24 May 2012

The ultimate solution to the USA's national debt crisis

There's a nice report on CNN that makes my point beautifully. It shows that despite the relatively low interest rates that are currently being charged by the markets, the cost of interest payments by the US government over the next decade will be over $5 trillion. Here's what they say:
"Uncle Sam will shell out more than $5 trillion in interest payments over the next decade, according to the latest projections from the Congressional Budget Office.
That's more than half of the projected $11 trillion increase in debt held by the public during that period.

Over the decade, more than 14% of all revenue the government is projected to collect will be sucked up by interest payments."
So, what's the solution? Well, if you have been following the recent posts on my blog, US citizens could fix the system on their own by using the fractional reserve banking  trick to create enough money out of thin air to repay the entire national debt.

Here's how it would work.

The US government current owes $15.66 trillion to the banks, that's $50,050 per citizen.

To generate that sum using fractional reserve banking, a bank would need to have 8.6967% of that sum, namely $1361 billion.

So, suppose we set up a bank with a special "US National Debt Cancellation" account. People could pay money into the account, and when the sum of €1361 billion is reached, the account is frozen, the bank creates €15.66 trillion out of thin air, lends the money to the US 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 $4352 into the account to activate the mechanism. But there are enough billionaires in the US to contribute a substantial proportion of the money needed to get the scheme going. For example, Apple has $110 billion in cash reserves. They could really make themselves popular if they used some of that to get the US government (and US taxpayers) out of the clutches of the blood-sucking vampire squids.

In 2011, US taxpayers paid around  $250 billion in interest charges to the banking sector. It follows that the $1361 billion needed to finance the scheme would be paid off in around  four years based on current predictions.