Yes the markets prey on debt laden nations.

I have found the Parable "the world plus 5%" to give quite simple but profound answers to why the monetary system is structured the way it is.
www.larryhannigan.com/TheEarthplus5.htm . I post it here in case you have never seen this parable, though it was written in 1971.

the second parable that I like is the one of the island naton who had everything to complete a major public work (ie materials, technology,labour etc,) but did not have the cash. So they printed money, and the engineers paid the labourers etc and the labourers paid their bills etc and the economy flowed on very nicely, getting the job done.
when the Public work (ie bridge) was done, they waited a time, and then had a big party and destroyed the notes.. they still had the bridge, which initially they had "no money" to build.

I would like to see flood recovery dollars created at the moment in just the same way as in the second parable... remembering that money is merely an instrument of exchange... to facilitate the rebuilding process. I wonder If there are any serious politicians who would take the idea and run with it?? Don't ask me how it would work.. I'm a global with big picture ideas and dreams and visions.

i wonder what would happen if a country did try this idea? break the monopoly over the money supply? As we all know there is a limited amount of money available(in the current System) and donors all are finite as well. Why don't we try something new for this unprecedented diaster cleanup??

The characteristic of a pyramid scheme and a growth economy is that as long as it grows all is well. Unconsciously, we all believe in perpetual economic growth. Econcomic growth requires an ever increasing quantity of resources as well as new comers at the bottom so that those already on board, the well off, can get even weller off.

The banks simply continue on the myth of the ponzi scheme mentality and that is why they are allowed to get away with breaking the rules.

We will live in interesting times as we reconcile a broken make believe money system to real world food and energy shortages.

Sharan,

Visit http://cscoxk.wordpress.com/2011/01/21/funds-for-queensland-flood-relief/ to see (in less than 300 words:) how we can do exactly what you suggest. See also http://cscoxk.wordpress.com/2011/01/25/early-infrastructure-replacement/ to see an expansion of the idea.

We can do what you suggest today with our current system. Instead of the government putting a tax levy and distributing expensive money the government can issue interest free loans that will be paid back through the tax system.

The approach can be tweaked for other projects such as getting Australia to zero emissions by

1. Giving individuals interest free loans in inverse proportion to the amount of mains electricity they consume.
2. Requiring the individuals to invest the funds in ways to reduce the level of green house gases.

See an illustrated version of why this is a good way to increase the money supply this way at http://www.youtube.com/watch?v=wXqHSZOg3VA

See a longer discussion on why this will work at http://cscoxk.wordpress.com/2010/05/27/unleashing-creative-forces-for-a-sustainable-future/#comments

Thank you for a data driven article Joergen. The US debt is just about 95% of GDP at the end of 2010. This putative number however does not include agency debt said to be just shy of $6 trillion. Adding the 2 together gets a debt to GDP of about 140%. The US continues to cook the books trying to minimize the gravity. It is like looking at the burning Twin Towers and saying, "things are stable so far"
http://www.usgovernmentspending.com/federal_debt_chart.html