Government Debt: The Price We Pay…”international financial system is a sham”
BY JR NYQUIST
There is a fascinating passage in Pavel Stroilov’s book Behind the Desert Storm. It is a transcript from a discussion between Soviet leader Mikhail Gorbachev and Egyptian President Hosni Mubarak. Gorbachev wants to know where Mubarak gets his country’s money from. “Is it flowing in the Nile?” he asks. Mubarak replies that, “Everyone has debts in today’s world.” He went on to say that Egypt only accepted non-repayable aid. “Nowadays,” Mubarak explained, “almost nobody repays debts. I am talking to you absolutely frankly.”
It is nothing for governments around the world to acquire debt. They do so without thinking of the consequences. Consider Mubarak’s words: “almost nobody repays debts.” He is talking about the state, about government. It is no longer shocking that enormous government indebtedness has grown up on every side. The Economist has a global debt clock, which provides a minute-by-minute tally of “government debt across the planet.” As of this writing, that number is over $45.6 trillion. Government “debt across the planet” in 2000 was around $18.7 trillion. That means government debt worldwide has grown by a factor of 2.4 in 12 years. How much did the global economy grow? The Gross World Product (GWP) has grown from an estimated $41 trillion in 2000 to $70 trillion in 2012 – or by a factor of 1.7.
Through these figures we find that government debt worldwide is growing faster than the global economy. We see the consequences in Europe, and there will be consequences in America as well. Numbers don’t lie. There is a general trend toward higher government indebtedness worldwide, led by the United States. Some might blame this situation on the global economic crisis which began nearly four years ago. Government is now obliged to make up for people’s losses. Of course, not all losses are covered, not all businesses are propped up. Here the modern economy has become politicized in the sense that some sectors of the economy, some businesses, are thought to be essential. As someone famously said, they are “too big to fail.” This only means that government subsidizes their failure.