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Compreender a Dívida Pública (em poucos minutos)

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Understanding Public Debt ( in a few minutes) The public debt, again with the public debt "We must have less public debt! Public debt! Public debt!" Yes, yes, we understand that But in truth, public debt is indeed a worldwide issue Unnaffected countries are rare The proof: worldwide public debt has exploded during the last decennial But why so much public debt? And what can be done? "Less public expenses! More competitivity! An austerity plan! Privatize everything! Whoa, not so fast. Are you sure about all that? Then how do you explain why so many countries have reached this exact point? Isn't that weird? And why won't you mention the Fractured Reserve System? The process of money creation through credit expansion? Or Lisbon Treaty's article 123? They seem like important issues. "Whaa?Hum?What?" I see, you don't even know what I'm talking about Well, so it's probably for the best that I explain it to you. Chapter 1: "The bathtub story" Picture the economy as a bathtub Currency plays the role of water The trick is to fill it with the right quantity. Not too much. Or too little. When an economy grows, it's as if the bathtub grew as well So it's then necessary to add more water Which is to say to print more currency But a question arises How should we create more currency? The taps of the economy are a particular kind of banks, normally public which we call Central Banks They can create or destroy currency at will And thus fill or empty the economy The currency created by these banks is called central currency But there's also a second tap which is made up by the commercial banks. But this tap works in a particular way Here's an explanation: Let's imagine we ask our bank a loan Many will think that the bank will get the money from one of its safes But this isn't the case In reality the bank will in fact "create" the money for the loan through an accounting operation This money will then be materialized while the reimbursement occurs To this process we simply call Money Creation Through Credit Expansion (summary of Chapter 1) Chapter 2: "Which tap has the strongest flow?" In order to know which of these taps has the strongest flow we must know the rules for opening them First rule: Lisbon Treaty's article 123 We must understand that banks finance themselves through a Central Bank and that's how the first tap opens To put it in another way, Central Banks create the currency that States require to cover their deficit But these practices usually have an electoral reason for existing and provoke an important inflation situation Since the 70s this has been the argument by which the States, , advised by the finantial world, have forbidden direct access to a Central Bank This is a restriction that exists today, it is still visible in the Lisbon Treaty, signed by all EU members, in its article 123. The states thus cannot open the first tap, so they use the second tap This means that in order to cover their deficits States must get their loans in the finantial market, particularly with the commercial banks Second Rule: Fractured Reserve System Like States, families and companies also make their loans in the finantial market Thus we have a lot of loaned money associated with commercial banks But do these banks have enough funds to issue these loans? In principle they do because as we've seen, the Central Bank creates the money which is then borrowed But there's a limit, which we call the Excess Reserves Ratio This mechanism is used to assure that banks have a certain amount of money readily available However this limit is so flexible that in the end commercial banks are able to create and borrow up to 6 times what they have in actual currency! And if despite this flexibility these funds aren't enough no worries, since they are authorized to borrow money from the Central Bank in any way they see fit This gives us plenty of freedom to open the second tap To this relatively unknown process we call the System of Fractional Reserves It is nowadays applied worldwide (summary of chapter 2) Chapter 3: "An expensive bath" Now that the way the taps work is explained let's return to the bathtub We've just seen that the first tap doesn't do anything else but to feed the second tap In other words, we realize that the central banks today are nothing more than bank regulators So we can now understand that the bathtub is completely full from water coming out of the second tap In other words, the totality of the currency in circulation has its origin in credit emitted by banks Effectively, existing money now essentially consists on what is called "scriptural money" Which is another way of saying that it's money issued through credit But there's a problem with all this: water evaporates And since money comes from credit it evaporates as soon as these credits are reimbursed So we must always keep the second tap running so that the bathtub stays full Which is to say that States, families and companies must always keep borrowing money from the banks so that the economy works! Second problem: all of this is very expensive In practice, credit negotiated with banks always carries an interest rate with the goal of financing the lender As a consequence, we must always pay the necessary interest so that this "scriptural money" fills up the economy And it has to be said that this represents a great deal for the banks ... and also for the lenders And only one fifth of this is actually left over for everyone else Let's see how these interests weigh in with a practical example: France's huge public debt Respecting the rules we've described before, the French State no longer uses its central bank since 1973 but pays interest instead What has been paid in interest from that date Has been the remarkable figure of 1.4 billion euros Why is this number remarkable? Because it is very close to current french public debt Which has increased 1.3 billion euros in this exact same period of time It is clear that what made this debt increase were mostly the interest on this very same debt! And let's not forget that beyond the public debt, there's a debt related to french private companies, for examplo, which is now worth around 7 billion euros! The reasons for this growth of public and private debt worldwide are now clearer In practice, most countries worldwide contribute to the same bathtub and must get these loans and pay interest so that their economies function And to reimburse these loans they frequentely take on new loans which in turn imply more adittional interest So now we have a debt that feeds on itself and grows, grows, grows... ...inevitably! (summary of chapter 3) Conclusion We've seen that public debt is said to be mainly caused by mismanagment by the State or by low competivity, and that the only solutions are to privatize the economy or apply austerity plans But this is simply bullshit! It is matematically IMPOSSIBLE to solve the issue of public and private debt without addressing monetary creation through credit (with the associated interest) because these are the natural causes of those very same debts! If we want to solve the debt problem, the first indispensable step is to assure that we don't depend on the second tap to fill the bathtub and just use common sense instead That is, to limit the power of monetary creation to a Central Bank This is the only way for a monetary system to exist that doesn't feed off its own debt For 4 decades now that States are barred from accessing a Central Bank under the pretext that the tap is sometimes used abusively Today we're in the opposite situation: the first tap is cruelly absent while another has replaced it, filling the economy with an huge debt that is impossible to pay back Let's not forget the huge profits banks and lenders get off this arrangement I thinks it's deplorable that such a crucial subject isn't even debated by the political class and that it is never even approached in the newspapers Thank you for your attention THE END

Video Details

Duration: 10 minutes and 35 seconds
Year: 2011
Country: France
Producer: MrQuelquesMinutes
Director: MrQuelquesMinutes (autor)
Views: 221
Posted by: nuno oliveira on Oct 20, 2011

Uma explicação concisa dos mecanismos de criação e crescimento da dívida pública europeia. Legendagem de um original visível em http://www.youtube.com/watch?v=ZE8xBzcLYRs

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