The latest report from the McKinsey Global Institute says that total world debt — private, corporate and governmental — has risen from $142 trillion to $199 trillion between 2007 and 2014. This is a rise of $57 trillion or $8 trillion a year — so the total will have breached $200 trillion by now.
But where has this $57 trillion come from? It certainly hasn’t come from Quantitative Easing (QE) — extra money printing — by America, UK, Japan and the EU as a consequence of the 2008 Crisis. QE will not have printed more than about $5 trillion between 2007 and 2014. Money printing by non-advanced countries couldn’t have been more than that either. So, mixed within a total world debt we have a tranche of $50 trillion or thereabouts [199-142] that has never been printed but only came into existence by some sort of mystery route.
This is not implying that the mystery came about by magic, or counterfeiting or even criminal conspiracy. It only came about by a world financial sector which, because of incessant greed — a normal human instinct — makes sure that it always looks after itself whenever it invents a new financial device. It has been able to slice and dice governmentally-printed money so much and in all sorts of ways that many of those who go deeply enough into debt will never recover. If too many creditors can’t recover their money then the system itself is not only in danger on bringing the world’s economic system to a catastrophic halt, but to themselves also.
Which, of course, almost happened in September 2008, when almost all the large retail banks of the non-Chinese world seized up and had to be rescued by governments only hours before the start of the working week when millions of people needed to use cash machines. What might happen next time is that, because governments are so much more indebted than they were in 2008, they may not be able to rescue the banks.
To be utterly realistic about the whole matter of the financial sector, the whole situation has become so complex that the next catastrophe is inevitable. There is only one solution and that is one in which governments have nothing more to do with money. It is legitimate for governments to tax their citizens for the sake of their security and spend money accordingly but it is not legitimate for them print as much as they like when they like. Next time businesses invent money then citizens ought to be knowledgeable enough to effectively prevent governments from using the printing press for their own convenience ever again.