A Universal Debt!
December 3, 2011Posted by on
I posted the link to Paul Gringon’s video as I found its message quite appealing, given the censure being heaped on bankers and financiers. However, I found the solution offered to the hypothesis of ‘money as debt’ somewhat optimistic, for in whatever form money is regulated, politicians will attempt to manipulate the supply of money to service their own political agenda. I have always eschewed the conspiracy theorists, Illuminati, Bilderberg, Freemasons, et al, but perhaps what is most surprising about conspiracy theories, is their popularity. There is a wide, if somewhat sceptical, acceptance of the possibility of a conspiracy, balanced by a naïve belief that somehow protection from such conspiracies is inherent in a democracy.
Well: while I may not be a conspiracy theorist, I am certainly a collusion theorist and faced with the paradox that one, or both, of those colluding, may also be conspiring. Certainly Paul Gringon’s video ‘Money as Debt’ reinforces the fact that Governments have always colluded with financiers, especially when they are they are bankrolling the government. I am pessimistic about any change in this arrangement. I find Paul Grignon’s theories on money somewhat trite, even though I agree with Grignon saying that the money doesn’t exist to meet the debt level. In saying this Grignon omits the notion of ‘cash flow’ and ignores the effects of inflation on debt. Grignon seems to be moving towards a barter system as shown in this interview. This would appears to be a step backwards in the monetary system, which must eventually lead back to money as we now have it; controlled by a central government. Perhaps Grignon should have stopped while he was ahead at Money as Debt.
Nevertheless: there is some vindication for my views on ‘collusion’ and Grignon’s views on money as debt in the formation of the Eurozone. Here an artificial currency was created, which could be seen as taking Grignon’s solution of ‘personal credits’, to its greatest conclusion. That is: of National Governments issuing ‘personal credits’ on behalf of the nation in the form of Government Bonds or Gilts. This led me to post The Trojan Börse. I am drawn to the Austrian School of Economics , which explains why I am drawn to this critique of Grignon. But we should be grateful to Grignon for drawing our attention money and the seriousness of the problem. Unfortunately it takes a financial crisis to awaken this interest. At which point, all hope of reforming the financial system is lost. When governments collude with financiers and economists to solve the problems caused by the crisis, we are grateful when they do so. Once the economy returns to a stable money supply, any interest in Grignon and his views moves to the fringe.
There is however one thing remaining and that is the debt and who is in debt to whom. A while ago I recall that someone looked into world indebtedness and facetiously drew the conclusion that The Earth must be in debt to the rest of The Universe. This was because every country in the world had an external debt load (barring about three). Obviously the earth is not in debt to someone else in the universe – unless you are a conspiracy theorist – but it is true that there is a global indebtedness. What really matters, is not the debt, but the ability to pay off the debt with the interest that the debt accrues and the consequences of any inability to do this. This ability to repay, or not repay, is related to the debt of a nation and its GDP, which in terms of debt repayment is a ‘cash flow’ issue.
In terms of GDP we now find a world that is mostly in debt, but in debt to whom? In the simplest terms: Governments are in debt to their taxpayers. It is the taxpayer who eventually must bear the burden of this debt. And would that it were that simple! We have effectively, what may be called direct and indirect tax contributors. Direct taxpayers contribute to the government’s budget without being paid by government to do so. This is called the private sector: except that it isn’t all private. If the ability to pay taxes in the private sector is accrued from government contracts – paid for by the government (taxpayer) – then it could actually be adding to the debt. Just like the public sector, where all tax contributions are paid for by the government – in effect the government paying itself. I know that the division between the public and private sector is not this simple, but that leads us to another story which would inevitably include Government Bonds and the printing of money.