Talk About Facts, Not Fear
by Simon Black: Is
the IMF Now Recommending Capital Controls…?
step away from the noise for a moment and look at the big picture.
This isnt about doom and gloom, or fear, but objective facts.
the Western hierarchy dominated by the United States is in a completely
unsustainable situation. Across the West, national governments have
obligations they simply cannot meet both to their citizens
and their creditors.
In the UK,
national government borrowing is already 22% higher than at this
same point last year, a record year for borrowing. Meanwhile, the
UKs budget deficit for August hit a record high.
the new government of Francois Hollande passed a historic
and austere budget that is still posting a deficit of
3% of GDP. Thats including a 75% tax on incomes exceeding
one million euros.
In Japan, the
government is mulling legislation that will fund 40% of the budget
with deficit-financing bonds.
In the United
States, the government recently hit $16 trillion in debt about six
weeks ago, after reaching the $15 trillion mark last November. It
took 200 years to accumulate the first trillion in debt and 286
days to accumulate the most recent trillion.
Each of these
countries has a debt level that exceeds 90% of GDP the historic
point of no return. More importantly, each of these countries also
has to borrow money simply to pay interest on money theyve
This is important
because it makes the problems multiple. At the beginning of the
1780s, the French monarchy was spending around 30% of tax revenue
to service its debt. Eight years later when the revolution began,
they were spending 62%.
The next 26-years
in France were filled with internal civil war, external war with
Austria and Prussia, hyperinflation, crime, social unrest, and Robespierres
In the 19th
century, the Ottoman Empire faced an even steeper financial decline.
In just 11-years, the Ottoman central government went from spending
17% of its tax revenue on interest payments to spending over 52%
of its tax revenue on interest payments. Then came default, in just
In the US,
debt service is also rising. According to the Government Accountability
Offices figures, the US government was spending 9% of revenue
to service the debt in 2002. Throughout most of the last decade,
in fact, the US government spent roughly 9% of its tax revenue on
But in 2009,
the figure hit 9.75%, then 10.5% in 2010, then 11.5% in 2011. For
the fiscal year that just closed on September 30, the Bureau of
Public Debt reported cumulative interest expense of $375.8 billion
on income of $2.45 trillion. This is a rate of 15.3%. See the trend?
not just debt burdens that are problematic. Rich countries
in the West are also rapidly debasing their currencies, spawning
tomes of regulatory impediments, restricting the freedoms of their
citizens, aggressively expanding the powers of the state, and engaging
in absurd military folly from Libya to the South China Sea.
this is not the first time history has seen such conditions. In
our own lifetimes, weve seen the collapse of the Soviet Empire,
the tragi-comical hyperinflation in Zimbabwe, and the unraveling
of Argentinas millennial crisis. Plus we can study what happened
when empires from the past collapsed.
the rest of the article
© 2012 Sovereign Man
Best of Simon Black