Wednesday 6 July 2011


The US owes over $14 trillion, the UK owes £900 million, Greece now owes another €340 billion, I owe nearly €100,000. How much do you owe, how much have you spent that you didn’t have and when will you have it.

National debt is calculated as a percentage of GDP (gross domestic product), this is to say how much you owe compared to how much you make. For me that means 2-3 years of giving every penny myself and my wife earn to pay off our debts, nothing for food, fuel, mobiles. Then there is the interest, this would put another year or so on that scenario. But, of course we have to eat and clothe ourselves and the fridge needs a beer or two. Take a look at your finances, how many years are you in the hole for. 

The fact is that everyone owes, you, me, even the Swiss. Japan’s debt sits at over 200% of GDP but their economy is healthy, despite the recent tragedy. What makes us nervous is who we owe to, for example a couple of thousand on the credit card will worry you much more than two hundred thousand on the mortgage and a couple of hundred on the electricity bill may cause panic. Now ask the question; what exactly do we owe? Why money, of course Pounds, Euros, Dollars. We owe money to the banks and credit companies, tonnes of the stuff. They give it to us to give to others who give it for stock, who give it for raw materials and the government takes some in taxes, give some to the banks. All of us, big and small owe it to the banks, who in turn owe it to other banks and on and on it goes. The truth is, there is not enough money in circulation to clear all the loans in the world. Even if the world lived on baked beans on toast for years. 

So what is money exactly, well the chaps at Oxford define it thus:
noun [mass noun]
  • a current medium of exchange in the form of coins and banknotes; coins and banknotes collectively:
It conveniently solves the problem known as the double coincidence of wants which is to say that I have a Lady Gaga cd that I don’t want and nor do you (naturally) but you have some spare beers. If we didn’t have money, I would have to ebay the cd, wait for the money then get the beers, by which time I might not be thirsty (yeah, fat chance). 
So it’s useful stuff indeed, however its value is very abstract and changes hugely from country to country (the same, lets say, bottle of beer may cost 3 or 4 times less in Bulgaria than it does in Britain). It varies from person to person (Frank might do your plumbing work for considerably less than James). So it does not have a constant value. But we are used to all that, not to mention the fact it's worth a little less each year. 
It is a representative unit of world resources, just like shares in a public company. Wrong, the gold standard is but a history lesson in economics nowadays and the banks and finance houses have been allowed to lend money that they don’t have for so long that it now represents the combined product of the world, including services and iPads for many years to come. 
So what is it. What you have in your pocket is but an icon, a rosary, an object of faith, beyond that it is smoke and mirrors. The high priests of this floundering religion are trying put the fear of b’Jesus into us all. People are losing their homes, livelihoods and even their lives for it. All religious wars have their casualties and this one will be no different.                
This is a thought that has been troubling me for some time now. What is it really all about. The cows are giving as much milk, they’re baking as much bread, they are still making iPhones by the ship-load, houses are still being built, Lady Gaga is still making CDs. What exactly is the crisis? There is a lack of something that didn’t really exist in the first place. Isn’t that like getting flogged for stealing the Emperors new clothes! 

For more Money-based monkeying about or financial tom-foolery:

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