economy of l&1TP3Q039;innovation

Phenomenology of government debt


State debt is often in the press. In recent days, the most talked-about is the Greek debt of the state, local authorities and public institutions, the amount of which, compared to GDP, is widely commented on and the prospects for repayment fiercely debated. Especially since the new majority and the new government were only elected to find a way not to repay it and to allow the population to escape the austerity measures imposed by the IMF, EMU and the ECB, which have taken over part of this debt. These measures, while they may not ruin the country, at least ruin the bulk of the population.

It is now widely acknowledged that this debt, and the resulting situation, is largely linked to the financial crisis of 2008 and the phenomena I described in my book "Financial or social crisis? » (1) published in 2009 by Editions Bénévent. In my epilogue, I said:
"If our society were based on the values of freedom, equality, fraternity and moral virtue, the crisis under analysis would only be a financial crisis, a social epiphenomenon. If the true foundations of society are competition, competition, the quest for power, for domination by imposing submission, if the main parameter is money, if the rich are admirable, if poverty is blameworthy, if the poor and miserable are despicable, then this crisis is not only a financial crisis, but a very serious crisis of society. »

Six years later, I am not tempted to change a word of that. Not for the pleasure of pretending: I told you so, which would be of little interest. But rather to remind us that measures that could provide solutions were proposed at the time, by others and by me, and that those that were taken, which consisted of wiping out the debts, whitewashing the main players and casting a modest veil over the role of certain financial institutions, could have no other effect than to allow the crisis to move on to a new stage.

Without wishing to go back over what I explained in the above-mentioned book, it is necessary for me to recall that although state finances are very often discussed, both in the press and in the public political debate, their real situation is totally unknown, even to the best specialists in the field. Quite simply because the accounts do not exist. They are never drawn up, nor are they closed. Of course, in order to know this, you have to know the issue. Knowing what an inventory, a balance sheet, a profit and loss account is, how they are drawn up, what they are used for. And those who do know it refrain from saying it. Those who are likely to say it, generally not knowing or understanding it. And the few voices that denounce it are inaudible, because they are not part of the impassioned debate, of the show-politics, orchestrated by politicians and journalists, who keep silent on these subjects to preserve their interest and power.

Every enterprise, sole proprietorship or company must, at least once a year, draw up a balance sheet, which it sends to the financial administration and files with the clerk of the court to which it belongs, for publication. A balance sheet is a numerical inventory of assets, that is to say, of what one owns, compared to a numerical inventory of liabilities, that is to say, of what one owes. The difference being the result, profit or loss. The advantage of this method is that it measures the impact of income and expenditure on the development of the situation. This is otherwise impossible. If you spend €100 million to get something that is ultimately worth only €10 million, you simply won't know it. Unless one understands administrative language and knows (and can read), exhaustively, if necessary between the lines, the annual reports of the Court of Auditors. (Who does an admirable job under impossible conditions.) None of this exists in public accounting, where it is only a question of "budget", expenditure forecasts, "budgetary correction", increase or change in the allocation of funds.

In principle, in order to assess a person's situation and solvency, one compares their assets and debts, income and expenses. This is not possible for statements, none of the published figures are conclusive. The only method used removes their significance. One can only rely on "rating agencies", whose recent scandals have shown that they know how to safeguard the interests of their clients.

Why not enjoy unlimited reading of UP'? Subscribe from €1.90 per week.

This does not explain the phenomenology of the crisis and the debt of states, but only why it has been impossible to analyse and remedy it.

It must be clear to everyone, both specialists in financial matters and ordinary citizens with little knowledge of these phenomena, that I could not describe all the actions and operations, systems and mechanisms that led to the crisis. Many of them are unknown to me, and would have been known to me, that one life would not be enough.

Nevertheless, I can provide an outline of the main mechanisms. For actions and operations, they have been described in the financial press and in books, particularly on the 2008 crisis. For the systems, they are explained in economic and financial treatises.

We're going to start from two opposite points. On the one hand, the chronic deficit in the budgets of the main "developed" or "emerging" countries, with the (temporary) exception of China. On the other hand, the mass of capital circulating on the international markets. There is a link between these two systems that ensures the opposite evolution. The larger the deficits of the states, in trillions of dollars, the more the mass of capital in movement increases with increasingly higher multiplier ratios. (cf. "La crise de la finance globalisée", Anton BRENDER and Florence PISANI, La Découverte Editions 2009).

There are a number of other factors to consider:
-Budgets are constantly increasing in the face of GDPs that are rather deflated, but artificially inflated by manipulation (administrative production, integration of illicit work, even criminal activities which, of course, do not contribute anything to taxation and distort the assessment).
Increased concentration of political, economic and financial decision-making powers in the hands of fewer and fewer people.
-The concentration of wealth among an increasingly small number of increasingly wealthy people. According to Oxfam, " the share of world heritage held by the richest 1 %s had increased from 44 %s in 2009 to 48 %s in 2014, and will exceed 50 %s in 2016"..
-The constitution of financial or monetary "reserves".
-Management delegation.

It is clear in France, the USA or Japan, in most countries, and currently particularly in Greece, that political leaders do not know how to solve problems, the solution of which is entrusted to them by the citizens. That in election campaigns they promise to reduce unemployment, to ensure the sustainability of social systems ... That when they come to power no results are obtained. That to try to achieve this, they increase budgets and taxes in order to develop their projects and "give themselves the means".

When they see that their strategy is in vain, they judge their agents and administrations to be ineffective, multiplying the feedback, information and power, discouraging the agents by depriving them of any possibility of real action in the field. Whereas it is the method that is wrong.

That this phenomenon can be found, with differences in nuances, in large companies, where managers anxious to concentrate as much power as possible, in order to avoid developing personal relationships of trust towards employees who would become important, but wanting to attach a clientele to a brand or a logo, make, as in banks, systems of musical chairs or career plans based on travel, developing an "esprit de corps" to the detriment of all external relationships.

These behaviours lead to the impoverishment of populations. Poverty to which politicians are not sensitive, especially in France, where they live largely "at the expense of the princess", their salaries often representing only part of their "pocket money".

For enrichment, as for the concentration of power and all social phenomena, they appear, in the most exacerbated way, at the top of the pyramid. It has been studied at this level and it would be long, difficult and costly to continue the study at other levels. But by taking a few cases that I know of as examples, it seems to me, as it could appear to many of you, that the same phenomenon is manifesting itself at all levels of society, that it could even explain the situation of certain tramps (homeless?).

To fight against disinformation and to favour analyses that decipher the news, join the circle of UP' subscribers.

The enrichment of the few and the impoverishment of the many are largely the result of fiscal imbalances. These imbalances are initiated by policies and benefit finance primarily through the build-up of reserves.

Why question the constitution of reserves? Are they not intended to "secure the future"? Pensions? In fact, the real problem does not arise from the constitution of reserves, but from the use made of reserved funds, which brings us to the following question. It should be noted, however, that the building up of reserves is, in itself, a factor of imbalance and deficit. If, as it is constantly proclaimed, budgets must be balanced, it becomes necessary for income and expenditure to be equal. If part of the revenue is put into reserve, there will not be enough to finance equal expenditure. The only way to ensure both is to invest the reserves by spending the corresponding amounts in assets that will help generate wealth.

This is not done by agents, fund managers, pension managers or others, simply because it is not in their interest. This is to make capital gains appear at the shortest possible term, to ensure the most movements, in order to receive the most commissions. Their interest being perfectly opposed to those of their agents, who would benefit from the greatest security and valuation in the long term, therefore the minimum of movement. If the relationship between the two is direct, it will be possible to monitor, control, reproach and withdraw the mandate. As there are always several intermediaries and the two ends of the chain cannot know each other, the contradiction of interests is ignored (voluntarily masked?). As the intermediaries are not responsible for the damages they cause, because they are indirect, the system has ensured its durability and irresponsibility. It can continue to wreak havoc with impunity.

How can it be explained that the combination of these mechanisms leads to the debt crisis of states and particularly of Greece?

I have often read about "conspiracy theory", and it even seems that it is used to recruit and justify jihadist terrorist actions. I sincerely do not believe that there is a large-scale conspiracy. I am convinced that the explanation is much simpler. Those who cause these situations do not consult each other. It is not necessary, they simply have to act in the direction that their interests dictate. Since their objective is to make money in the short term, by manoeuvring large amounts of capital as quickly as possible in response to news in the media, that is what they do. As is the case in the international field, that there are no rules, no authority to enforce them if there are any, they are subject to nothing other than what they consider to be their interest. According to the title of Joseph E. STIGLITZ, it is "The Triumph of Greed".

How does the combination of the effects of these different mechanisms lead to the current situation?
Lack of proper record-keeping makes it impossible to know the real impact of public expenditure and thus the effects of policies, other than those sought and monitored.

This has two main consequences:
-The multiplication of administrative tasks and the development of its hierarchy, in an attempt to alleviate the disorders of society resulting from the inefficiency of the measures. The exponential growth of information to be processed without any means of selecting its relevance. The resulting costs.
-The abandonment to the financial sector and the "law of the market" of the functions of arbitration and regulation of finance and the economy.

The internationalisation of finance, its control and that of economies by a small number of actors, who exploit tax competition between states and the lack of international regulation has resulted, through the design of financial instruments, in
This is the result of the "sophisticated", perverse multiplier effects, and the swelling of financial masses whose size, which is out of all proportion to "real" economies, determines the insolvency of states.

The measures that could solve this problem are known. They were already proposed to solve the 2008 crisis. They involve the abolition of anonymity and the obligation for creditors to prove the origin and regularity of their claims. All those which, as in 2008, will tend to avoid them will have no other effect than to allow the crisis to move on to a new stage. In the fairly short term, this is likely to be the bankruptcy of states. We can then hope that the disappearance of its main debtors will lead to the destruction of the current international financial system. We can only hope so.

Marc-Albert Chaigneau, Lawyer

(1) "From revolution to inversion" proposes a new project for the reform of society. A model preferable to revolution in that it requires neither violence nor destruction, but only the inversion of a certain number of our behaviours. Reversing behaviours, to do this, reversing reasoning, analyses, personal and professional relationships, based on the principle of subsidiarity (based on collaboration, mutual aid - a hierarchical and functional reversal, as the only possible overcoming of the primary scheme of domination - submission). With From revolution to inversion, the objective remains the one set out in the Declaration of the Rights of Man and of the Citizen, adding to it what is the logical and necessary counterpart, duties and obligations. For there can be no rights if there are no equivalent obligations in return. Through this essay, the author proposes reforms of the social system, of public services...and he gives us the keys for the implementation of a true democracy: direct democracy, which many had dreamed of, but had renounced, believing it impossible to implement. He shows us how it would be accessible, but warns us that it will only ever be accessible to responsible citizens.

Inline Feedbacks
View all comments
energy transition
Previous article

A monetary policy at the service of European investment and the climate

Next article

"Digital confusing": the impact of digital on SMEs, a question of survival and an unprecedented opportunity

Latest articles from ECONOMY



Already registered? I'm connecting

Inscrivez-vous et lisez three articles for free. Recevez aussi notre newsletter pour être informé des dernières infos publiées.

→ Register for free to continue reading.



You have received 3 free articles to discover UP'.

Enjoy unlimited access to our content!

From $1.99 per week only.