The Theorem of Interest (Le Théorème De L'Intérêt)

Abstract

This paper shows that, in the present non-system of international payments, the indebted countries serve interest twice over. Once net interests have been financed in their entirety by trade and financial surpluses, indebted countries suffer furthermore the loss of an equal measure of their international reserves. The theorem of interest is the discovery of a fundamental pathology in the domain of international payments effected by banks. Starting from the bookkeeping identity between EX and IM, the author shows that the payment of interest by each indebted country considered as a whole redoubles the payment of interest that befalls its residents.

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Keywords: External debt, Interest payment, International monetary operations, International monetary economics

JEL Classification: B59, E42, F02, F34