardised design for use in China and then build the units unaided. Using AP1000 and CPR-1000 reactors (developed after earlier technology transfer from Areva), Chinese planners want to build well over 100 new reactors by 2030.”

    “Research base for new Chinese nuclear power
    30 October 2008

    A new research and development office opened in Beijing this week, focused on the task of assimilating AP1000 nuclear technology for mass deployment.”

    http://www.world-nuclear-news.org/NN_Research_base_for_new_Chinese_nuclear_power3010081.html

  • Posted by LJR

    “Gort! Klaatu barada nicto.”

    Keep fingers crossed.

  • Posted by XvonZ

    FG: Seneca would say “Ducunt volentem fata, nolentem trahunt.”

    Unless, that is, the unwilling are no longer willing to be dragged.

    As Seneca also said, “An unpopular rule is never long maintained.”

  • Posted by Qingdao

    China has eleven operating nuclear power plants with some 20 more units about to start or in the earliest stages of construction. The country has plans to increase its nuclear capacity sixfold by 2020 and then a further three to fourfold reaching 120-160 GWe by 2030. Despite these ambitious plans, nuclear would still only represent a small share of the country’s burgeoning electricity demand – the 50-60 GWe planned for 2020 would only represent about 5% of Chinese generation.

    (Today’s World Nuclear News)

  • Posted by Cedric Regula

    Qingdao

  • Posted by Cedric Regula

    Qingdao:

    That’s the problem with having the #1 policy objective of 8% minimum growth first, and then figuring how you get there second.

  • Posted by satish

    I dont how can chinese use their forex reserves. They are locked up in treasuries,agencies. Even if they stop buying treasuries dollar will collapse, let alone selling.

  • Posted by me
  • Posted by Twofish

    FG: Normally forest fires happen on a regular basis but they are small and many trees survive them. If you try to suppress fires altogether however, combustible material accumulates, and when inevitably a fire happens, it is far more intense and the forest is destroyed. But forests do regrow.

    Sure but the last time we had a “let it burn” philosophy, it took 15 years. And after the forest regrows you end up with exactly the same problem. The business cycle exists because of human greed, fear, and arrogance, and I don’t think it will be possible in the next thousand years to eliminate human greed, fear, and arrogance, you just have to manage it.

    One needs to point out that when you have a financial crisis, wealth doesn’t get destroyed. If someone defaults on a home mortgage or the stated value of the house goes from $500,000 to $250,000, the house does not burn down. The real danger is that if as a result of the financial crisis, no one looks after the house (i.e. windows get broken, copper plumbing gets stolen, etc. etc.) then this actually does destroy real wealth.

    FG: I’m ok with bankruptcy… if we let it happen.

    It’s happening right now. Most people really have never seen a bankruptcy up close and really don’t know what a bankruptcy looks like. The first thing that happens in a bankruptcy is that the you have a judge issue “first day orders” in which you figure out what you need to do to keep the company operating. The second thing that happens is that you get “debtor in possession” financing in which banks put in emergency money to make sure that critical vendors and employees get paid. Then you go over all of the debts and then write them down, and you go through a process in which things get restructured.

    So Lehman goes bankrupt, does that mean that we burn down the Lehman office in Time Square and then destroy the millions of dollars in perfectly good computers in them? Of course not. The bankruptcy process is there to insure that as much value as possible gets preserved.

  • Posted by FG

    Twofish: no one looks after the house [...]then this actually does destroy real wealth.

    But that wealth was really destroyed when someone built a house no one needs. Not when the government failed to punish savers enough to force them to buy an overpriced house.

    Twofish: The bankruptcy process is there to insure that as much value as possible gets preserved.

    If the goal is to limit the damage and save some of the trees, I’m ok with that.
    If the goal is to suppress any fire for fear the whole forest would explode, then this is not only impossible, it is just wrong.

  • Posted by Chris

    All of this requires very active government intervention. If the government takes a hands-off policy then you have a repeat of the Great Depression.

    Actually the New Deal extended and deepened the Great Depression. Things got progressively worse through the decade.

  • Posted by baychev

    DJC,
    you are quite of a dreamer. the bulk of this $4.7tn cross border lending is between affiliates of the same company, or said in other words, not real debt. if VW builds a few plants in china/india that shows as cross border lending, but in fact the parent company is lending to its wholly (or joint) owned subsidiary. this is not a loan that has to be repaid or that would put risk on the parent company or the bank that has provided the credit.

  • Posted by bsetser

    please do not paste entire articles into the comments section. thanks

  • Posted by bmh

    Re Bancruptcy is not the end of the world from wiki
    In the Torah, Moses’ Laws prescribed that one “Holy Year” or “Jubilee Year” should take place every 50 years, when all debts are eliminated among Jews and all debt-slaves are freed, due to the heavenly command.[1] Moreover, the Hebrew (or Jewish) law of debt forgiveness can be found in the Christian Old Testament at Deuteronomy 15:1–2, which instructs a release of debt every seven years.

    In ancient Greece, bankruptcy did not exist. If a father owed (since only locally born adult males could be citizens, it was fathers who were legal owners of property) and he could not pay, his entire family of wife, children and servants were forced into “debt slavery”, until the creditor recouped losses via their physical labour. Many city-states in ancient Greece limited debt slavery to a period of five years and debt slaves had protection of life and limb, which regular slaves did not enjoy. However, servants of the debtor could be retained beyond that deadline by the creditor and were often forced to serve their new lord for a lifetime, usually under significantly harsher conditions.

    Best BMH

  • Posted by Judy Yeo

    hmm, didn’t a bloomberg (or was it the telegraph?) journalist point to Putin taking opportunity of the crisis to regain control over the russian oligarchs?

    again, a tough year for democracy?

  • Posted by satish

    2fish- who is going to pay for the irrational exuberance.
    Payback time is when people think they are doomed.

Pingbacks