"The Hoover Effect"

Here is the real world debt and capital flows situation made as plain as it can be. New Economics Foundation is the parent site of Jubilee Research. Both support the same great work:

GLOBAL “HOOVER EFFECT” SUCKING WEALTH OUT OF POOR COUNTRIES INTO THE U.S.

IN COUNTERBLAST TO IMF REPORT LEADING THINK TANK’S DATA REVEALS GLOBAL DRAIN OF RESOURCES FROM IMPOVERISHED NATIONS

As the World Bank and IMF hold their annual meetings to discuss the state of the global economy, nef has released groundbreaking data demonstrating that the global economy - as structured by western politicians and bankers - is acting as a giant “hoover”. The new analysis of global inequalities shows that globalisation is sucking wealth and resources out of the poorest countries and concentrating it in the hands of a few in the richest countries, particularly the United States.......

........According to the report, the “hoover effect " of the global economy is caused largely by an international financial structure skewed to benefit the rich. The dollar led construction of the international financial system means that poor and rich countries alike are obliged to keep financing the US deficit, through the purchase of US “IOUs” (Treasury Bills).

In the absence of a global key currency standard, the US Treasury Bill now plays the part that gold once played in the global economy. This system, according to nef’s report, has led to the increased transfer of resources from poor countries, and the concentration of wealth in rich countries. There is a net flow of $48 billion every year from the poorest people to the richest, easily outstripping annual aid grants of £32billion.

As financial instability increases countries are forced to hold high levels of US dollar reserves, usually in the form of US Treasury Bills. They are, in effect, making very low interest rate loans to the United States, while at the same time borrowing from abroad (including from the United States, the World Bank, and the IMF) at very high rates of interest.

Capital flight and outflows of Foreign Direct Investment, to the tune of $97.8 billion every year, leave poor countries for banks in Switzerland, the United Kingdom and the United States in particular. Some of this money is legal investments made by residents of developing countries in Northern countries, but much of it is illegal capital that finds its way into the accounts of all too willing banks in the North. ....{article link continued}