Sunday, February 5, 2017

S&P: Le Pen's French Debt Plan Would Trigger Default

France would default on its sovereign debt if it unilaterally converted its euro-denominated obligations into new francs following a National Front election victory, a senior executive at ratings agency Standard & Poor's told The Economist, reports Reuters.

"There is no ambiguity here," Moritz Kraemer, S&P's head of sovereign ratings, said in a letter published in the weekly magazine's latest edition.

"If an issuer does not adhere to the contractual obligations to its creditors, including payment in the currency stipulated, (we) would declare a default," Kraemer wrote.

FN leader Marine Le Pen has pledged to take France out of the euro and convert its debt into a new currency.

This sounds close to an Ellen Brown money printing scheme.

 Le Pen should just default on the debt and that would be the end of it but she wants a new currency to support her many interventionist schemes. She is not close to advocating the type of hard money currency that the French economist Jacques Rueff would have.

The problem with the populist revolts occurring around the globe today is that the masses are economically ignorant when it comes to fundamental economics and they have no clue as to what is in their best interest. Thus, one central planning group ends up being replaced by a different central planning group. The idea of free markets and liberty do not register as an option.



  1. I agree and I also think the leaders of these movements have either no certain or incorrect theories of Economics and/or the State.

    We need 1 of 3 things: 1) a populist leader who believes in free markets and liberty, 2) to educate and persuade the masses on free markets and liberty, 3) to educate and persuade the intelligista on free markets and liberty.

    40 years ago, our side chose option 3. Sad!

  2. Wasn't Candidate Trump making some noise about possible debt default a few months back? I mean, clearly neither he nor the FN is remotely libertarian, but it seems like default has to appeal to libertarians for a few reasons:

    1.) The creditors who lose their shirt generally wittingly funded the state, in the name of seeking a "secure investment." I don't mean to morally judge these people, but I would feel far better about them taking the hit than, for example, forcing the taxpayer to rescue them.

    2.) It could potentially ruin the state's credit and make it more difficult for it to continue to extract resources from the productive economy going forward.

    I mean, it would have obviously been better if these debts had not been run up to begin with, but now that they have been, default seems like a pretty attractive resolution. Maybe when Trump gets tired of slamming immigrants and free trade he can revisit this?