On the question of interest and debt service.
As more and more exchanges in the blogosphere address this issue, I think it is useful to re-emphasize that the issue of repayment of public debt and the problem of managing money - and a wild growth - are largely related to the question of the level and the influence of interest rates. Outside
therefore responsibilities related to money creation, it seems necessary to establish rules for credit control (in addition to any rules of supervision of revenues).
I often supported the idea of an interest rate of "ethics": no rate (especially that of public debt) should be above the actual rate of growth anticipated for the economy, only way of not having a bath 'money' which empties faster than it fills, and prevent excessive growth of research with the sole purpose of paying off loans.
A little arithmetic (and the basic use of a spreadsheet ;-)) show (s) the thing so trivial
Taking a growth rate of 2% and an interest rate 5%, an elementary calculation (at constant velocity, and with interest rates and stable growth rates) over 20 years gives us the following results:
The first column is the year, the second column of M1 decreased to 100 initially (rising to 265 in 20 years).
The evolution of GDP figure in the third column (it starts with the value 384: in fact, everything should be multiplied by 3.15 for the 1800 billion euros of French GDP in 2008).
The fourth column measures the change in the ratio M1/PIB
The last column resets, so "smooth" evolution of GDP between 1989 and 2008 françcais: these are just orders of magnitude, of course, corresponding to a growth rate of "virtual" of 2%.
(We will show in another table the statistical evolution over 15 years - evidence, "official" - the monetary aggregate M1 over this time to cash ("Currency" = higher ticket items) )
In 20 years, an interest rate of 5% and a GDP growth of 2% of M1 increased from 26% to 46% of GDP GDP .
is another way of saying that the financial sphere will be enriched at the expense of the productive sphere , or that capitalists take advantage of unearned income at the expense of "workers", such as contractors 'proletarians'.
We also see, well, a 3% difference between these two rates leads to the general government deficit could never be repaid, at least to reduce expenditures and increase revenues (taxes?) Of state drastically, and therefore intolerable.
That's what many writers, including AJ and Ph. Holbecq Derudder had shown (see "Public debt, a profitable business ") and interest payments for 27 years, between 1980 and 2006, accounted for more than 1100 billion euros, while the debt itself has increased by 913 billion euros. Ssns these accrued interest - that is, if France had been able to create the corresponding currency, instead of borrowing from commercial banks - France, in late 2006, would have had more than 200 billion budget surplus, which would have allowed fully repay accumulated deficits during these 27 years ...
Without going so the exorbitant privilege granted to banks (the privilege of "fiat money beat" and priest able to state with 3% margin: Natixis is a ticket dated January 2010 has yet confirmed) - other tickets on this blog or elsewhere, having amply discussed, it seems useful to show that if M1 has increased relative to GDP, it was the same in similar proportions to the liquid-money (higher ticket items) but with relatively large fluctuations.
The following table will illustrate this point, this time in the context of the euro area (15 years, month by month figures in thousands of euros):
Period ↓ Currency appreciation M1 M1/Currency
2009Nov 750,109 4,462,083 5.95
2009Oct 745447 4484004 6,02
2009Sep 740640 4402728 5,94
2009Aug 741163 4399063 5,94
2009Jul 745471 4332559 5,81
2009Jun 734980 4236798 5,76
2009May 731994 4186899 5,72
2009Apr 729212 4193541 5,75
2009Mar 719947 4118806 5,72
2009Feb 715969 4129472 5,77
2009Jan 712336 4099616 5,76
2008Dec 722924 3974183 5,50
2008Nov 703740 3957568 5,62
2008Oct 698922 4004350 5,73
2008Sep 657204 3887351 5,91
2008Aug 656106 3850635 5,87
2008Jul 658825 3836504 5,82
2008Jun 652134 3845554 5,90
2008May 645772 3850976 5,96
2008Apr 641431 3837211 5,98
2008Mar 632928 3840488 6,07
2008Feb 628792 3840617 6,11
2008Jan 623208 3854044 6,18
2007Dec 638620 3830465 6,00
2007Nov 618703 3853032 6,23
2007Oct 613589 3842720 6,26
2007Sep 610528 3832355 6,28
2007Aug 610685 3838780 6,29
2007Jul 612964 3823959 6,24
2007Jun 605045 3790991 6,27
2007May 597697 3766299 6,30
2007Apr 594842 3745802 6,30
2007Mar 588596 3738977 6,35
2007Feb 578812 3709559 6,41
2007Jan 575735 3691691 6,41
2006Dec 592282 3685076 6,22
2006Nov 571587 3616325 6,33
2006Oct 567175 3598083 6,34
2006Sep 563264 3599260 6,39
2006Aug 559066 3580731 6,40
2006Jul 562779 3557871 6,32
2006Jun 553802 3559106 6,43
2006May 543680 3544348 6,52
2006Apr 540385 3517573 6,51
2006Mar 532322 3484658 6,55
2006Feb 524920 3464427 6,60
2006Jan 520930 3440421 6,60
2005Dec 532914 3422983 6,42
2005Nov 514488 3386468 6,58
2005Oct 510522 3377160 6,62
2005Sep 507149 3349436 6,60
2005Aug 500919 3328395 6,64
2005Jul 506427 3300974 6,52
2005Jun 496551 3254973 6,56
2005May 485829 3050521 6,28
2005Apr 481074 3026812 6,29
2005Mar 471751 3003462 6,37
2005Feb 463566 2990502 6,45
2005Jan 459893 2962631 6,44
2004Dec 468426 2906478 6,20
2004Nov 448753 2912272 6,49
2004Oct 444394 2885794 6,49
2004Sep 438041 2870081 6,55
2004Aug 433400 2838079 6,55
2004Jul 436246 2825754 6,48
2004Jun 423014 2793055 6,60
2004May 416623 2775026 6,66
2004Apr 409373 2777006 6,78
2004Mar 399591 2756923 6,90
2004Feb 393469 2719587 6,91
2004Jan 389117 2707860 6,96
2003Dec 397902 2677644 6,73
2003Nov 379148 2661724 7,02
2003Oct 371239 2656872 7,16
2003Sep 364830 2623085 7,19
2003Aug 362668 2608287 7,19
2003Jul 361475 2576327 7,13
2003Jun 351042 2559749 7,29
2003May 343756 2553842 7,43
2003Apr 336320 2526511 7,51
2003Mar 327218 2501963 7,65
2003Feb 319317 2483887 7,78
2003Jan 312120 2456046 7,87
2002Dec 341158 2443268 7,16
2002Nov 321353 2416183 7,52
2002Oct 313872 2388636 7,61
2002Sep 306676 2371262 7,73
2002Aug 301114 2340264 7,77
2002Jul 296574 2323232 7,83
2002Jun 285696 2305287 8,07
2002May 273847 2290992 8,37
2002Apr 261655 2272466 8,68
2002Mar 254298 2241293 8,81
2002Feb 240476 2249355 9,35
2002Jan 246680 2247259 9,11
2001Dec 239720 2223121 9,27
2001Nov 279707 2219348 7,93
2001Oct 295453 2202549 7,45
2001Sep 309607 2192127 7,08
2001Aug 319234 2171594 6,80
2001Jul 328033 2157842 6,58
2001Jun 333023 2156258 6,47
2001May 332902 2142987 6,44
2001Apr 336171 2124661 6,32
2001Mar 336281 2105802 6,26
2001Feb 335032 2106116 6,29
2001Jan 336070 2094886 6,23
2000Dec 348369 2025811 5,82
2000Nov 337698 2021191 5,99
2000Oct 337602 2022323 5,99
2000Sep 339817 2014125 5,93
2000Aug 338781 2022499 5,97
2000Jul 343909 2012884 5,85
2000Jun 342023 1997825 5,84
2000May 338382 2005859 5,93
2000Apr 338582 2022097 5,97
2000Mar 335456 2003226 5,97
2000Feb 331989 1988897 5,99
2000Jan 333840 1987997 5,95
1999Dec 350787 1923210 5,48
1999Nov 331071 1914637 5,78
1999Oct 330544 1900239 5,75
1999Sep 328282 1887809 5,75
1999Aug 327370 1878935 5,74
1999Jul 332861 1880658 5,65
1999Jun 324790 1857387 5,72
1999May 322403 1837747 5,70
1999Apr 320733 1820616 5,68
1999Mar 318574 1807938 5,68
1999Feb 313911 1787741 5,70
1999Jan 314331 1808480 5,75
1998Dec 323437 1732438 5,36
1998Nov 314284 1705466 5,43
1998Oct 313372 1681123 5,36
1998Sep 311823 1669227 5,35
1998Aug 315095 1660416 5,27
1998Jul 320715 1650839 5,15
1998Jun 315514 1656273 5,25
1998May 317279 1634368 5,15
1998Apr 314877 1626160 5,16
1998Mar 311850 1607042 5,15
1998Feb 311818 1585539 5,08
1998Jan 311449 1573311 5,05
1997Dec 320614 1565384 4,88
1997Nov 314712 1554021 4,94
1997Oct 311745 1550447 4.97 311131 1530295 4.92
1997Sep
ratio M1/currency, I called in other notes "Money" / "cash" has varied between 4.88 and 7.80 - apart from a period a little special, that of the euro's launch in late 2001/early 2002 - currently about to turn 6 (In France, changes in the ratio of "illiquidity" seem smaller, the ratio being himself m ^ me lower (currently around 5)).
This suggests two things, it would probably dig a little deeper.
a) A liquidity crisis if it occurs in the euro area, probably not begin not France, because there are relatively more tickets available (relative to paper money) in France and Europe - while, however, the use of bank money (through employment bank cards, checks or wire transfers) is at least as great in France than in the rest of the eurozone.
b) changes compared to M1 and cash ("currency") can not say whether the central bank or commercial banks that initiate the process of raising money. But the process of increasing the money supply is undeniable, accompanied by a similar increase in the amount of money Cash in circulation. These concomitant increases are greater in percentage terms than GDP growth, and seem to be explained, in large part by the interests not "ethical" levied by banks.
Comments welcome.
BL
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