October 15, 2010
In June the Office for Budget Responsibility forecast that the Government’s interest payments on its debts would be a whopping £43.3Billion this financial year.
Part of this interest is payable to the Bank of England, who created £200 Billion through quantitative easing (QE) and used it to buy government gilts.
Analysts at Société Générale have calculated that if the Bank of England issues a further £50 Billion of QE as is expected and uses it to buy more Government Gilts, the Government could end up paying the Bank of England £7.75 Billion in interest this year. Money that will, of course, eventually be returned to the Treasury.
March 25, 2011
Most resources for IMF loans are provided by member countries, primarily through their payment of quotas. Since early 2009, the IMF has signed a number of new bilateral loan and note purchase agreements to bolster its capacity to support member countries during the global economic crisis. Multilateral borrowing arrangements provide a further backstop to IMF resources. Concessional lending and debt relief for low-income countries are financed through separate contribution-based trust funds.
The quota system
Each member of the IMF is assigned a quota, based broadly on its relative size in the world economy, which determines its maximum contribution to the IMF’s financial resources. Upon joining the IMF, a country normally pays up to one-quarter of its quota in the form of widely accepted foreign currencies (such as the U.S. dollar, euro, yen, or pound sterling) or Special Drawing Rights (SDRs). The remaining three-quarters are paid in the country’s own currency.
Quotas are reviewed at least every five years. Ad hoc quota increases of 1.8 percent were agreed in 2006 as the first step in a two-year program of quota and voice reforms. Further ad hoc quota increases were approved by the Board of Governors in April 2008, resulting in an overall increase of 11.5 percent. The 2008 reform came into effect in March 2011 following ratification of the amendment to the IMF’s Articles by 117 member countries, representing 85 percent of the IMF’s voting power.
The Fourteenth General Review of Quotas was completed two years ahead of the original schedule in December 2010, with a decision to double the IMF’s quota resources to SDR 476.8 billion.
Public debt is the total amount of money owed by the government to creditors. It is usually presented as a percent of gross domestic product (GDP)
Genuine and non-genuine debt
Public debt is the amount of money owed by the government to itself and to its creditors who, like the IMF, have taken money from that government, via quotas in order to have it paid back to them. In the end, our money plus interest.
This is not genuine debt – this is banker debt, legerdemain, a con trick. North at Lew Rockwell:
The international currency system is based on two primary factors: (1) central banks’ counterfeiting operations; (2) debt-based money. The first guarantees long-term price inflation: debt servicing with depreciating money. The second prevents any long-term reduction of government debt that serves as central bank reserves, i.e., monetary deflation. This is a ratchet upward in the government debt markets of the world.
There is debt and debt. The first kind is your private debt you’ve racked up and it needs paying out, on acceptable terms. Then there is illusory, created debt figures involving governments which play by a different set of rules in never intending to pay down their debt but do turn to the citizen and say:
“All debt must be paid down, our predecessors racked up an enormous and expanding debt, therefore your living conditions must be decimated. Along the way, you must sign over all sorts of freedoms to the bankers.”
The banks and government are playing a creditor/debtor game in which we are invited to participate and lose and the only beneficiaries are them. And there are political issues at stake, as well as economic:
Even judged by the stated missions and policy goals of each agency, the World Bank and IMF are abject failures. Both agencies have lent hundreds of billions of dollars to developing nations since the 1950s, but these hard currency loans have actually damaged their clients in the developing world and reduced economic opportunities. Instead of promoting real commerce and stable economic growth, both the IMF and World Bank instead encourage financial profligacy and political corruption; speculation and monetary idiocy on a truly global scale. Loans from these and other multilateral institutions have left the citizens of borrower nations heavily burdened with hard currency debts and, as a result, deprived of meaningful economic opportunities.
These are false organizations. The problems of the society are stated only in terms of the balance sheet whereas the real problems are:
1. decline in real wage value and purchasing power;
2. decline in the chances of starting up and sustaining small businesses;
3. basics such as affordable housing and food moving beyond people’s pockets;
4. decline in quality of life.
There comes a point where all the false determinants of policy in the country are set to one side and things like moratoria on debt are required whilst the country gets back on its feet, leaves the EU, IMF, BIS and other bloodsuckers and focuses on new products, reduced taxes and other spurs to purchasing within the country.
In the interests of fiscal responsibility though, repayment of this fictional debt can then be phased back in but the main thing is that you don’t collapse an economy over a fictional debt in the first place. That is utter madness.