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Foreign Debt Explained: It’s not what you think.

During a recent Q&A with Adelaide University’s Economics lecturer, Dr Steven Hail, I asked several questions about the much misunderstood subject of Australia’s foreign debt position. Steven has a Ph.D. in economics, from Flinders University, and Bachelors and Masters degrees in economics from the London School of Economics. 

This is a transcript of the discussion…

JOHN: Steven, can you help me out here? There has been talk recently about Australia’s “foreign debt”. What is this? I read recently that Federal government foreign debt is approx 30% of the overall total, now reported to be about $1.04 trillion. But to whom do we owe it and why? What did we borrow it for?

STEVEN: We didn’t borrow it at all. The rest of the world chose to buy it. Anyone can buy Australian government securities, just as anyone can hold Australia’s currency. Australia’s negative net international investment position in total is about 60% of our GDP, where it has been for a long time. It is mainly in the form of private and semi-government (state) bonds, but some of it (and an increasing amount, due to their safety) is in the form of Australian government securities. This has been a problem, as it has been hard for Australian banks to get enough Australian government bonds to meet their regulatory requirements, since there are not enough of them in existence to meet the demand. It is entirely the wrong way around to think of it as us borrowing from someone. Instead, the rest of the world chooses to net export to Australia (as it has every year since 1974) and holds the AUD it is earning in the form of Australian dollar assets. It is a portfolio decision of foreign investors, in a world where there are no controls on the assets they buy, and nothing to do with us or the Government needing to borrow. Moreover, the securities are in our own currency, or to the extent that private bonds are in foreign currency, are hedged against foreign exchange risk more than 100%. The problem is that people who imagine they know something, and in fact really don’t understand anything, end up imagining that this is Australia, of the government, going out looking for foreigners to buy its debt. That is total nonsense. The Government chooses to issue bonds – which it could easily just not issue at all. Foreigners then choose to buy some of those bonds. End of story.

JOHN: So is this “foreign debt” so called, our current account balance, our terms of trade, our trade deficit where the RBA holds accounts on behalf of foreign central banks in $AUD which can only be spent here? Does the government enter into contracts written in a foreign currency (say $US) to buy stuff like submarines etc?

mqdefaultSTEVEN: We don’t refer to a ‘foreign debt’. We refer to a negative net international investment position. It means that, in terms of Australian dollars, the holdings the rest of the world has on Australian equities, bonds and other financial assets are greater than the holdings Australian residents have over foreign equities, bonds and other financial assets. It is basically the result of our previous current account deficits, stretching back over many years, which are themselves the result of the rest of the world wanting to save our currency. It is nothing to do with the RBA, really. It is not in foreign currency. We have no unhedged net foreign currency liabilities. In fact, we have net foreign currency assets, you might be surprised to know. While the government enters into foreign currency denominated contracts sometimes, it always buys the foreign currency to fulfil them on the foreign exchange market, and does not borrow in foreign currency. Short term trade credit is insignificant.

JOHN: So, rounding things off, if that’s possible, we have no foreign debt (that is, monies borrowed and owing to another country in their currency), all government securities, bonds, treasury notes are issued in $AUD available to overseas buyers, but as we are the currency issuer, these can always be paid; our trade deficit is ongoing but does not involve exposure to any foreign currency and all foreign currency contracts are paid for by buying foreign currency, not borrowing. Have I understood it correctly? Am I right in thinking that our trade deficit is foreign ownership of $AUD currency deposited in RBA accounts?

Just a minor correction to the above. I realize we hold foreign currencies in various country’s central banks with whom we have a trade surplus.

STEVEN: Nothing to do with a trade surplus. Trade makes up less than 1% of the turnover of the foreign exchange market. We hold some funds with foreign central banks for liquidity purposes, but also hold foreign government securities, as part of our foreign exchange reserves. Nothing to do with trade.

1465365864494I should add that such reserves are of use if the RBA decides to trade in currencies to influence exchange rates. We have a freely floating currency, but the RBA does nevertheless sometimes intervene to nudge the market – particularly if the currency is seen to be moving too quickly in one direction or the other.

JOHN: So where does this $1.04 trillion figure come from? The AOFM website shows only $443 billion on issue.

STEVEN: Private sector, and it is a gross figure, not a net one.

JOHN: Right. Now I get it. Thanks.

47 comments

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  1. Mark Needham

    String Theory.
    Simple enough, Hey!
    Correct me if I am wrong ( Because, I am ) why debt seems to be, not a bad thing.
    As seems to be, ALP Governments, spend freely, willing and without limit.
    again, I am an electrician, not a scientist with a doctorate in stuff.
    Conciliatory,
    Mark Needham

  2. Troy Prideaux

    I was really looking forward to hearing his answer to this question : Does the government enter into contracts written in a foreign currency (say $US) to buy stuff like submarines etc?

    But I don’t think he answered it – or maybe he did with a ‘yes’ but qualified that with a ‘but it doesn’t matter’ (to paraphrase)

    Nevertheless, interesting exchange which I’ll be bookmarking for later reading (again)

    Thanks for sharing

  3. bobrafto

    So, we have nothing to worry about except for the LNP.

  4. Anomander

    Thanks John. I’m going to need to read this several times more carefully.

    Although I’m still not 100% au fait with it, but I think I’m close.

  5. paulwalter

    The day after I pick up a Stiglitz at a five and dime, this turns up. Like Anomander, I’ll be chewing it over before putting foot in mouth also, although I’d wonder at this moment why there seems so little clarification of these things for the public, is it just me or something else is involved, some thing akin to the elite’ s hold on literacy in the Middle Ages?

  6. Andreas Bimba

    Steven said: “Nothing to do with a trade surplus. Trade makes up less than 1% of the turnover of the foreign exchange market”.

    I take this to mean the ‘currency trading cowboys’ turnover absolutely swamps the value of our exports, imports and ‘normal’ capital/cash transfers? In other words over a period of time such as a year I assume the net transfer from the ‘currency trading cowboy sector’ would be very small in comparison to the turnover as this well paid casino like trading balances out?

    The quantity of $AUD held by foreigners in the form of government bonds issued by the RBA does indeed depend on the trade deficit, or more correctly on the current account deficit.

    So John’s last question/statement: “Am I right in thinking that our trade deficit is foreign ownership of $AUD currency deposited in RBA accounts?” is correct and Steven’s answer although correct was misleading??

  7. John Kelly

    Mark, you will hear all measure of opinion on debt from classical economists. Best you block your ears. In reality, national debt for a currency issuing nation (like ours) is an oxymoron. Debt for us is the act of buying back money already created. Furthermore, all current debt issuance could be extinguished with one click on a keyboard. It could be done today and no one would even notice. It’s all just numbers in a computer. The only measure of spending for a currency issuing nation is the strength of its available resources. It’s resources, not money, that is important. We can’t spend what we don’t have. But if the resources are there, we can spend up to 100% of their productive value without fear of inflation or devaluation. We currently spend around 25%.

  8. Glenn K

    Paul, Stiglitz has written several books and you should read them all. I first came across him in 2002 so none of what he writes is really new (per se), but the MSM and neo-cons have been ignoring him and others like him.

  9. Glenn K

    John,
    how do you arrive at the 34% figure. I’ve never seen that before. please explain (and no, I’m not as dumb as P.H.)

  10. John Kelly

    Sorry Glenn, my mistake. I was thinking one thing and writing another. It’s 25% and I have corrected it.

  11. John Kelly

    Andreas, I’m not sure if we are on the same page here. I wasn’t referring to the foreign exchange market, just the foreign currency holdings at the RBA. I’ll ask STEVEN for some clarification.

  12. wam

    if we buy septic planes in $american when A$1 bought US$1.05 we lose billions if we bought in $A we make billions????
    I bought yen off a japanese boatin Aust, at a good price the banks advised to buy $US but the yen revalued and the yanks devalued my cash increased 10% and the others decreased 22.5%. Too simple??
    ps in signing overseas deals, does anyone think the rabbott and robb were able??

  13. Mark Needham

    Ta, John. So how did Iceland go Bankrupt. Why didn’t they just wipe the “white board” clean?
    Every time I try to understand, this stuff, and I start to think that, I do. That is when, I realise, that I do not.
    Mark Needham

  14. totaram

    Mark Needham: “As seems to be, ALP Governments, spend freely, willing and without limit.”

    Unfortunately, this is not true. ALP govt.s always talk of ” govt. budget repair” which is a neo-liberal nonsense. Only private sector “budgets” (or balance sheets) need “repair” because they are too heavily indebted or leveraged, and the danger of default looms.

    According to one Neil of Sydney, who posted here, “kind foreigners” lend our govt. the money and as a result interest payments go overseas, “never to be seen again”. When these “kind foreigners” stop lending our govt. money, the govt. will be in deep trouble and will need to pay higher and higher interest to get loans from “kind foreigners”.. Unfortunately, for that theory, as the govt. debt has grown, the RBA has been lowering interest rates, which is what determines the interest govt. pays on its “debt”.

  15. Harquebus

    More economic gobbledygook from John Kelly. It is fools like him and those that he reveres that are holding us back.
    Economies are tied to the physical world which, no economist seems to understand. They want to do with currency what can only be done with energy.

    “Keynesian economics isn’t even remotely plausible. But it’s what is taught all over the world. They don’t understand fundamental economics. This is the problem that we have: all economies on the planet are being run by economists that don’t understand economics.” — Mike Maloney

    “On a worldwide basis, it takes energy to make the economy grow.”
    “It will be difficult to save the financial system, because there will be huge defaults both on bank loans and on outstanding bonds. Banks, insurance companies, and pension plans will all be affected.”
    “Once we understand the reason for our low-price problem–diminishing returns and the economy’s tie to the use of energy–it is clear that there is no way out of the problem over the longer term.
    In the not-too-distant future, our low commodity price problem is likely to become a low asset price problem. Once this happens, we will have a huge debt default problem.”
    https://ourfiniteworld.com/2016/10/11/why-energy-prices-are-ultimately-headed-lower-what-the-imf-missed/

    “Economically, interest is nothing but an expectation of further growth; that is, original principal plus increased value. Our entire financial system is predicated on future expansion to support the interest. Yet without oil-based energy, growth cannot continue.”
    http://mikeruppert.blogspot.com.au/2016/09/from-engineer-john-howe-why-lower.html

    “The focus is on the value of LNG exports cancelling out the negative contribution of oil imports to the trade balance and its macro-economic impact. But since the foreign owners of LNG export terminals use their cash as they must (debt repayments) or wish it is unlikely that much of that revenue will be used to pay for oil imports.”
    http://crudeoilpeak.info/australian-budget-2016-underestimates-role-of-oil-part-2

  16. mark

    agreed harquebus.Energy trumps ecomonics.mark

  17. Mark Needham

    Thanks John. Head is spinning. I’ll stick to electrical stuff.
    Positive goes to negative…..
    Drifting off to sleep,
    Mark Needham

  18. totaram

    ““Keynesian economics isn’t even remotely plausible. But it’s what is taught all over the world. ”

    Outright lie, or a complete misunderstanding of what constitutes “Keynesian Economics”. But never mind the facts.

  19. Andreas Bimba

    Harquebus repeats like a broken record. The earth receives ample solar radiation and in addition there are ample opportunities for wind energy and tidal/wave energy. We are not going to die from a lack of energy. You have responded that more energy is required to make clean energy infrastructure than is produced, this is also bull shit by a large margin and I have provided links to relevant articles in the past. Even if clean energy was a total failure, thorium nuclear reactors could easily provide all of our electrical needs if needed.

    Yes there are imminent crises from a lack of fresh water, arable land, overpopulation and most critically from global warming.

    Harnessing the power of the economy most effectively to divert sufficient resources into clean energy, environmental sustainability and to address all the critical problems the world faces is the answer, not your defeatist ‘crawl back into the cave’ approach.

    Proper democratic and governmental oversight is essential as leaving these critical problems to a greed dominated market clearly will not work as we are now witnessing.

    John Kelly argues regularly against our current political shortcomings and is a proponent of Modern Monetary Theory economics which I have no doubt is the most complete and accurate macroeconomic approach and offers the greatest opportunity for providing the necessary economic resources to drive the transition to sustainability and to do this in an equitable way.

  20. John Kelly

    Harquebus, I get that we live in a finite world. I get that we are exhausting our natural resources. I get that if we continue this way we will ultimately hit a brick wall and perish. I get that energy is the issue. BUT what do you expect us to do that countless others including yourself are already doing without achieving anything? I write of what can be done NOW to re-distribute existing wealth, not rape the planet for more. I am not your enemy.

  21. Harquebus

    John Kelly

    Fiat currencies are pretend wealth. The real wealth has been squandered and the future that we have borrowed from has arrived.
    It is economic contraction, population reduction and real money that is now required. Not more of nor variations of the same.

    My efforts reach a larger and different audience to yours and although, like yours, it mostly wasted effort, at least I don’t promote bullshit solutions like yet another fiat currency nor delusional renewable energy pipe dreams.

    “Why have a monetary system based on gold? Because, as conditions are today and for the time that can be foreseen today, the gold standard alone makes the determination of money’s purchasing power independent of the ambitions and machinations of governments, of dictators, and political parties, and pressure groups. The gold standard alone is what the nineteenth-century freedom-loving leaders (who championed representative government, civil liberties, and prosperity for all) called “sound money”.” — Ludwig von Mises

  22. Michael Taylor

    “Harquebus repeats like a broken record”.

    You’re not wrong there, Andreas.

    Though I will give him one thing: he hasn’t rushed into John’s post complaining that he’s written something other than Harquebus wanted him to. I’m pleased he didn’t. He does it to everyone else. Mind you, he still had to put on a snide comment or two to John.

    Frankly, I’m getting quite sick of it.

  23. Jack Straw

    Harquebus could you please explain your theory vrs Johns theory in plain simple language without any hyperlinks.I may be a bit thick though I’m having trouble understanding this topic. Take your time. I also love examples.Or even John could expand in simpler language.

  24. Harquebus

    Andreas Bimba
    “The earth receives ample solar radiation”. Solar radiation is diffuse. It needs to be collected over large areas or over long periods of time. Your ignorance is showing.
    I probably have read your links. Reports stating EROEI greater than one are either a sales pitch or do not factor all of the energy invested. They are easily discredited.

    Jack Straw
    See my comment above.
    The argument boils down to whether fiat currencies can do as our economic types claim that they can. I say they can’t. History is on my side, they always fail.

  25. townsvilleblog

    Yes HarquebusOctober 15, 2016 at 9:19 am, if only you were in charge we’d have no worries at all, right! I beg to differ, your refusal to understand reality really makes me wonder at times whether or not you have a grip on reality?

  26. totaram

    Townsvilleblog: If harquebus’ remarks have no clear connection to the post, don’t engage. He just repeats his “talking points” based on his “facts” (mostly manufactured by him or others).

    John Kelly is simply explaining what you need to know, to have some perspective, when you hear people bleating about “foreign debt”.
    If any one has specific questions relating to that explanation one can attempt to further explain or throw some light. If someone tells you that the sky is green, with purple polka dots, and therefore John Kelly’s post is rubbish, what is there to say?

  27. Jack Straw

    Harquebus I have looked at many of your links and the ones on fiat currencies and growth .They were informative though I still don’t know enough to comment fully yet. Maybe John could expand in simpler terms? Though I will read it again tomorrow.

  28. totaram

    Jack Straw:

    Before you look at a link or read it, you need to try and understand who has written it. You will find links telling you that the earth is not spheroidal. So is it “informative”? You need to check a whole list of factors before you decide. In science we trust in peer-review. In that an article is sent by the editor of the journal to referees who remain anonymous. In some cases, the review is “double blind”, so the referees do not know who wrote the article. The article is thus checked for accuracy, correctness, etc. before it is published. When reading blogs, you need to have a trusted source and usually a good source will have links leading to peer-reviewed science. Otherwise, you can be in with the climate-science denialists.

    Recently, I commented on one of the links given by Harquebus, because, as I explained in my comment, it was just ridiculous logic and therefore rubbish.. So careful reading and caution is in order. I don’t have the time or energy to vet all the links s/he provides, but some of them are extremely questionable.

  29. Jack Straw

    yes I will withhold judgement still investigating this area of understanding. Though H seems very keen on the Hyperlink re other called or so called experts views. For me the idea of any post on this forum is to be able to communicate your views and understandings of your issues in a clear and provable way in a simple fashion that anyone can understand.

  30. Harquebus

    totaram

    You wouldn’t happen to remember which link that was. I’d like to take a look.

    Unless the links that I post are accompanied by a search criteria, they come from my saved links in which case, I have read them and I read a lot.

    Cheers.

  31. PK

    Whilst it is true that energy has much to do with production, energy has zero to do with anything related to public or private debt. Bizarre.

    Thermodynamics does matter when we examine production. That’s valid. However, injecting it into a discussion on asset prices and debt is, more or less, an attempt to confuse and derail conversation. It has nothing to do with the subject.

    Harquebus is practiced in the argument called “the Gish Gallop”… what he does into as small amount of space as possible to derail the conversation post actual fact that is unrelated to the subject as he has done above in an attempt to confuse, distract and derail the conversation, that is “proof by verbosity”.

    http://rationalwiki.org/wiki/Gish_Gallop

    All Harquebus is doing is trying via “proof by verbosity” is to cast doubt on MMT.

    So lets back on track and on conversation and not muddy the waters with irrelevant to the subject discussion….

    The most important misperception is that MMT is in some way outlining an ideal or a new regime that could be introduced. The reality is that MMT just describes the system that most countries in the world live under and have lived under since 1971, when the US president at the time, Richard Nixon, suspended the convertibility of the US dollar into gold. At that point, the system of fixed exchange rates—in which all countries agreed to fix their currencies against the US dollar, which was in turn benchmarked in price against gold—was abandoned. So since that day, most of us have been living in what we call a fiat currency system.

    http://hir.harvard.edu/debt-deficits-and-modern-monetary-theory/

    Foreign debt is as outlined above.

    Monetary Sovereign Government debt (as per the last of Harquebus posts or the “deficit” of your prefer that term) is really just a form of ‘money’, and not ‘debt’ at all, in the conventional sense of the term. The deficit is “money” that the Government doesn’t take out of the economy, it is the “money” that is on the private sector in investments and savings.

    Professor Steven Keen
    https://www.youtube.com/watch?v=D0iFiUfDqSw&app=desktop

    Mathew Forstater – Binzagr Institute for Sustainable Prosperity
    https://www.youtube.com/watch?list=PL0-2Xya0opQX2Mx5YJ7kAs6WkV8J_B0QZ&v=CTaSziDVDDU

    Warren Mosler: The Government Deficit = Private Sector Saving (Federal Reserve = Reserve Bank)
    https://www.youtube.com/watch?v=F9zEEsgjxto

    Professor Stephanie Kelton: The National Debt Is Actually A Government Savings Account
    https://www.youtube.com/watch?v=9BYhoMILwR4&index=10&list=PLZJAgo9FgHWZzhpkjtMxIwZns26A0OdFz

    Professor L. Randall Wray
    https://www.youtube.com/watch?v=pex89N9Oqog&index=11&list=PLZJAgo9FgHWZzhpkjtMxIwZns26A0OdFz

    “The need to balance the budget is a myth.” -Paul Samuelson
    Paul Anthony Samuelson was an American economist, and the first American to win the Nobel Memorial Prize in Economic Sciences.
    https://youtu.be/-V6-GnsvcG0

    Dr Steven Hail Professor of Economics
    https://www.facebook.com/green.modernmoneytheoryandpractice/?fref=ts#
    https://www.facebook.com/green.modernmoneytheoryandpractice/?fref=ts#

    Professor John Harvey, talking about what should be the least controversial thing we ever talk about, but strangely isn’t.
    What he says about the US is true for Australia, too.
    https://www.youtube.com/watch?v=44BKjypXdkI

    Nobel prize-winning economist Stiglitz tells us why ‘neoliberalism is dead’
    http://www.businessinsider.com.au/joseph-stiglitz-says-neoliberalism-is-dead-2016-8

    Why America’s gigantic national debt is a good thing
    http://theweek.com/articles/618419/why-americas-gigantic-national-debt-good-thing

    Ever read Frank Ashe’s 2010 paper, ‘A Kindergarten Guide to Modern Monetary Theory’?
    I recommend sending it to anyone with a sceptical, but genuine and intelligent, interest in your MMT-inspired (or, should I say, reality-inspired) comments on ‘budget repair’.
    http://actuaries.asn.au/Library/FSF10_Paper_Frank%20Ashe.pdf

  32. PK

    Whilst it is true that energy has much to do with production, energy has zero to do with anything related to public or private debt. Bizarre.

    Thermodynamics does matter when we examine production. That’s valid. However, injecting it into a discussion on asset prices and debt is, more or less, an attempt to confuse and derail conversation. It has nothing to do with the subject.

    Harquebus is crafting an argument to avoid the implications of fiat, and at the same time, to appear as a person with deep, credible knowledge known as “the Gish Gallop”. The idea is basically to cram as much actual fact, that is unrelated to the subject into as small amount of space as possible to derail the conversation and at the same time, win the audience… “proof by verbosity”.

    http://rationalwiki.org/wiki/Gish_Gallop

    The entire point of proof by verbosity is to cast doubt on MMT…

    The most important misperception is that MMT is in some way outlining an ideal or a new regime that could be introduced. The reality is that MMT just describes the system that most countries in the world live under and have lived under since 1971, when the US president at the time, Richard Nixon, suspended the convertibility of the US dollar into gold. At that point, the system of fixed exchange rates—in which all countries agreed to fix their currencies against the US dollar, which was in turn benchmarked in price against gold—was abandoned. So since that day, most of us have been living in what we call a fiat currency system.

    http://hir.harvard.edu/debt-deficits-and-modern-monetary-theory/

  33. PK

    Now the debt (or the “deficit”) Harquebus is talking about in his last comment… to put that simply:

    Monetary Sovereign Government debt is really just a form of ‘money’, and not ‘debt’ at all, in the conventional sense of the term. The deficit is “money” that the Government doesn’t take out of the economy, it is the “money” that is on the private sector in investments and savings.

    Professor Steven Keen
    https://www.youtube.com/watch?v=D0iFiUfDqSw&app=desktop

    Mathew Forstater – Binzagr Institute for Sustainable Prosperity
    https://www.youtube.com/watch?list=PL0-2Xya0opQX2Mx5YJ7kAs6WkV8J_B0QZ&v=CTaSziDVDDU

    Warren Mosler: The Government Deficit = Private Sector Saving (Federal Reserve = Reserve Bank)
    https://www.youtube.com/watch?v=F9zEEsgjxto

    Professor Stephanie Kelton: The National Debt Is Actually A Government Savings Account
    https://www.youtube.com/watch?v=9BYhoMILwR4&index=10&list=PLZJAgo9FgHWZzhpkjtMxIwZns26A0OdFz

    Professor L. Randall Wray
    https://www.youtube.com/watch?v=pex89N9Oqog&index=11&list=PLZJAgo9FgHWZzhpkjtMxIwZns26A0OdFz

    “The need to balance the budget is a myth.” -Paul Samuelson
    Paul Anthony Samuelson was an American economist, and the first American to win the Nobel Memorial Prize in Economic Sciences.
    https://youtu.be/-V6-GnsvcG0

    Dr Steven Hail Professor of Economics
    https://www.facebook.com/green.modernmoneytheoryandpractice/?fref=ts#

    Professor John Harvey, talking about what should be the least controversial thing we ever talk about, but strangely isn’t.
    What he says about the US is true for Australia, too.
    https://www.youtube.com/watch?v=44BKjypXdkI

    Nobel prize-winning economist Stiglitz tells us why ‘neoliberalism is dead’
    http://www.businessinsider.com.au/joseph-stiglitz-says-neoliberalism-is-dead-2016-8

    Why America’s gigantic national debt is a good thing
    http://theweek.com/articles/618419/why-americas-gigantic-national-debt-good-thing

  34. PK

    Ever read Frank Ashe’s 2010 paper, ‘A Kindergarten Guide to Modern Monetary Theory’?

    I recommend it to anyone with a skeptical, but genuine and intelligent, interest in MMT and ‘budget repair’.

    http://actuaries.asn.au/Library/FSF10_Paper_Frank%20Ashe.pdf

    Another source for those interested in finding out more about MMT in an easy to understand and straight talking manner is:

    http://elliswinningham.net/

  35. Harquebus

    PK

    Energy and debt are related. Debt is increasingly being used to offset the effects of diminishing energy returns. To say that debt and energy are not related confirms economics complete disconnect with physical realities.
    There has never been a fiat currency that didn’t lose value and ultimately fail and yet, we have the likes of you who think that this time, it will be different. Just like all those clever fools before you who said the same thing.

    http://physics.ucsd.edu/do-the-math/2012/04/economist-meets-physicist/

    “According to the IMF, the total amount of debt around the globe has now hit a staggering 152 trillion dollars. That is an amount of money that is almost unimaginable, and the IMF says that it is equivalent to 225 percent of global GDP. It is the biggest debt bubble in the history of the planet, and it is rising at an extremely alarming pace. Experts all over the world agree that when this debt bubble finally bursts, it is going to create an economic crisis on a scale that humanity has never seen before.”
    http://theeconomiccollapseblog.com/archives/the-total-amount-of-debt-in-the-world-just-hit-a-record-152000000000000-152-trillion

    The world will eventually tell you to stick your fiat crap and will return to real money that can truly preserve wealth, gold and silver.

    Cheers.

  36. Jan

    H – We will just have to start bartering. Remember the greatest problem is still people themselves.

  37. Jack Straw

    “Alan ‘Woody Allen’ Greenspan” what a joke he was. Just to think that every stupid moron hung on his every utterance . Screw America. I hate the place.

  38. economicreform

    John K, Congratulations on an excellent response to Mark’s query. Most people do not understand that federal government “debt” is quite different in its nature to all private sector debt, and to the debt run up by lower levels of government (state, municipal). In all of the latter cases, the debt needs to be repaid, at least over the longer term, in order to avoid bankruptcy. Not so for a monetary sovereign government (i.e. the federal government), which creates and issues the nation’s currency and also creates and issues Treasury securities to the non-government sector. A sovereign government can easily ensure that the stock of securities (bills and bonds) on issue is effectively rolled over – in perpetuity. Moreover a sovereign government has no difficulty whatsoever in paying the ongoing interest on those securities, irrespective of any taxation receipts.

  39. Pingback: Foreign Debt Explained: It’s not what you think. | THE VIEW FROM MY GARDEN

  40. OPPOSE THE MAJOUR PARTIES

    here’s a very interesting article about a conservative UK politician who umasks the politics behind the national debt myth. its a crisis type strategy based upon lies and misinformation to justify privatisations, the transference of public assets to private hands and the reduction of gov services. http://www.independent.co.uk/news/uk/politics/the-deficit-is-just-a-smokescreen-for-a-tory-attack-on-the-state-former-civil-service-head-says-10491761.html

  41. OPPOSE THE MAJOUR PARTIES

    Harquebus. linking currency to gold will not create a more certain currency or economy or have the effects you state. the price of gold is fixed twice a day by private entities with vested interests in its price. mostly rothschilds banks or their agents. you would only be putting your currency to the interests and speculations of those private interests. frankly your insustance that a gold standard would work better than a fiat currency is contrary to historical, is unsubstatiated by either history or reason.

  42. Harquebus

    OPPOSE THE MAJOUR PARTIES
    I do not propose a gold standard. Forget the plastic tokens, precious metals only.
    I think that your view of history is distorted. As far as I am aware, apart from the fiat currencies currently in use, they have all failed. Please enlighten me if this is not the case.

    Search criteria: successful fiat currencies

    “To make the yuan-denominated contract more attractive, China plans the yuan to be fully convertible in gold on the Shanghai and Hong Kong exchanges.”
    http://oilprice.com/Latest-Energy-News/World-News/China-Readies-Yuan-Priced-Crude-Oil-Benchmark-Backed-By-Gold.html

    Gold and silver will still be traded long after your fiat currencies are dead and forgotten.

  43. OPPOSE THE MAJOUR PARTIES

    gold and silver can colapse like anything else. the great depression was a colapse of gold standard currency when gov sought to devalue its currency to protect the value of its gold stocks.
    Ancient Egypt had no currency and achieved what it did by a barter system. they had gold but its value was symbolic not as a medium of exchange.
    all that sort of shoots down ur argument.

  44. Harquebus

    OPPOSE THE MAJOUR PARTIES
    That is not my understanding and after checking, it appears that you are wrong and the ancient Egyptians did not use fiat currencies either so, I have no idea why you brought it up.
    Again you talk about a gold standard. I do not and have never proposed such a thing. As I have stated before, I propose using precious metals themselves, real money, as currency.

    Search criteria: ancient egypt currency

    “Before they started using coins around 500 B.C., Egyptians used a system of value based on the weights of various metals, especially silver and copper.”
    https://www.quora.com/Did-ancient-Egypt-have-money-How-did-it-work

    It has been complained by some here that the following series was produced by a gold dealer but, of all the reviews that I have seen, none have disputed its historical accuracy. I think that you will find it interesting.
    https://goldsilver.com/hidden-secrets/episode-1/

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