Is There Enough Oil to Pay Our Debt?


From – Jan 5, 2011

by Jeff Rubin

2010 left us all with a mountain of debt. Whether you’re a taxpayer
in the UK, Ireland or the US, it must already be pretty clear that
you’re on the hook for a lot of IOUs borrowed from your future. You may
not have borrowed the money yourself, but your government has already
done it on your behalf, running up massive, record-setting deficits.
What’s not clear is exactly how your government is going to pay that
debt back.

With students already rioting in London over huge tuition increases, and general strikes
the order of the day in places like Athens and Madrid, chances are slim
that incumbent governments will survive long enough to cut their way to
fiscal solvency. That’s not to say the fiscal brakes aren’t on (they
are—at least everywhere but in the US). But the deficits are so
gargantuan (as an example, Ireland’s is equal to one third of the
country’s GDP) that the twin tasks of slashing spending and hiking taxes
could last decades, provoking all kinds of social and political
push-back during that time.

Given austerity’s slim chance at success, you might ask why
government borrowing rates in the bond market, though rising, aren’t
much higher. History would suggest that the yield on a ten-year US Treasury bond should be close to double what it is, given the size of Washington’s borrowing program.

The reason it’s not is that creditors and debtors both share a common
belief that a powerful economic recovery lies just around the
corner—one so powerful, in fact, that tax revenues will suddenly fill
government coffers and let bondholders be paid the huge sums they are
owed while at the same time sparing taxpayers an otherwise draconian

The only problem is that the economic growth everyone is counting on
is powered by oil. And as you’ve probably noticed, that’s getting more
and more expensive to burn.

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About Damien Gillis

Damien Gillis is a Vancouver-based documentary filmmaker with a focus on environmental and social justice issues - especially relating to water, energy, and saving Canada's wild salmon - working with many environmental organizations in BC and around the world. He is the co-founder, along with Rafe Mair, of The Common Sense Canadian, and a board member of both the BC Environmental Network and the Haig-Brown Institute.