I was reading about the Greek haircut last year when the EU along with the Greek government forced bond holders to accept a 75% haircut on their assets. I remember Germany doing something similar at the end of WW2. I was wondering if this is perhaps more common then previously thought?

Does anyone have anymore examples of democratic governments directly seizing or devaluing financial assets?

  • 4
    – Ben
    Apr 20, 2013 at 22:13
  • Depends on your definition of "seizing or devaluing financial assets". Plenty of countries combined strong inflationary measures with restriction on converting country's currency to other currencies (Russia comes to mind as one example, in 1990s); which has the same effect.
    – user4012
    Apr 21, 2013 at 18:10
  • No I'm not talking about indirect inflationary methods but rather direct actions.
    – Karlth
    Apr 22, 2013 at 14:00
  • @user357320 - people are screwed either way, as the old joke goes :) But it's your question so you set the rules.
    – user4012
    Apr 23, 2013 at 1:09
  • How it depends on whether a country democratic or not?
    – Anixx
    Apr 24, 2013 at 22:02

3 Answers 3


I can mention three direct devaluation and seizure from my readings and memory where Democratic countries involved.

  • first one: Hungary in 1996, Bokros Package contained direct devaluation of Hungarian Forints, so all savings lost value instantly. I think this method is not unique in history, but sadly I can't mention other.

  • second one: Recently in Hungary, 2011. The government seized all the private pension funds. Those who wanted to keep it, were forced to make a disclaimer, they want to keep it. The goverment treatened the population: the disclaimers will receive no state pension even if they pay the related tax. Only 3% kept their savings (including me). I am sorry, I can't really provide English sources, just a Hungarian one. The private pension payments are still held back by government regardless if you made the disclaimer. The savings' 89% by now gone on ad-hoc expenses.

  • third one: Seizure of private gold in 1933 in US, an interesting subject indeed. The given value was lower than the gold value itself.


It's a small (not a county wide example), but US Government forced the bondholders of GM to accept a haircut that was contrary to capital structure of the company (in order to give more of the post-bankruptcy assets to the labor union).

More specifically, unsecured bondholder claimants received roughly 10% (90% haircut) on their securities - they got 10% equity in new GM for ~$27B of old GM liabilities, and could not sell till the post-IPO price fell by ~1/3 - meaning, it was even lower than 10%, more ~5-8%.

In contrast, by Obama's "Car tzar" insistence, UAW got what was estimated to be 50-60% on their liabilities (src), almost 10x more - while one of the main principles of bancruptcy law is that similarly senior debtholders must be given the same treatment.

  • Not from me! Thanks for suggestion, I had forgotten about GM. Also wasn't something similar at Washington Mutual?
    – Karlth
    Apr 22, 2013 at 13:57
  • @user357320 - you're quite right. Actually someone made a parallel between WaMu and Cyprus: openmarket.org/2013/03/20/…
    – user4012
    Apr 22, 2013 at 14:19
  • Just to be clear it wasn't the union that got the preferential treatment, but a fund, administered by the union, used to provide medical benefits to retired workers. That's a big difference. Apr 23, 2013 at 17:05
  • @DJClayworth - The trust is still part of the union, for the benefit of union members. The distinction you are making is technically correct, but I don't see how it's meaningful in this context - it benefits ALL union members who are retired now or will retire later and will be paid for their expenses out of that trust.
    – user4012
    Apr 23, 2013 at 18:23
  • 1
    Let's also not forget that the GM bondholders always had the ability to decline the offer. This wasn't a compulsory deal. Apr 24, 2013 at 0:15

Your example is of a partial government debt default. Russia and Argentina both defaulted on their debts in recent history. (So did Iceland, in relation to government-guaranteed foreign savings accounts of its bad banks, in the opinion of the governments representing those savers - but the EFTA Court ruled that no such obligation existed under the circumstances.)

Incidentally, Russia is an awkward example for the economic school of thought known as Modern Monetary Theory (or MMT), which states that any country that controls its own currency and issues debt in its own currency cannot go bankrupt. In particular, key MMT advocate and financier Warren Mosler was not expecting the Russian default, and lost money because of it. He now states that Russia defaulted on its debts for "political", not "economic" reasons. (I would be interested to read evidence to back this up.)

  • 1
    Re: Iceland. The saving accounts weren't government guaranteed. (EFTA ruling)
    – Karlth
    Dec 31, 2013 at 14:56

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