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MOSLER'S LAW: There is no financial crisis so deep that a sufficiently large tax cut or spending increase cannot deal with it.

Hints of Portugal PSI?

Posted by WARREN MOSLER on March 21st, 2012

From Morgan Stanley
Note the talk of a PSI (bond tax):

5. Portugal: Portugal’s five-year bonds are trading at ~16%, right around the level where Greek bonds traded last April when Eurozone officials began to turn their attention to forcing losses on private sector creditors. The key area of concern in the market is a €9.7B bond maturing in September 2013 that is not covered by the country’s €78B bailout. Portugal needs ~€25B-€30B to fund itself through 2015. Portuguese officials hope that a pickup in market confidence will allow it to return to the bond market in time to refinance the 2013 bond. The Portuguese funding concerns have been widely discussed in the press. While there has been speculation that the country could be next in line for a debt restructuring, this outcome has been disputed by both Portuguese and troika officials.

5 Responses to “Hints of Portugal PSI?”

  1. Neil Wilson Says:

    As ever the choice is accommodate or confiscate.

    Without the currency issuer accommodating excess savings, then those excess savings have to be eliminated either by bankruptcy/default or by explicit taxation.

    Clearly the fear of the impact of accommodation must be very large indeed.

    What are they frightened of?


    Unforgiven Reply:

    @Neil Wilson, Mostly of damaging their theo-nomic point of view, I’d imagine.

    Honestly, I wish somehow the PIIGS could bring suit against them. Perhaps they could pay the lawyers with tax credits?



    the irony is those ‘savings’ aren’t a problem as per the inflation rate, unemployment, etc. In fact, from that point of view deficits need to be higher.

    the problem is entirely political, as is the ‘answer’ which itself is counter productive to the real economies as well.


    Art Patten Reply:


    Also ironic that many Americans still believe in (and some rail against) ‘liberal’ Europe.


  2. Symmetry Capital Management, LLC » Near-Term Looking Rosy, Longer-Term Not So Clear Says:

    [...] widely under-appreciated risk (hat tip to Warren Mosler) is the threat of more private-sector haircuts for holders of troubled European government debt. [...]

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