Debt and its Impact on the Well-being of Nations

I am pleased to present this new book in which an analysis of the public debt and the private debt of the world is made and a new payment method is proposed: the demonetization of part of the debt and its materialization with the payment through high-value tradable goods such as gold, oil, food and natural resources, so that if a nation or institution does not have enough cash, it can pay with this type of goods. This opens a new perspective to international economic relations. The book also succinctly analyzes Venezuela's external debt and proposes a solution.

This is the index:

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Index

Synthesis

Introduction

Should debts be forgiven?

The English Classical School and the debt

Is it possible to pay all the debts of the world?

External debt of the United States, China and Japan

Global Debt

External debt of the Group of 7

External debt of low and middle-income countries

Debt in Europe

The IMF Recipe

Unpayable debt

London Club and the Paris Club

The forgiveness of the debts of the poorest countries

Modalities of debt relief programs

How private debt becomes public debt

Why and for what the International Monetary Fund and the World Bank were created

The origin of debts of developing countries

Large private debts

The debt of Venezuela

Conclusion

References

Index of tables

Global Debt (Public and Private) Countries Selection

The 3 countries with the highest external debt for the year 2018

External debt of the Group of 7 for the year 2018

The 10 low and middle-income countries with the highest external debt

Total External Debt

https://www.amazon.com/gp/product/B07V2XGQRP/ref=dbs_a_def_rwt_bibl_vppi_i3

The unique solution for Greece, Spain, Portugal and Italy is to abandon the euro

These countries do not have other option if they want to keep their political systems and avoid a social shock. The International Monetary Fund, the European Central Bank and the European Community impose their decisions to the countries members of the Union. Some measures are reducing the pensions and the salaries of the public workers, diminishing the public spending in health and education, the privatization of the public enterprises and the public services and the increase of the public services tariffs.


It is obvious that the world population is beginning a rebellion. The protests worldwide are undoubted evidence. Occupy Wall Street ---which began on September 15 2011--- is already a big movement in the United States. In Spain ---where occurred the first manifestations of the indignant--- the protests are every day most; the same happen in Greece, Italy, Portugal, England and Iceland. For example, on October Saturday 15 2011, big protests also happened in Rome, Madrid, Barcelona, London, Berlin, Frankfurt, Brussels, Sidney, Japan and New Zeeland, among other places.

The protests are against the bankers and their unlimited desires of wealth; also against the indulgent attitude of the politicians and governments that give to the bankers trillions of dollars in bailout but deny basic resources to the majority of the population, by mean of the restriction of the public spending. All the money is for the bankers and the breadcrumbs, the remains for the rest of the people. That is the basic reason because the people are angry worldwide.

1. The solution

For overcoming the current crisis some European nations do not have other option than to abandon the euro and come back to their previous national currencies. The reason is very simple: because when those countries adopted the euro they resigned to its sovereign capacity to decide its monetary policy. In the past, Spain, Portugal, Greece and Italy were able to issue the amount of national currency that they required for their economies, with enough independence. But now no; now they must require the approval of the European Central Bank, the European Community and of the International Monetary Fund. That is the cause of the current crisis, because the first priority for those institutions is to recovery the loans given by the banks to those countries. Therefore they require strict measures of austerity to the nations; they want that the nations employ their resources ---in first instance--- to pay the debt acquired with the banks.

If Greece, Italy, Portugal and Spain abandon the euro and come back to their national currencies, their central banks will be able ---autonomously--- to issue the money for paying the salaries of the police, the teachers, the firefighters, the doctors, the nurses, etc; and will be able of to pay the national public financial commitments. They are industrial societies with an important autarkic capacity; they can survive with their own national resources because they are self-sufficient in agriculture, industry and services. Of course, those countries need to maintain and to increase its international commerce because through it they obtain their international mean of payment; and currently they have a part of that international commerce.

2. What would happen if Greece does not pay? A hypothetical scenario


If Greece abandons the euro the problem for Greece would be how to pay the external debt, in this case, the debt acquired in euro and/or dollars with the banks. An important question is: What would happen, really, in the true practice, if Greece does not pay its debt? Well, in this moment, because of the dependence of the euro it would be a chaos for the population because the government would be not able of paying the salaries to the people and to guarantee the movement of the economy; but if Greece comeback to its national currency the situation would be different, because the government would be able of issuing the necessary money to guarantee the economic movement. If Greece has an adequate level of internal supply of goods and services it might overcome the first stage of the situation and advancing to a best position. The same is applicable to the other countries.

If Greece abandon the euro, at the beginning, the financial international consequences for Greece would be hard; first of all, it would not get, for the moment none loan from the financial system; this mean that the country would not be able of to pay its external debt during a time. But this situation cannot be for much time, for a simple reason: when you are a big debtor of a bank you, in the practice, become in a partner of the bank; if you broke the bank also will broke. That is the big problem for the banks currently: their debtors are, in the practice, their partners.

The unique form that Greece pays its external debt is getting more international means of payment, this mean dollars or euro and for that is necessary that the country increase its participation in the international commerce. The other form is refinancing their debt at a convenient period. A combination of the two solutions might be possible. The international financing system knows that there is not other option than refinancing the Greek debt and giving fresh money because if they do not do this very soon the banks will broke.

3. A big show

All this situation is a big show of the bankers and some politicians for obtaining more benefits: a) more bailouts, b) more interest rates, and c) more benefits regarding the debt, because the sovereign papers that in this moment does not has none value will be sold to a good price in the future.

The sovereign debt never is paid completely; it is an eternal debt and this is the big business of the bankers; they simply change papers by other papers at a new term. For example, Greece will not pay its debt in euro or dollars; Greece only will change their expired papers for new papers to be collected supposedly at mid or long term. Meanwhile, the banks obtain the best part.

4. Conclusion

The international financial system will resolve the problem refinancing the debt of all the countries involved in the situation. The banks will impose their conditions; that is the objective of the current crisis that was provoked by the same banks for obtaining more and more money. That is all. But it is also very likely that some European countries like Greece, Portugal, Spain and Italy will reconsider the benefits and disadvantages of to stay in the euro sphere…The pressure of their populations perhaps will compel to the leaders of these countries to adopt a decision regarding the comeback to their previous national currencies. Germany and France, which obtain the most advantages from the euro, might keep the Union.

Financial crisis: the solution is to issue more money and not reducing the public spending

I would like to express in too few words the essence of the works that I have written in the last weeks, 
regarding the current financial crisis.

1. The economic and financial crisis has its origin in four facts, essentially: a) the growth of the world economy, b) the corruption of the bankers that employed the resources of the clients for their own benefits, c) the bailout given by the governments to the bankers, d) the high price reached by the petroleum in the year 2008, which provoked panic between the main economic actors.

2. It is necessary to realize that the world economy operates in a new scale; in consequence, it is necessary to adjust the financial resources to that new scale. Reducing the public spending is a mistake; for example, if you augment your weight the solution cannot be to reduce the size of your clothes: your trousers, shirts, jackets, etc; on the contrary, the solution should be to acquire new clothes according to your new weight; well, the same is applicable to the economy.

3. The nations can issue the amount of money (in national currency) that need without limitations: money is metal and paper without intrinsic value http://pablorafaelgonzalez.blogspot.com The unique financial restriction for the countries is the availability of international means of payments, in other words, the U.S. dollars which is the international currency of interchange.

4. It is logic and natural that the United States has a big debt because of a simple reason: the U.S. dollar is the international currency of interchange.

5. The solution for the current financial and economic crisis is: a) to issue more money according to the new scale of the world economy, b) restituting the purchasing-capacity of the workers in the nations affected by the recession, c) to increase the public spending in health and education, d) to increase the public and private jobs, e) reducing and maintaining the interest rates, f) avoiding the privatization of the public services g)  forgiving a part of the countries debt and developing a new world financial policy and  h) to establish severe punishments for the banks frauds. 

The monetary policy is a key element to reduce the poverty and achieving wellbeing

I want to dedicate this reflection to the politician leaders of the countries affected by the scarcity of financial resources.


The lack of money is one of the main causes that impede the wellbeing of many nations.

First of all we must ask which the cause of the lack of money is.

The answer is not complex.

The lack of money has its origin in two facts: a) The misconception about the limitations of the national governments to manage its monetary policy in sovereign form and, b) The scarcity of dollars, which is the fiat currency employed for the international transactions.

It is necessary to say that in the last years the world has accepted a new international currency for the international transactions, the Euro, but this operates in a reduced magnitude. Also we must underline that recently has appeared an economic trend that intend establish a new currency or setting the Chinese currency, the Yuan, like a third international mean of payment. The financial crisis in the Euro zone and the downgrade of the U.S. debt made by Standard and Poor too few weeks ago has contributed to strengthen that trend.

I will explain following, the two mentioned causes:

a) Misconception on the governments limitations

The issue of money in the different countries of the world obeys to a series of economic rules and international duties. Those rules were established in the Post War with the creation of the International Monetary Fund, IMF.

The first rule is that the amount of national money that circulates in an economy must be in relation with the amount of the international reserves of each country. In turn, the parity of the national money regarding the U.S. dollar is the measure that establishes the total amount of national money that should circulates; in other words, is the parity regarding the U.S. dollar the fact that determines the monetary liquidity in the majority of the world countries; this rule act as a limitation that impedes to the national governments of the different countries to increase the monetary liquidity over the limit guaranteed by their international reserves. For example, if you have $ 10,000,000 in your international reserves and the parity regarding the U.S. dollar is 1 per dollar your national liquidity should be also 10,000,000 units of your national currency. If your parity regarding the dollar is 2 per dollar, then your national liquidity should be a maximum of 20,000,000 unities of your national money. This limitation in the capacity of national currency issuing is one of the principal causes of the developing nation’s dependence and indebtedness. The reason is very simple: because when the public spending surpasses the limit of the government capacity to issue money, the governments require loans to the international agencies or the private banking system. This is one of the mechanisms that have caused the developing nations debt.

One first step to resolve the problem of poverty is that the politician leaders of the developing countries realize that their countries have two sovereign capacities: a) to establish in sovereign form and without limitations the parity of their national currencies regarding the U.S. dollar and b) to issue, also in sovereign form and without limitations, the amount of national currencies that their economies require.

You do not need to request loans in dollars or Euros for financing activities in your national (local) currency. You need to request a loan in international means of payments (dollars or Euros) only if you do not have the amount of those currencies and you need to acquire goods or services in the international market. But, for financing activities in your national (local) currency, you can issue the amount of money that you need in sovereign form, and, of course, with the due balance. None foreign government neither none international agency can impede to a country to issue the national money that need for their internal economic activities; so that the issuing of national money is a sovereign decision of each country, do not limited by the amount of their international reserves, like commonly the people think, even like many politicians leaders think.

b. The scarcity of U.S. dollars

One of the most important obstacles for the development is the scarcity or lack of international means of payment (U.S. dollars or Euros).

You can issue in sovereign form the national currency of your country, but you cannot issue the currencies of other countries. Therefore, you cannot issue U.S. dollars neither Euros. Only the U.S. government can issue dollars and the European Union Bank to issue Euros.

Like the U.S. dollar is the most important currency of international interchange, the United States has the dominium of the international economy, because its government is the unique that has the sovereign capacity for issuing U.S. dollars. This is the main cause of the United States economic supremacy.

There are other key facts that contribute to the U.S. economic supremacy: a) that moreover of the gold, the U.S. dollar is the currency employed by the central banks of the world countries to keep their international reserves, b) that the most part of the international loans and debts are denominated in U.S. dollars, c) that the U.S. do not has external debt but internal debt, because the formal concept of external debt is the debt acquired in international means of payments, in other words, in U.S. dollars. Like the U.S. debt is denominated in its own currency, the U.S. dollars, this mean that the U.S. government does not has external debt but internal debt. This fact gives to the U.S. government the capacity of managing its financial situation with absolute liberty and independence.

The rest of the world countries do not have that liberty, independence and autonomy. The reason is very simple: because they depend of the amount of U.S. dollars that obtain and keep as a consequence of their economic transactions; they cannot issue U.S. dollars, in change, the United States can issuing all the amount of U.S. dollars that need.

Conclusions

- The governments can manage its monetary policy in sovereign form; this mean that they than can establish the parity of their currencies and the amount of monetary liquidity according to their internal economies needs, and without limitations regarding their international reserves.

- It is not necessary to request external loans for financing internal commitments, for example, the construction of one highway, school, hospital, etc; they must be financed with national (local) currencies.

- The external debt (in international means of payment) must be acquired only for financing external activities, for example, for acquiring goods or services in the international market, and only if the country does not have those resources.

- The external debt is one of the most obstacles for the countries development; therefore, the countries must make its most effort for avoiding acquiring new debts.

- The managing of the monetary policy is a key element to overcome the poverty.

- These ideas represents a different conception on the traditional monetary policy and are a complement of the basic concepts exposed in the essay entitled Money is only metal and paper without intrinsic value, philosophy of money, available in http://pablorafaelgonzalez.blogspot.com

Why the debt is not a problem for the United States? An answer in 150 words (II)

The debt is not a problem for the United States, because the United States is the owner and issuer of the international currency for the commercial and financial transactions, and, moreover, the currency in which the central banks of the world maintains their international reserves.


But, the essence of the issue is that while for the rest of the countries their financial international commitments are external debts, for the United States their financial international commitments are internal debt, because it is a debt in its own currency. The difference between external debt and internal debt is that the former is denominated in international means of payment (U.S. $), while the second is denominated in national currency of each country.

The fact that its debt is considered internal debt and not external debt is the big advantage of the United States, because the U.S. has sovereign capacity to issue U.S. dollars, without limitations.

Why the poor countries do not overcome its poverty? Political economy

"When public money is stolen for private gain, it means fewer resources to build schools, hospitals, roads and water treatment facilities. When foreign aid is diverted into private bank accounts, major infrastructure projects come to a halt. Corruption enables fake or substandard medicines to be dumped on the market, and hazardous waste to be dumped in landfill sites and in oceans. The vulnerable suffer first and worst."

UN Secretary-General.  UNDP, Democratic Governance. 23 April 2011.

Index

1. Overview
2. Ancestral attitude of man
3. Material conditions
4. Natural resources change
5. Distribution of wealth
6. Least developed countries
7. Income and development
8. National currencies and international currency
9. The United States has no external debt
10. Value and support of the national currencies
11. Gold value
12. The external debt is the main obstacle for the development
13. Corruption, a source of the world’s poverty
14. Lack of efficiency
15. People’s attitudes and development
16. A contradiction: the United States poverty
17. The Neo liberalism was imposed to the undeveloped nations
18. The extreme liberalism also affects the United States
19. What to do

1. Overview

The majority of the world population is poor. Only a small group of countries concentrate the world wealth. Why does this happen? There are diverse opinions on the theme. Some researchers assure that it is a problem of intellectual capacity. Others say that the wealth is a consequence of the attitude regarding the work. But I consider that the poverty is a consequence of two limitations: a) the man attitude and b) the material conditions.

In the year 2000, the world leaders defined a program of 8 points to improve the economic and social conditions of the world population; this program was named the Millennium Development Goals and their objectives are: 1. Eradicate extreme poverty and hunger, 2. Achieve universal primary education, 3. Promote gender equality and empower women, 4. Reduce child mortality, 5. Improve maternal health, 6. Combat HIV/AIDS and other diseases, 7. Ensure environment sustainability and 8. Develop a Global Partnership for development.

Between the years 2000 and 2011 has been achieved some important progress in some countries but the most still remain in a precarious condition. Why does this occur? To understand this, it is necessary to considerer some key aspects of the man history.

2. Ancestral attitude of man

Since the beginning of the times, a small group of men took for them the principal wealth that is the Earth. They became landlords by mean of the appropriation, the robbery of the land. That is the origin of the wealth accumulation. This fact, in turn, determined the born of the social classes.

The phenomenon of the land appropriation occurred in all the societies.

Egoism is the feeling that predominates in the majority of the human beings and was the feeling that motivated the first wealth accumulation. This feeling is the cause of the most problems of the world: poverty, damage to nature and the environment, social violence and war.

3. Material conditions

Some regions of the world are privileged while others not. The abundance, scarcity or lack of natural resources determines the poverty or the richness of nations. Notwithstanding, it must be highlighted that there are countries do not privileged in natural resources that are rich, Switzerland and Japan, for example. Why does this happen? The answer is very simple: because in the modern world the money is employed as mean of change for obtaining all the goods that exist and who possess money can buy the resources and everything. 

4. Natural resources change

But the availability of natural resources is changing, as a consequence of three factors: a) the overexploitation, b) the pollution and c) the climate change. These restrictions set in peril the Millennium Development Goals, MDGs.  

Every day the signs of scarcity appear in many regions of the world. This means that, at mid term, the possession of money will be not enough for obtaining natural resources. This already has happened in some periods of history, for example, in times of war. During the Second War, the availability of resources was restricted and it was decisive for the Hitler’s and Japan defeat. In that time, a piece o bread was more valuable than a diamond or an amount of gold or money.

The Food and Agriculture Organization, FAO, are warning about the impact of the climate change and the pollution on the food production. In the last months, the food prices have suffered an important increase; this reveals the food trends. The price of the goods demonstrates its scarcity or abundance. So that the availability of natural resources is key for the poverty overcome. Until now it has been possible for the nations less favoured in matter of natural resources to buy them in the international markets, but if the situation of scarcity acquire a most intense form, it will be not easy for those countries to get the scarce resources.

It is necessary to underline that the food price is influenced by a key input: the oil price. In the last decade this has experienced an important augment and the perspective is of a sustained trend in that same sense.

Other important situation that deserve be mentioned is that there are two other facts that affect the food security; they are the food loss and the food waste.

In a Report entitled Cutting Food Waste to Feed the World, of 11 May 2011, FAO assure the following:

“Roughly one third of the food production in the world for human consumption every year ---approximately 1.3 billion tones gets lost wasted.

Food losses ---occurring at the production, harvest, post-harvest and processing phases--- are most important in developing countries, due to poor infrastructure, low levels of technology and low investment in the food production systems.

Food waste is more a problem in industrialized countries, most often caused by both retailers and consumers throwing perfectly edible foodstuffs into the trash.”

End of the quotes. Available in Internet in:

http://www.fao.org/news/story/en/item/74192/icode/

5. Distribution of wealth

The same that has happened inside the countries also has passed between the nations; this mean that the strongest countries invaded the less developed and weak nations and this fact caused the economic preeminence of the formers. The wealth of the European nations ---in good part--- came from America, came from the slavery, from the appropriation of the American lands and the overexploitation of its resources. For example, all the gold and silver obtained by the European countries during the 16^th and 17^th centuries was taken in violent form from America.

In the interior of the less developed nations occurred a similar phenomenon. The privileged classes took for them the best lands and established the slavery. By mean of this process was consolidated the power of the rich classes in those countries.

In the modern world ---formally--- the slavery disappeared but in the true reality it still exist in many countries of the world; for example, currently there are nations, especially in Asia, where the workers work the 30 days of the month and their salaries do not pass $ 120 per month. Those are the new forms of slavery. There are international institutions that denounce these situations. Concretely, it exists denounces about the situation of slavery that suffer millions of workers in the industrial cities of China and other regions of the world. China has obtained a privileged position in the international commercial market because of the overexploitation of their workers. International companies have moved their activities toward China and other countries of Asia to obtain benefits of that unfair situation.

In the next table may be appreciated the situation of poverty in regions like East and Pacific, China, South Asia, India and Sub-Saharan Africa. A common fact for those regions is its overpopulation and this is a key factor that impulse its poverty.

Source: World Bank, Global Monitoring Report 2011, Improving the Odds of Achieving the MDGs, Box 1.1.

6. Least developed countries

Between 8 and 13 March 2011 in Istanbul, Turkey, United Nations realized the Fourth Conference on the Least Developed Countries. In an official document UN assure the following:

“Since 1971, the United Nations has recognized the Least Developed Countries (LDCs) as the “poorest and weakest segment” of the international community. Extreme poverty, the structural weaknesses of their economies and the lack of capacities related to growth, often compounded by structural handicaps, hamper the efforts of these countries to improve the quality of life of their people. These countries are also characterized by their acute susceptibility to external economic shocks, natural and man-made disasters and communicable diseases.

How many countries are the LDCs?

The current list of LDCs includes 48 countries: 33 in Africa, 14 in Asia and the Pacific and one in Latin America. Cape Verde graduated from the list at the end of 2007 and Maldives on 1 January 2011.

What qualifies a country to be an LDC?

The United Nations Committee for Development Policy (CDP) uses the following criteria to identify LDCs:

1) Low-income, measured by an average income per person over three years. An average income less than $745 per person per year is considered for inclusion, and above $900 for graduation;

2) Weak human resources, as measured by indicators of nutrition, mortality of children aged five years or under; secondary school enrolment; and adult literacy rate;

3) High economic vulnerability, measured by population size; remoteness; diversity of goods exported, share of agriculture, forestry and fisheries in the economy; instability of agricultural production; instability of exports of goods and services; and homelessness owing to natural disasters.

What are the main challenges facing the LDCs?

● High levels of poverty: More than half the 800 million people in the LDCs live on less than a dollar a day. Women in LDCs have a one in 16 chance of dying in childbirth, compared to one in 3500 in North America.

● Food insecurity: More than 300 million Africans, where 33 out of the 48 LDCs are located, are food insecure.

● Economic vulnerability: LDCs are highly dependent of external sources of funding, including official development assistance, workers’ remittances and foreign direct investment. This overly exposes them to external shocks such as the global financial crisis, which has had a severe impact on their economies.

● Environmental vulnerability: While they contribute least to climate change, LDCs are among the groups of countries most affected by climate change. Poor housing, over-dependence on natural resources and the lack of adaptive capacity all people in LDCs at a greater risk to the impact of climate change than people in other countries. Many LDCs are also small islands whose very survival is threatened by rising sea levels.”

End of the quotes. Available in Internet in:

 http://www.un.org/wcm/content/site/ldc/home/Background/quick_facts#11127

7. Income and development

The lack of income or the reduced scale of income is the material cause of the poverty.In the modern industrial world, the money is the mean through which the human beings get the goods and services that they require to satisfy its needs. In the pre-industrial society, the situation was different and the people had the possibility of changing goods by other goods or of to be self-sufficient in some activities. For example, the antique farmers had certain level of self-sufficiency; they were able of producing the food and some basic inputs employed in other basic activities of the life. But now, in the modern world, if you do not have money you cannot get anything. In this scenario arise a key question:  

Where does the income come from?First of all it is necessary to make a distinction between the income of the nations and the private person’s income; this last encompasses the income of the private business and the income of the individual people.In the case of the governments, the income comes from two sources: a) the tax system and b) the sovereign capacity of the states to issue money. In the case of the private persons (business and individuals) the income arises of different sources, like the government (public spend), the remunerations of the diverse private activities in the internal market and the remuneration of the exports to the external markets.

8. National currencies and international currency

The income is ever in money, national money or international currency. With the national money the governments and the private people of each country make the economic transactions inside of their countries.

Since the Second World War, the nations selected the dollar of the United States of America like the currency for the international transactions. This means that the U.S. dollar is the currency through which the world does the most international business.

Each country can issue its own national currency but they cannot issue currencies of other countries. However, it is necessary to say that the issue of national currency of the different countries should follow some international rules.

If a country or a private people do not have the international currency required to pay in the international markets ---and this is the dollar of the United States--- that country or person cannot realize international economics operations.

How the countries and the private persons do obtain the international currency, the U.S. dollar?The answer is: through the international mechanism of payments: you sell a good or service and the buyer pay you an amount in the international currency, the dollar. A minor amount of international transactions are made in Euros and in the national currencies of Japan and China. This means that you will have more or less international means of pay ---dollars--- depending of your ability to sell goods and services in the international markets.

The United States of America has the biggest advantage in the international finances and in the international commerce because its government can issue the U.S. dollar that is the international currency for the international interchange. None other country have this advantage. This means that the United States of America can acquire ---without limits--- all the goods and services that want in the entire world, because its currency is accepted worldwide. The rest of the countries do no not have this advantage. They must get the US dollar for making their international economical transactions.

The national governments of the rest of the countries are able only of to issue their national currencies.

9. The United States has no external debt

The reason is very simple: because the technical concept of external debt is the debt acquired in foreign currency. According to the international statistics published by the International Monetary Fund, the United States has no debt in foreign currencies reflected in the international financial statistics. The debt of the United States is in dollars of the same United States; this means that it is an internal debt because it is a commitment in its own currency. So that the people that talk about the burden debt of the United States are not right. It is not the same an external debt than an internal debt. The external debt represents a sign of weakness of the economy of the rest of the countries because they need foreign currency ---U.S. dollars--- to pay it and they do not have always the amount of money that requires. But for the United States the situation is completely different, because the United States can issue all the amount of dollars that need its internal economy because the dollar is its own national currency. Also it can issue the total amount of dollars that the international economy requires.

We must remember that the most international operations are made in dollars; therefore, the United States must fulfill the monetary needs of the international economy. The debt of the United States is a consequence of its role as issuer of the international currency of interchange, the U.S. dollar.       

The debt of the United States instead of to be a factor of weakness of its economy and the world economy, is a factor that reveals the strength of the US economy. The financial crises are caused by the owners of private fortunes to obtain personal benefits. They do the crisis and the governments pay the bailouts. That is the true truth.

10. Value and support of the international currencies

Since the Agreements of Breton Woods, in the post war, the value and support of the national currencies of the different countries of the world was established in base to the dollar of the United States of America. In those years, in Breton Woods, the countries agreed: a) the creation of the International Monetary Fund, b) that the international reserves of the nations must be kept in dollars c) That the value of the U.S. dollar should be established regarding the gold value, d) That the dollar would be the international currency of interchange, and e) that the emission of national currencies should maintain a relation with their reserves in dollars. For example, if you set that your national currency is worth in two (2) units per U.S. dollar, this mean that each national currency in circulation should be supported by a reserve of $ 0.50; the problem is that the nations not ever obey this rule. In all the cases, the parity regarding the dollar is an act of sovereignty of each government; this means that they can issue more or less amount of national currencies.

I don’t believe in public fiscal deficit; the governments have sovereign capacity to issue national money; which is the support? The people faith, nothing more; none currency has an own value, per se. The currencies of all the countries are simple papers without intrinsic value that are accepted by the people to make transactions in the market and only the governments have the power to issue those papers. In the past, the currencies had an intrinsic value, because they were made of gold or silver. But with the apparition of the bills of paper the situation changed. At the beginning the bills had a support in gold but along the time this support was eliminated and now its support is only its credibility, its acceptance.

11. Gold value

The currencies cannot be supported in gold for a simple reason: all the gold that exists in the world is not enough to support the big amount of money that circulates in the world.

The other issue is the intrinsic value of gold. Why gold does has a value? Which is the utility of gold? The value of gold is a convention, a creation of man without real base. You cannot eat, drink or use gold but for jewelry. The most important use of gold is as international instrument of reserve by the central banks of the countries. This is also a convention. The central banks might use other minerals like diamonds, platinum, and others. In change, there are goods that represent a true value: oxygen, water, food, medicines, petroleum. They have an intrinsic and useful value. You cannot live without them but you can without gold.

12. The external debt is the main obstacle for the development

The programs for the development of the undeveloped countries have been based in a paradoxical policy: the acquisition of big amounts of loans from the international financial system and the international agencies. This is new form of domination that became the undeveloped countries in absolutely dependents of the international financial system.

Many countries must employ more than 50% of their income to pay the external debt. This implies that they cannot afford the basic necessities of the population.

13. Corruption, a source of the world’s poverty

The other problem that impedes the development of the poorest countries is the corruption of a part of its leadership. The scarce fiscal resources of these countries are not ever employed in an honest form. The own fiscal resources of each country and the international aid sometimes is diverted for the personal benefit of the rulers. This determines the maintenance and enhancement of the poverty. The United Nations Secretary speech on the theme that heads this work is a perfect synthesis of the consequences of corruption for the world. The corruption subtracts the resources that should be employed in the progress of the people, usually, of the less favored social groups. Therefore, more than a crime, corruption is a sin against the poorest.

14. Lack of efficiency

Important investments in public services and infrastructure are made in many underdeveloped nations but, in many cases, those investments do not produce the appropriate results. This is especially visible in the sanitary and educational fields. Indeed, is in those activities where the majority of the undeveloped countries are very far of the Millennium Goals.  

15. People’s attitude and development

The economic and social behaviors and custom described in the previous paragraphs reveal the existence of a solid system that obstructs the development. Instead of promoting the progress of the nations, in the undeveloped nations the people’s attitudes contribute to stress the underdevelopment. Those attitudes are, among others, the following: a) the lack of conscience about the sanitary and health norms; for example, it is a custom in an important part of the population of the undeveloped countries the practice of unhealthiest actions like to cough and sneeze without protecting their mouths or to spit in the streets. A Mayor of a Chinese city has developed an intense campaign to teach at the citizens to avoid this custom. It is common also the commerce in the streets of food without the most elementary norms of sanitary, the inexistence or bad use of the public services of water and waste, b) The destruction of the natural resources and the damage to the environment, especially the contamination of the sources of water.   

16. A contradiction: The United States poverty

The United States is the first capitalist nation of the world but, in that country ---though it seems a contradiction--- the poverty exists. According to the Census Bureau document entitled Income, Poverty and health Insurance Coverage in the United States 2009, “the official poverty rate in 2009 was 14.3 percent up from 13.2 percent in 2008.” The report assure that “In 2009, 43.6 million people were in poverty, up from 39.8 million in 2008, the third consecutive annual increase in the number of people in poverty.” In the following table may be appreciated the official figures.

Source: United States Department of Commerce, U.S. Census Bureau, Income, Poverty and Health Insurance Coverage in the United States 2009, table 4, page 15.

Perhaps the most relevant proof of the poverty in the United States is the limitation of health care services which affects millions of citizens. This do not happens in the other industrialized developed nations, where the states guarantee the medical attention to the citizens.

In the United States, the health services are private business managed with economical benefits criteria and this impede at the poor people the access to the health services. A report published recently, assure, for example, that the time of wait for elective surgery might be of several months for the poor people and sometimes this never happen and the people die.

Source: United States Department of Commerce, U.S. Census Bureau, Income, Poverty and Health Insurance Coverage in the United States 2009, table 8, page 23.

The figures demonstrate key issues of the economic conduction of the United States. Moreover, too few days ago, conservative economists pointed out to sell the gold reserves of Fort Knox to pay the internal debt of the United States. The same economists requested the privatization of public services that are in hands of the Federal Government.

17. The extreme liberalism also affects the United States

The previous examples reveal that the U.S. faces an extreme economic liberalism trend that might be an important cause of the economic and social problems of this great country.

In the last years, the United States has begun to feel openly the extreme liberalism effects. The financial crisis of the year 2008 and its consequences is an irrefutable proof of this. The Federal Reserve boss, Ben Bernanke, recognized that the weak supervision by the government was one of the main causes of the financial fallout. The United States balance of payment weakness is other visible consequence, because the country imports are very important and their exports are affected by the competition of new exporters, like the countries of Asia. These situations have increased the unemployment rate and the poverty rate in the United States like was proved in the previous statistical tables. 

18. The Neo liberalism was imposed to the undeveloped nations

In the decade of the 80^th years, starting the dissolution of the Soviet Union, the World Bank and International Monetary Fund imposed the Neo liberalism to the undeveloped nations. The threat of do not refinancing their debts was the method employed to obligate at the undeveloped nations to accept the policy. The Neo liberalism may be considered like an extreme phase of the economic liberalism.

The basic elements of the Neo liberal policy of the eighty and ninety years of the 20^th century was: a) the privatization of the public services and public enterprises, b) the public services price increase, c) the international commerce liberalization (Globalization) and d) the interest rates augment. This policy ruined the economy of the undeveloped countries and destroyed the success that those nations had reached in the past. The results were more poverty, more unemployment and more damage to nature and the environment, because that system search only financial benefits at any cost.

19. What to do

First of all we must underline that the model of development followed until now by the undeveloped nations ---the Neo liberalism and Globalization--- has not been successful. It is necessary, then, creates a new model of development to diminish the poverty, the dependence, generate employment, fair salaries and protect nature and the environment. I would like to make mention of some concepts that might contribute to make possible the creation of a new model of development:

a. The poverty is a big problem with numerous implications: This means that the solution must be tackled since diverse points of view. It is not only an economic problem. It is, moreover, a sociologic,politics and demographic problem. From that broad perspective the problem must be considered. Since the economic dimension, the poverty may be considered as the lack or scarcity of basic means of subsistence. In the modern world this may be translated like the lack of money, because the commerce all is based in money. To buy any good or service is necessary money, if you do not have money you cannot acquire anything. In turn, the lack of money has a cause: the absence of economical activity as entrepreneur or like worker. So that the first measure to combat the poverty is to guarantee the development of economic activities in the production and distribution of goods and services to generate employment and fair income to workers and entrepreneurs. A third economic actor exists; it is the most important: the States, the governments of the countries.

b. The natural resources and the resources of capital are limited: If the population grows to a superior rhythm than the resources, it is not possible to reach a balance between population and resources. The consequence is the poverty. Hence, the other key measure to tackle the poverty is the demographic control.  

c. The financial capitalism is the responsible of the poverty of nations:  Like the majority of the poor countries do not have enough financial income to buy in the international markets, it should be created a new system that let them to acquire the goods and services that they need without currency. For example, like these countries have abundance of raw materials the mechanism might be to change raw materials for goods and services. The undeveloped countries should employ those goods and services to develop its internal economy, by the creation of new economic activities in concordance with their natural resources and the size and abilities of its population. If the process is realized according with the mentioned objectives, to change raw materials for goods and services would not be a mechanism to accentuate the dependence. On the contrary, the mechanism would let at the poor countries to have access to the goods and services that they need but that they cannot acquire in this moment because do not have enough money and to build a solid economy.

The financial capitalism has caused also the poverty in the rich nations, because important sectors of those countries do not receive the necessary financial income to reach an adequate level of life.

d. More flexibility in the financial loans: This would be a road to enhance the number of loans to the undeveloped nations.  

e. Best control over the international financial aid: the international agencies and the donors should create a best system of control of the funds given to the undeveloped nations to guarantee its right use.

f. More employment: The struggle against the unemployment is vital. The employment is the key of the wellbeing. I suggest: a)  A Global Program of Reforestation that would let the creation of millions of ecological employments worldwide  and the protection of nature and the environment and b) A program for the intense use of the time and the productive infrastructure in those countries affected by the depression of their internal markets. The basic proposal of this program is the creation of the double working-day and the half working-day, to incorporate millions of unemployed to the productive activities.  

g. Protection of Nature and the environment: The international agencies and the governments of the countries should intensify and create concrete programs of employment for protecting nature and the environment. Programs in these fields currently exist but they are not sufficient. The effort should be enhanced and this would contribute effectively to the population wellbeing and the preservation of the planet.

h. The mentioned programs have something in common: they employ a minimum amount of energy which is one of the scarcer resources in the current world.