62 trillion USD and a lever that could lift a world

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There’s a sentence, maybe apocryphal, attributed to the famous proto-scientist Archimedes: “Give me a place to stand and with a lever I will move the whole world.”; this is one of most cited sentence ever and the basic idea is clear: with the proper fulcrum and the right lever, even the biggest things can be moved.

All around the world, we can see as there’s a mighty need for building or refitting infrastructures (roads, sewers, bridges, railways and so on) and usually there is no money (or little money) available for this kind of expenses in the national budgets. The same can be said about investments in the vital fields of scientific research, public education, social security and much more. Most nations have a tight budget for almost everything aside for the current expenses (salaries, mortgages, maintenance).

What we get is debt. A mountain of debt. According to the estimates of this site, National Debt Clocks, we are well over 62 trillion USD and the sum is growing by the minute. For the sake of my own mental health, I will not give you the figure of the interests on this monster. A good chunk of the international trading market is about the negotiations of national debt titles (obligations), a nice way to say that a nation will pay an interest to the investors if they buy a share of their debt. That means that said debt will globally raise forever, with no end in sight.

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For every 20 USD that are virtually in circulation, one is based on the real economy and nineteen are based on financial speculation of some kind, with debt obligations as one of the biggest players in the game. Our global economy is based on money that does not exist. Like it or not, what makes the world go round is no more than a general agreement. The world’s biggest financial institutes, say Nomura or Blackrock to name a few, thrive on this non-existent money. Every now and then, something goes wrong.

A few countries go bankrupt here and there, places like Argentina or Iceland, or one of many countries in the third or fourth world. Billions vanish in a click, there are a few weeks of well-controlled noise in the media, then the mechanism goes on. When a big country is at risk, like the USA in 2008, some big shift happens in the depth and the noise goes up a couple of notches for a while. When a new point of equilibrium has been found, we go back to square one and restart.

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Is there an exit? Do we have any choice to escape such mechanism? In the past, I ‘ve proposed a haircut to the national debts. Cutting one hundred basis points of capital every year for five years will depress the interests and give oxygen for more public investments. Nowadays I would like to call for something more radical. What if a big country braves the markets? Choose one in this trio: Italy, Japan and the USA. They are big in terms of national debt, this is their key role in this scenario. If any of this nations plain refuses to pay its debt, the markets worldwide will crack down in a matter of days. Is it possible?

Now, back to the initial problem: what to use to set in motion the public investments. The answer, the lever if you prefer, is the debt. Using a non-existent mass of money to solve real-life problems. This is a paradox of sorts, but it will work. I will use my country, Italy, as an example. We got a national debt worth as much as 2,200 billion Euro and we pay the awesome figure of 70 billion Euro each year of interests alone. For a comparison, our GDP is about 880 billion Euro. Let’s say that Italy will not pay interests for a year; how much investments a country like mine could do with 70 billion Euro available? We could turn our country upside down with such a budget. The same could be said about any other country in the world, even our good friend Archimedes will be impressed.

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