DEBT AND SOLVENCY

GOVERNMENT DEBT AND SOLVENCY

by

Sanford Pinna, M.D.

COPYRIGHT 2009

In Dubai, today, we are seeing a small country,

whose leaders were literally insane for the last

decade, face the fact that borrowing money has

a life threatening side.

Borrowing money is like a person taking

cocaine—take a little and you are euphoric—

take a lot and you are dead.

Borrowed money must be repaid. Repaying by

borrowing more, only postpones the inevitable

nasty ending.

Almost every country in the world has

borrowed unbelievably large sums of money—

from banks, businesses and individuals.

Governmental financial leaders have

gloated about the fact that they oversee dossiers

of these vast mounts of debt. They do not

refer to the debt in numerical terms; but

rather, as a percent of the nation’s GDP.

“Oh, our debt is only 30 percent of

our GDP.”

The implication is that the GDP can

only grow, and, of course, the debt will

be paid off.

But, do GDP’s always grow?

What happens when they fall?

The 30 percent can become 300

or 3000 percent!

THE WORLD FACES REALITY

Dubai is the tiny canary chirping in

the coal mine:     “I smell deadly gas.”

The “miners” of the world are awakening.

The global economic slow-down will

reduce GDP’s everywhere.

Weak countries, such as: USA, U.K.

Greece, Ireland, Spain, Italy and many

Latin American countries, may watch,

like a mother seeing her children washed

away by a flooding river, as their GDP’s

plummet in the rushing financial waters

of the Economic Rip Tide.

TOO MANY PEOPLE

There are seven billion people on

the Planet Earth.

That is seven billion mouths to feed,

but, also, almost fourteen billion hands

to work.

Rich countries have more workers than

they can use.

Poor countries are shipping their over-

abundant workers everywhere, seeking work.

We see millions of poor workers

thousands of miles from their homes.

These workers are in Dubai. But,

they are also flooding into the USA

and the UK and all other countries

with excess free capital.

These workers pay no taxes—and

being hungry, they will work for

cheap wages.

Cheap labour means cheap prices,

which  means a lower GDP.

Who will pay the governmental

debt?

Not the cheap labor.   They will

not even pay taxes.

So, the governments must borrow

again, simply to pay the interest on the old debt.

HOW LONG CAN THIS GO ON?

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