14 Jul 2012

The gory truth about how banks have ripped us all off

I think that the message is starting to get through. Banks lend governments money that they don't have to lend - they just create it out of thin air. And then they charge us interest on on those loans. I've already used the European Central Banks own figures to show that this has cost taxpayers in the EU the unbelievable sum of €5.6 trillion since 1995 - that's more than half the entire government debt of the 27 EU countries - currently €10.42 trillion.

But the database on the ECB's website hides plenty of other jaw-dropping information. For example, you can download the amount of interest on government debt paid for nearly every year since 1995 as a percentage of each countries GDP. Here are the figures.

The amazing thing is that the current cost of interest payments (2.9% of total EU GDP and 3.0% for the 17 Eurozone countries) is actually quite low.  Look back a bit and you will see that the interest charages in 1995-1996 were between 5.4% and 5.5% of total GDP! And if you were lucky enough to be living in Belgium at the time, your government was paying up to 8.9% of all the country's wealth creation to the banks in interest charges. But it could be worse - you could have been living in Italy where the numbers reached 11.5%!! Even sensible Sweden was paying over 5.0%.

I suppose we could be grateful for the fact that the banks have actually become marginally less greedy in the past 18 years - although its a different story if you are living in Greece where the banks effectively stole 7.0% of the country's GDP in 2011.

But the unbelievable thing about all these numbers is that THERE IS NO GOOD REASON WHY GOVERNMENTS BORROW MONEY FROM BANKS AT ALL. They can perfectly well create their own money using central banks with no interest to pay at all. If they had done this back in 1995, Europe's tax payers would be €5.6 trillion better off. There would be no austerity. And we could tell the ratings agencies what they can do with their Triple As.

Citizens should be calling for a revolution now. Money creation by commercial banks should be banned. We should ban government borrowing from commercial banks. Instead, governments should directly generate the money needed for projects that get overwhelming support from citizens - as explained in my latest Youtube video on "Some Radical Proposals for Monetary Reform".

In the meantime, it would be nice to get the banks to tell us all what they did with the €5.6 trillion they stole.

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