The Debt crisis: A prelude to catastrophe?

realitykeeper

I watched an interesting documentary recently about the debt crisis in the UK (Ireland is also mentioned in this documentary). It did not seem to be deliberately alarmist or the work of conspiracy theorists. I would be interested to hear the views of anyone who has seen it.
http://www.youtube.com/watch?v=AYVZKpH3pnM

recedite

Their figure of UK debt to GDP ratio (500%) seems exaggerated; IMF based sources indicate 88% is the true figure. Perhaps they include private debt as well as public debt, but they apparently don't believe in giving details or sources.
This brings us to another aspect of the "looming disaster". Debt and credit are two sides of the same coin. Many of the people who are owed the public debt are citizens of the UK (and the target audience of the Money Week magazine) If all the public debt were cancelled tomorrow in a massive default they would lose out as individuals, but the country would gain. In effect, a massive transfer of wealth from private individuals to the State. The opposite in fact, to what happened here in Ireland during our bank bailouts. We took on massive public debt to bail out the bankers and bondholders.

The fear that the financial system will collapse is the fear felt by someone who has invested in a Ponzi scheme. The only question they worry about is how to get their money out of it before it collapses, and as far away as possible. Government applied capital controls and devaluations are the enemy. In effect, the whole banking system is a Ponzi scheme. Wealth is constantly being extracted from the productive economy by bankers and bondholders in the form of interest payments, dividends and bonuses.
The system was devised by the Bank of England and The Crown hundreds of years ago. It depended on double digit growth in trade to pay for the interest payments. This in turn depended on new colonies and new trade routes constantly being opened up, all protected and assured by the most powerful navy in the world.

The film gives 1909 as a significant date for the start of the build up of unsustainable UK debt, and blames that on social welfare reforms. More to the point, the date corresponds with the end of the empire's expansion.
The film mentions the Weimar hyperinflation; caused by German war reparation repayments, which in turn made their way to the bondholders of UK and American govt. debt.
It mentions the US Great Depression, without mentioning that it happened soon after private bankers set up "the Federal Reserve" and took over issuing the public money supply. That was the reason citizens were not allowed to hold gold. To ensure that the banker's fiat currency which they could easily manipulate for private gain would be universally accepted by the citizens.
The hypocrisy in that film disgusts me. They seem quite happy to see a worker die on reaching a pensionable age, but they seem oblivious to the fact that they represent the interests of a whole class of parasitic people, who constantly extract money from the productive economy.

KyussBishop

Indeed, the wider issue is debt-based money, i.e. the fact that almost the entire money supply is issued by private banks, as debt; they have enormous control over the monetary system (complete control over money creation, effectively), and the interest paid on the debts they give out, allows them to engage in massive rent-seeking upon the rest of the economy (and thus everyone in it).

Money creation is currently used entirely for private purposes, and if it were taken back to use for public purposes by government (limited by inflation targets), then public debt would never again be a problem (government could fund itself through money creation, and slowly pay off all past debts), and government would have all the means it needs, to end almost every existing form of private rent-seeking.


It is, in my view, the single most important issue in the world today (because of its implications), and is truly bizarre it has been like this for so long.

Once you study the implications of it, you see that it 100% changes politics and economics, and makes goals attainable that previously seemed unattainable, like ending the economic crisis, tackling climate change and the coming energy crisis (from shortage of fossil fuels), down to providing jobs and an equitable life for everyone etc.; it obliterates all of these concerns, making the primary impediment against them political, not economic, restrained only by the actual physically real capabilities of economies, not by 'money', which today actually restrains the real economy from its full potential.

recedite

I doubt that anyone could get elected campaigning on a political issue that most people can't grasp.
Still, there might be some mileage in promising to reduce the interest rates on peoples mortgages to, say, 1% above the current rate of inflation. That would be pretty much in line with the ECB base rate of around 2% or just over it.
As the taxpayer is ultimately responsible for "recapitalising" bad loans anyway, the State issuing the money becomes its own insurance company, so there is no need to add on any extra % to cover credit default insurance.

If you halved the interest rates on peoples mortgages overnight, it would make a big difference to the the property market, personal insolvencies, the economy ...everything.
Going back to the OP, I don't see any riots in Iceland, where the financial system collapsed, but the taxpayers refused to pay out to the financial speculators. Riots only happen when (a) the people are being fleeced and (b) they become acutely aware through harsh austerity measures that they are being fleeced.