FOR RELEASE: 05/12/2013
Contact: Philip Pilkington
Tax-Backed Bonds Will Still Solve the Eurozone Crisis and Stop Austerity
The Levy Institute of Bard College recently released a follow-up policy note by Philip Pilkington on the continued relevance of tax-backed bonds as a means of solving the Eurozone crisis. The policy note reevaluates the revolutionary tax-backed bond solution to the Eurozone crisis in the face of ongoing changes in the monetary union.
Tax-backed bonds work by providing investors with a solid guarantee that in the case of a default by a Eurozone member country their sovereign debt can be used to make tax payments within the state. This would provide investors with a solid, 100% guarantee on their investment. Such a guarantee would ensure low and stable yields without the intervention of the monetary authorities and would allow the issuer of tax-backed bonds to halt any damaging austerity programs which they may be undertaking.
The original policy note which was co-authored with the originator of the plan economist and hedge fund manager Warren Mosler and was published in March of 2012. Since then there has been a lot of discussion about the proposal.
The Irish Finance Minister Michael Noonan raised the proposal in the Irish Parliament in May of 2012 but rejected it based on advice that he received from the National Treasury Management Agency (NTMA). The new policy note published by the Levy Institute addresses the Finance Minister’s concerns and concludes that the policy is still viable in light of the objections raised by the NTMA.
Press coverage of the proposal has been extremely positive so far, with a seminal op-ed being published by the famous anthropologist and author of ‘Debt: The First 5000 Years’ David Graeber in The Guardian. We are also awaiting an upcoming appearance of Philip Pilkington in a film about the debt crisis for French television that deals with the crisis as a whole.
To see the new proposal please follow this link. To see the original proposal follow this link.
We look forward to a lively debate surrounding the proposal in the coming months.
From your Policy Note:
“Turning to the Deputy’s question, I am informed by the NTMA that investors in Irish Government bonds legitimately expect that tax receipts form a substantial part of the revenue stream to meet Ireland’s debt obligations as they fall due. Such investors rank “pari passu” (i.e. equally amongst themselves) and would not expect investors in tax backed bonds to be granted a preference in terms of payment obligations, particularly if any significant volume were to be issued. (Houses of the Oireachtas 2012)”
He appears to have think that ‘tax-backed bonds’ means guaranteed payments on the bonds out of tax revenue, rather than that the bonds can be *used to pay taxes*..
I see how it could be read that way. I hope that’s not what he meant because that would imply a serious incompetency on the part of the people at NTMA.
My reading is this: the concern is that, in the case of default, the investors with tax-backed bonds will be able to collect their payments but the investors with normal bonds will not, as tax revenues fall due to the influx of tax-backed bonds. That makes sense, so far as I can see.
Ah interesting, sounds very similar to this:
Wish I had the time to read more widely, as this kind of policy appears to have been promoted since a long time ago, and the above NEP article is my first real good look at it.