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31 Jul 2012

Over a trillion dollars in interest payments on government debt per year since 2007

Here's another way of looking at the figures on interest payments paid by governments. I'm using the numbers provided by the World Bank. For 2006-10, the dataset provides figures for 119 countries, although the data for 2010 is only partial, and there are some holes in the data. And there are another 67 countries (including Argentina and Mexico) where there is no data available at all.

In the following table, I have ranked the countries in terms of the average amount paid between 2006 and 2010. As you can see, the $952 billion figure that I calculated as an average value is my previous post is seriously below the actual numbers for each of the four years from 2006 to 2009.

Here are the numbers. Enjoy....









































Again, it's the USA that wins the competition. They provided no less than $312.6 billion in interest payments in 2007. Don't forget that the US Treasury could perfectly well print money interest free, as Abraham Lincoln did when he printed $450 million in Greenbacks during the Civil War. In other words, the $312.6 billion can be thought of as a racket in which the banks extort money from US taxpayers.

But the most eye-watering figures are the total value of the interest payments for all the 119 countries in the table. This value exceeded $1 trillion in for every year since 2007 where it peaked at over $1.1 trillion. Anyone care to guess what has happened in  2011?  Given that the markets are now charging Eurozone countries like Greece over 27% interest, I think we can safely say that the numbers are going to be well over $1 trillion a year and climbing.

Now do you see why all governments are having to impose massive austerity on their populations? Given that a trillion dollars a year is being sucked out of the economy every year (and sent to private accounts in offshore taxhavens?), it is not surprising that 99% of the population is struggling.

The solution? Take the power to create money away from commercial banks, and use central banks to create the money governments need directly, and without interest. The first thing to do would be to create enough central bank money to allow all governments to pay off their loans. If the central banks offered the same low rates offered to commercial banks, this massive siphoning operation would end. And, in fact, the central banks could perfectly well offer zero interest rates if they so wished. No more austerity. No more ratings agencies. A return to sanity.

It really is that simple.

Is there a politician out there who wants to win the next elections? You know what to do....
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2 comments:

  1. Simon Thorpe4 August 2012 at 10:06

    "
    They provided no less than $312.6 billion in interest payments in 2007"....."
    In other words, the $312.6 billion can be thought of as a racket in which the banks extort money from US taxpayers."

    Have you actually looked at who has bought these bonds? Most are owed by foreign governments / pension companies/ insurance companies / public institutions - not "Banks".

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  2. Simon Thorpe4 August 2012 at 15:29

     Thanks for commenting.

    If you have any information on what percentage of government debt is held by banks vs pension funds vs insurance companies I would be interested.

    The argument that it is thanks to the financial systems ability to take $1 trillion per year off governments in interest charges that we can get pensions paid seems hard to follow. If governments were not forced to borrow from the markets, then the $1 trillion a year that they would economise would pay for a hell of a lot of pensions. That is not a sensible way to finance pension schemes - especially if the markets are demanding up to 27% (as in the case of Greece).

    As it happens, as a French Civil servant, most of my pension is paid for by the pension scheme contributions of people currently in work. It's a system that is under stress because the number of people working is being cut and the number of pensioners is increasing. Nevertheless,  I don't think that any of my pension depends on the ability of the French governement's pension scheme to extract money from the governments (and taxpayers) of other countries.

    As for the idea that allowing governments to effectively print money being problematic because is doesn't reduce borrowing, I beg to disagree. For example, if the ECB provided money to governments so that they could pay off their debts to the banks, you could set the rules so that those banks could not relend the money. That would take the debt out of circulation.

    But in the end, the real battle lines will be on the question of who should be creating the money supply.... commercial banks, who generate over $7 trillion a year, and who get taxpayers to pay $1 billion a year in interest charges, or publicly controlled central banks who could create the money supply with no debt attached.

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