World on the Greece – y slope to financial ruin.

According to news reports, finance ministers from the world’s leading economies worked on through last weekend to line up a deal that will see the world embark on a second global rescue package worth nearly $2 trillion in April this year.

They claim this is needed to stop the euro-zone sovereign debt crisis from spreading and putting at risk the tentative recovery.

Germany said it would make a decision some time in March on strengthening Europe’s bailout fund, a move other Group of 20 countries say is essential to clear the way for throwing extra funds into the International Monetary Fund.

I have been doing a little research and found that the nations coping best with the economic slump are those that did not join in the first money priniting exercise stimulus. The point about such a project is it contains the seeds of it’s own destruction. Printing money is not a question of revving up the printing presses. Money these days exists computer databases and only shows up in spreadsheeds.

There is very litle real money around.

So when we say ‘printing money’ it means governments borrowing money on which they must pay interest. And the more money governments borrow to finance their profligate spending, the more interest they must pay.

This is how Greece got into it’s current state. The interest that nation must pay on its €1,7 trillion debt at current interest rates of around 7% is €120 billion. With a GDP of about €220 billion and falling the nation is in a spiral of debt. It must take on more debt by borrowing to pay the interest on existing debt. Simples.

So long as economists and politicians choose to ignore this we are all on the Greece – y slope to the same fate.

What makes matters worse is nobody in their right mind would lend to governments these days so governments are buying in their own bonds, i.e. borrowing from us poor punters. And they are not giving any guarantees when or even if they intend to pay us back.

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