Europe's Debt Cancellation Would Mean Recognition Of Insolvency | WHAT REALLY HAPPENED X-Frame-Options: SAMEORIGIN

Europe's Debt Cancellation Would Mean Recognition Of Insolvency

Economist Thomas Piketty, creator of some of the most absurd proposals embraced by the extreme left, has published an article in which he demands a cancellation of government debt in the hands of the European Central Bank “in exchange for greater public investment” ... which, by the way, would be paid with more issuance of public debt. Fascinating.

Luís de Guindos, vice president of the ECB, has settled the controversy with two pieces of evidence.

“Cancelling the debt (in the ECB balance sheet) is illegal and also does not make economic sense,” he explained to Reuters on February 4th, 2020.

The first part is obvious. It is prohibited by the bylaws of the European Central Bank. I will explain the lack of economic logic here.

A debt write-off or cancellation is the evidence of the issuer’s insolvency. If, as Piketty repeats, the solvency and credit credibility of the Eurozone is not at stake, why ask for a cancellation? If, in addition, as Piketty and other defenders of massive state indebtedness maintain, deficits are not a problem and increasing debt is not a concern because it creates reserves, why cancel it?

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