SHAME ON GOVERNMENTS AND IMF

Governments could borrow money  from ourselves, our banks, our pension funds, our businesses, our mutual funds and unit trusts, more cheaply simply by promising to repay what they have borrowed - with as little as 1% interest. Very Cheap.

With some governments owing more than 1 GDP (a nation's total income for a year) 1% interest is not a lot to pay. Total tax revenues in most nations are above 30% of GDP. 

What have they borrowed?

They say it is money.

We say it is our hard earned income.

We want financial fairness.

They say repaying the money is safe and fair. Plus interest - then they hold down interest rates or they allow inflation to rise devaluing money. Or both.

Repaying money that they can devalue and which banks and central banks do devalue is not fair.

If governments were to repay the income that they had borrowed they would not have difficulty because their income is our taxed income and taxes on spending from our income and our saved income and our investment income. It is all a tax on our income, saved, spent or invested.

FOR EXAMPLE

Let us say that the government borrows 3 National Average Earnings / incomes (3 NAE) from your pension fund. They pay interest on that. 20 years later they have to repay. Meantime incomes have doubled twice. If they just pay the money back (as they do now), how does that help? What prevents them from paying back the same 3 NAE that they borrowed? That will be four times the money they borrowed.

By then government revenues may be four times higher.

Instead, they pay interest on MONEY. They call that taxable income.

Who knows what money will be worth?

If governments took income from working people and paid it to pensioners, those pensions would keep pace with working people's average incomes. No winners and no losers. What is the difference? They got our savings on loan in the meantime. No other difference in cost except 1% interest if they repay the income that they borrowed.

EXTRA COST - TOTALLY UNFAIR

Instead, investors that lend money to governments that repay money with interest insist on having extra interest because of that risk to their wealth. Interest costs on money can be very high - far above the 1% they might have to pay on borrowed wealth. 

That costs the tax payers extra money. The uncertain value of these investments then causes chaos in the investment markets and it means that no one knows what their savings or reserves invested in government bonds (lending to government) are worth. If inflation goes ballistic these could be worth nothing.

Even without extreme inflation, pension funds cannot guarantee what their pensions will be worth. That is not fair.

BAD FOR GOVERNMENT AND THE ECONOMY

Governments do not know how much taxation to levy to service these money repayment debts.

LESSON FROM EUROPE

In a recession, governments still pay the same fixed rates but their revenues are falling as incomes are falling. Ask the governments of Europe like Spain, France, and Italy what that means for economic recovery. It happened to them. Greece is now thinking of using Bonds linked to GDP. That is a link to total national income.

It will help the Greeks if the recession gets worse. The plan is to restore the economy. The opposite.

That will cost Greece more because more people will be employed and total national earnings / income (GDP) will rise even if National AVERAGE Earnings remain unchanged. So they will pay their masters (lenders) in Germany and elsewhere a whole lot MORE than the wealth (income / earnings) that they have borrowed.

More corruption - this time from the governments of Europe and the IMF. The IMF also lent to Greece. This was largely their idea. A way to profit from those in trouble - unfair as usual.


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