On the question of debts and the possibilities of escape ...
day long, and media, we hear statements prodigious debts, after talking two years ago of over-indebtedness associated more particularly subprime.
But what is it really, and we are, collectively and individually, condemned by this curse , over-indebtedness?
Who are these debtors, and why this heap of debt?
In this post, after speaking of debtors, creditors, we will talk about (not creditors, not debtors ;-)), Then we will talk about debt, and finally we will outline some possible "out of debt."
A-Debtors.
They are known, it is just everyone.
First, there are statements, not just those called, very hard, the PIGS (Portugal, Ireland or Italy, Greece and Spain): can add the USA, UK, France, Japan and lots of other pays.Ensuite some companies.
Finally, many individuals, either because they were caught by a frenzy of consumption or simply because they do not earn enough to live. Or certain individuals or organizations who thought they could win on the Exchange or on the financial markets for sure, and have speculated with the money they did not have.
B-Creditors
Prior to cite just a little background on the concept of money and currency. When we talk about money, it sometimes confuses two concepts.
The first notion is the silver-liquid, which we now call species: these are the notes and coins in circulation in a given area. In the eurozone, the euro banknotes will be (Five euros to 500 euros, or coins (a penny to a few euros). These "species" are released by the central bank (in euro zone, the ECB).
The second notion is that of bank money (bank), the amount of which is included in checking accounts for individuals or businesses in the accounts of commercial banks.
There is a third "currency," central bank money , which corresponds to the accounts that banks are required to be opened with the central bank, or its annexes (Bank of France for France)
The sum
"species" plus "bank money (bank is called, by definition, monetary aggregate M1, or money (narrow). Every element of M1 can be used safely as a" means of payment ".
The species are used for "small" amounts of up to 1500 or 2000 euros. scriptural money - through tools such as credit card, checks, transfers, ... - is increasingly used as 95% of the value of transactions carried out in this way.
Financial institutions nonbank merely to transit - a fee for their services, of course - any surplus money (cash or money) to those who have "too much" (they are called cleverly agents to financing capabilities' - our ants) to those who do not have enough ("agents in financing needs - our cicadas.
If only our creditors were" ants ", there would never needs Increasing the amount of money in circulation . The "Ants" lend to the cicadas, or through financial institutions or directly.
This is not, fortunately or unfortunately: from one year to another, M1 increases much faster than real wealth such that wealth can be synthesized by GDP.
In fact, most of the currency in circulation (85% of M1, against only 15% for species) corresponds to claims (views of the bank) or indebtedness (viewpoint of borrowers) made or due for months or years.
banks are very large creditors, even though they have created money , creation based only on promises of repayment of debentures. These debts, in the current monetary system, will never be fully repaid.
Suppose, in fact, that starting from a given situation, banks lend 100 billion euros to an agent cheap financing needs "- a very large grasshopper.
By taking a "small" interest rate, eg 5%, the cicada will make (if it repays in one year): 105 billion. Where could well come from the $ 5 billion more?
There are only two possible sources - if we neglect the international trade. The source
"central bank", which should issue new tickets, but she can not do that going into debt itself: where additional debt. Or
source "commercial banks" themselves, who can do that by granting new loans.
In both cases, there is full refund (principal plus interest) there must have increased the money supply M1 (sight deposits plus cash). If the party
GDP of 100 billion funded by these did not increase by 5%, the inevitable can take two forms (not to mention the event the borrower, the grasshopper, go bankrupt):
a) growth of money supply , larger than that of GDP, leading to inflationary trends
b) the share of "pie" of banks will increase: the financial and banking sector - the sector "capitalist" - is growing at the expense of the real sector of the economy (firms and households' non-pensioners)
The problem seems more complicated if we bring in international trade. But if one sees the world as a single economic system, the issue of debt remains the same, the only difference is that now there are several currencies. But it is always the commercial banks create bank money, which in all countries is much larger than the species 'national'.
C-Debt is inevitable?
Debts "provisional" are probably inevitable for many reasons, including the difference of timing between the processes of production and consumption, even if GDP is stable (zero growth).
may be needed to "make credit "- which is not the same thing to advance money - that is to say a loan" money "- when the expected cash flow of periodicals, but that one is obliged to consume, or buy other, more frequently.
If the interest rate would be "ethical", that is to say where the newly created money (by money lending) or the savings already made would be provided at the same rate as Growth of GDP, any debt (provisional) could be refunded without problems.
Thus, if we borrow $ 10 billion to 3%, and if our growth rate is 3%, we pay off the principal, $ 10 billion, plus interest: $ 300 million. Everyone is happy. Those who have produced "more", those who have lent (or savings, or the newly created money, and canceled by the refund)
Simpler still: zero growth, we borrow at 0%, it repay principal only.
D - Faced with the current debts, is there a solution?
If you do not change the current monetary system, it no alternatives to conventional solutions catastrophic.
More and more money will be paid to the most creditworthy countries, or more powerful politically, economically or militarily. The others will be put on the wagon, as "PIGS". But even this can not go on indefinitely. The only way to repay the interim, is to take money from others. This can be
by hyperinflation: pensioners being for a time, dispossessed: they lend to 10% as prices increase by 15%, money supply by 20%. Small annuitants lose, banks, which recreate money they need, do not risk much.
The deteriorating economic situation, some companies, yet "profitable" with an interest rate of "ethics" of 2%, are unable to repay at a rate of 5%. They fail, and this aggravates the situation of our "short-sighted" - not always responsible for their over-consumption "or their" under-saving, especially when they become unemployed in sectors such as automotive or agro-food sector.
No "method" can not function, incidentally, without collateral damage increasingly important, since Overall, the current debts can never be fully repaid with the current system.
What should he do so.
Two tracks, one on an urgent basis, the other taking a little longer.
a) In emergency : separate debts "public" private debt (corporate and individuals) to be able to treat them differently.
For public debts (or cancel them altogether - method "to the 1917 Bolshevik - or declare obsolete the past interests of the public debt - is central issue money - without interest - An amount equal to accumulated debts). For
private debts, again treated differently corporate debt and the debts of individuals.
For individuals, cancel the debts of heavily indebted, when they are in a precarious situation, and that these debts have been subscribed at rates "usurious" rates to higher ethics, adjusted for inflation and possibly one or two points. This usury rate in the current context (zero growth, 2% inflation) would be in France 4%, against 18 or 20% commonly practiced.
For corporate debt, those who watch correspond to business "for the collective good, environmentally friendly, and others. Fully recover debts to the former, or refinance by issuing central bank monetary (possibly by rendering these new resources at a rate "ethics"). For others, encouraging them to refinance themselves on the savings market, again limiting the rate to a non-usurious (ethics = growth plus inflation)
noted that much of these measures (especially the issuing central bank's monetary authorities led to pure cover public debt) is prohibited by the Maastricht Treaty and the Treaty of Lisbon . It will therefore submit the treaties in question, see out of the eurozone for France, perhaps even of the European Union. But such a threat may be enough to think it is right to do so without going to such extremes.
Denouncing the public debt, which is subscribed to 55% by "non residents" can also cause a scandal, but I do not see Chinese tanks, bombers or U.S. nomads Saudi intervene in this case, especially since they have similar problems at home.
The question is surendettemnt World and 280 billion surplus in China are nothing compared to the 50 or 60 trillion global debt. I think many countries would love the position that France could take in this area.
b) In the longer term
reform or revolution money are essential, outside and in addition to emergency measures discussed further above.
I leave because of the principle - or the premise - following: true wealth (at least in terms of hardware) is all that we can produce and consume . Currency, as cash or as bank money, is a means.
If this plea is perverted, if real wealth is much lower than the potential wealth - the fact that many are unused production capacity, both men and machines - then a monetary reform is essential.
This is not to want to enact any price growth, some productions are useless, even dangerous. But this has nothing to do with monetary problems: money created by banks is not created based on environmental or ethical considerations, but for the anticipated profit of banks. We must prevent banks adjust production according to their interests, whereas it is the general interest must prevail.
For this I only see three tracks 'global' possible, which can be tracked independently, but also complementary way .
The money trail or social credit - one of Douglas and Louis Even, the pioneers of social credit. The track
mutual credit : there are no additional issue of currency, but simply funds exchanged between the different economic agents, sometimes cicadas, ants sometimes
Runway suggested by Maurice Allais : commercial banks no longer have the right to create bank money ("100% money), are separated establishing "financial intermediaries" banks only passing management (accounting) money from cash management "
In next posts will attempt to take stock of these different tracks and on the track of specific currencies, complementary to use narrower, more specialized.
Comments Friendly, BL
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