The indebtedness of the states

If there is a phenomenon that characterizes the current economic condition
of the countries of the world, it is the phenomenon of their indebtedness.

So it is worth to briefly deal with the issue of government borrowing,
because it gives us perhaps the clearest picture of what will follow
in the future. What our future will be like, the future of our children,
the future of our society.

Probably there is no one who
doesn’t know that all nations
in the world, some less and
others more, are indebted.

And that with each passing year the states
are obliged to borrow more and more money
(because the ever-growing interests are
added to the previous loans).

Two questions should concern us now:

   First, who do the states borrow from?

   Second, where does this ever growing debt lead?

The first question is easily answered
(the second we will deal with in the next chapter).

The state borrows money from certain individuals.

From who else?

Money can belong either to the state or to private individuals. Since
it doesn’t belong to the state, then it belongs to private individuals.

The government borrows
money from private citizens.

Either through the banks where they have deposited their money
(and the banks then purchase the government bonds for them) or
through the stock exchange, where the individuals themselves or
their representatives buy the bonds.

To these private citizens the government must now pay interest.

And because the interest increases the amount of the money it owes, the
state is forced to borrow from the same people even more money and of
course to owe them more and more. The state is forced to borrow from the
same individuals ever more money to pay back what is owing them.

When the financiers lend their money they receive a certificate stating
that the state is obliged at a certain date to pay them, not the amount
borrowed, but that amount plus interest (which after some years can
be a multiple of the capital).

When the time comes, the state is obliged to pay back the money.
But it hasn’t got it. So it is forced to borrow from the same capitalists
an amount many times greater than the previous one.

This money the state returns immediately to its creditors because it was obliged to
borrow it exactly for this purpose, giving them also new certificates for the new debt.

In reality it is the same money (on paper, don’t imagine suitcases
full of banknotes) which is transferred back and forth, augmented
with the steadily growing interest.

Nothing is left in the state from this transaction.

What remains is the ever-growing debt.

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