24 May 2012

The ultimate solution to Portugal's National Debt Crisis

Following on from my post about fixing the Greek debt crisis, here are the numbers for Portugal.

Portuguese national debt currently stands at around €153 billion, that's €14,413 per citizen.

To generate that sum using fractional reserve banking, a bank would need to have 8.6967% of that sum, namely €13.3 billion.

So, suppose we set up a bank with a special "Portuguese National Debt Cancellation" account. People could pay money into the account, and when the sum of €13.3billion is reached, the account is frozen, the bank creates €153 billion out of thin air, lends the money to the Portuguese government, and the entire national debt is paid off. The loan would have very favorable terms under which the government would have to pay the money back after 1000 years with 0.000% interest.

On average, each citizen would have to pay €1,253 into the account to activate the mechanism.

In 2011, Portuguese taxpayers paid €6.6 billion in interest charges to the banking sector. It follows that the €13.3 billion needed to finance the scheme would be paid off in well under three years.


  1. Where on Earth does each citizen have €1,253 to spare?

  2.  Well, that's the average value. If some generous philanthropist wanted to save his/her country from the banks, they could put up the money.

    Actually, it turnes out that with the new Basel III regulations, leverage ratios can be increased to 33:1. That means that the amount per person could be divided by nearly 3.

    And, as I suggest, the government could actually refund those people who were involved  in the following 2-3 years using the savings from not having to pay bank interest charges on the debt.


  3. Thanks for the reply. It's remarkable how the solution lies within the very mechanism that allows banks to create money as debt, eventually siphoning their customers' resources to their own payroll. Alas, I'm too much of a cynic to believe people could ever unite to this point, even if to save themselves. The government would have to require that of them, but we all know who actually governs...