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Debt Worldwide Hits Record $86k per Person

bloomberg.com

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Re: Debt Worldwide Hits Record $86k per Person

#91

Post by nostromo »

sfilargi wrote: post #73
nostromo wrote: post #67

Earlier quoted context omitted.

Debt is how the supply of money grows. So, sure, if a few people don't want to have any debt, that's great. But if everyone stopped borrowing we'd be in a lot of trouble. There are other ideas about how we could grow the money supply of course. Perhaps the Federal Reserve could mail everyone some cash every month.

> So, sure, if a few people don't want to have any debt, that's great. But if everyone stopped borrowing we'd be in a lot of trouble. Why would we be in trouble. Explain it to me like I know nothing about economics?

That's a big ask. Instead I'll point you to the best video I've ever seen on this subject, by Ray Dalio. It's long, but worth it.

https://www.youtube.com/watch?v=PHe0bXAIuk0

Re: Debt Worldwide Hits Record $86k per Person

#92

Post by joe_the_user »

jdoliner wrote: post #2

Does anyone actually still believe that these debts will all someday be repayed? Does anyone even believe that the amount of debt will go down, rather than up, over the course of any length of time? Even a day? I don't, which raises the question: how does a world where debt monotonically increases indefinitely work? Can that happen forever, in which case debt has just become a standin for currency (that allows people…

Does anyone actually still believe that these debts will all someday be repayed?

This kind of rhetoric involves essentially a misunderstanding of our present capitalist system.

Individual, organizations and government in the course of their existence, need to sometimes get access to more resources than they currently have. Borrowing for capital expenditures is the means to do this - issuing bonds, taking out mortgages and etc is the basic way this happens. This applies to houses, to bridges and to many other things.

Since new, large expenditures happen even as other others are paid-off, of course all the debt is never paid. There's no reason for all the debt to be repaid, paying it all would be counter-productive.

We could talk about the particular ways that debt and expenditures are done in this society (and boy there's a lot to talk about there). One big, problematic is imposing more debt on the personal level when it belongs on the state level (see student loans, "health care savings accounts" and other problems). But to begin the conversation, one has to understand how the broad economy works at all, how it's not equivalent personal values of honesty and thrift, etc.

Re: Debt Worldwide Hits Record $86k per Person

#93

Post by avip »

aurailious wrote: post #19
jdoliner wrote: post #2

Does anyone actually still believe that these debts will all someday be repayed? Does anyone even believe that the amount of debt will go down, rather than up, over the course of any length of time? Even a day? I don't, which raises the question: how does a world where debt monotonically increases indefinitely work? Can that happen forever, in which case debt has just become a standin for currency (that allows people…

> Does anyone actually still believe that these debts will all someday be repayed? I don't understand why you would ask this question. On the individual level its obvious that some debts won't be. It happens all the time for a lot of reasons. So I assume you aren't talking about the individual level. But on the macro level zero debt is a very bad idea and unless civilization collapses there will always be debt. Debt…

I find it difficult to reconcile this POV with environmental concerns. That elusive "debt" is 100% convertible to real resources (land, water). We have more debt because we consume too many things we don't need. How is that good?

Re: Debt Worldwide Hits Record $86k per Person

#94

Post by jklein11 »

jdoliner wrote: post #2

Does anyone actually still believe that these debts will all someday be repayed? Does anyone even believe that the amount of debt will go down, rather than up, over the course of any length of time? Even a day? I don't, which raises the question: how does a world where debt monotonically increases indefinitely work? Can that happen forever, in which case debt has just become a standin for currency (that allows people…

>>Does anyone actually still believe that these debts will all someday be repayed?

I believe that all debts will be repaid. They will either be repaid by the borrow or by the lender, when the borrow can't pay and the lender has to bail them out.

Re: Debt Worldwide Hits Record $86k per Person

#95

Post by aurailious »

coldtea wrote: post #51
aurailious wrote: post #19

Earlier quoted context omitted.

> Does anyone actually still believe that these debts will all someday be repayed? I don't understand why you would ask this question. On the individual level its obvious that some debts won't be. It happens all the time for a lot of reasons. So I assume you aren't talking about the individual level. But on the macro level zero debt is a very bad idea and unless civilization collapses there will always be debt. Debt…

> Debt allows people to own homes and cars and pay for education and invest in business. Debt means you are optimistic about the future. How about having homes and cars and education without debt? It's not like you need to be in debt to another and to steal from your feature to have nice things...

Using debt for homes, cars, education, and investments are generally assumed to be able to out grow the costs of that borrowing. For example, ideally a better education now means you can probably make more money over time, offsetting those costs and overall ending up much better than without borrowing. Its not stealing, to phrase like that is wrong.

If you only see these things as "nice", your should reevaluate what you value.

Re: Debt Worldwide Hits Record $86k per Person

#96

Post by aurailious »

joobus wrote: post #43
aurailious wrote: post #19

Earlier quoted context omitted.

> Does anyone actually still believe that these debts will all someday be repayed? I don't understand why you would ask this question. On the individual level its obvious that some debts won't be. It happens all the time for a lot of reasons. So I assume you aren't talking about the individual level. But on the macro level zero debt is a very bad idea and unless civilization collapses there will always be debt. Debt…

This reads like a person with Stockholm syndrome, captured by the Federal Reserve system. Money/currency does not have to be debt based. For a lot of America's history, it was not debt based.

> For a lot of America's history, it was not debt based.

For a lot of America's history we used horses and sailing ships to get around. Are you suggesting we should return to that too? Otherwise this argument is empty.

Re: Debt Worldwide Hits Record $86k per Person

#97

Post by ChuckMcM »

Sigh, Bloomberg how far you have fallen.

In the article this is the IMF talking, so we're talking about sovereign debt not commercial debt like credit cards or mortgages or car loans.

Sovereign debt is nominally repaid through the execution of the economy. A country borrows by selling debt securities, with fixed maturity dates and then redeems those securities once they mature.

Consider this really simple example in the US; The treasury department sells a note that has a face value of $10,000 and a maturity date 10 years from now, to Alice for $8,188. If you figure out what interest rate you would need to have $8,188 equal $10,000 in 10 years (monthly compounding) you would find that the "equivalent" interest rate or yield to be 2%. So they have "borrowed" $8,188 dollars from Alice, who, 10 years from now, will turn in her note and they will give her $10,000. They might end up selling two notes to Bob and Charlie just before Alice shows up at the window in order to have cash to give Alice but in either event the note that Alice bought gets "redeemed" (or retired) and it is off the books, it has been "repaid."

Over the course of the year revenues come in, and sometimes there is already enough cash in the drawer to pay off Alice without selling any more notes, in which case the total amount of notes out there goes down. The amount of revenue is proportional to the economic output or GDP of the country because, well everything gets taxed a bit. This is easiest to understand when looking at income taxes since the more income (the more people working the more people have incomes or more income) the more taxes you get. So more economic activity results in more revenue for the state, which means selling fewer notes. If spending levels are kept constant, and the economy grows, then you reach a point where you don't need any note sales to pay your bills.

So the IMF is responding to the news that the US deficit (which is that the US sold more notes than they had expected revenue) for the month of November was a record[1] to $205B. What does it mean to you and me? Well it probably means a some point someone in Washington DC will have to raise taxes if they want to keep the debt ceiling down.

[1] (warning autoplay video) http://fortune.com/2018/12/13/us-budget-deficit-record-novem...

Re: Debt Worldwide Hits Record $86k per Person

#98

Post by aurailious »

avip wrote: post #93
aurailious wrote: post #19

Earlier quoted context omitted.

> Does anyone actually still believe that these debts will all someday be repayed? I don't understand why you would ask this question. On the individual level its obvious that some debts won't be. It happens all the time for a lot of reasons. So I assume you aren't talking about the individual level. But on the macro level zero debt is a very bad idea and unless civilization collapses there will always be debt. Debt…

I find it difficult to reconcile this POV with environmental concerns. That elusive "debt" is 100% convertible to real resources (land, water). We have more debt because we consume too many things we don't need. How is that good?

Is education something we don't need?

Re: Debt Worldwide Hits Record $86k per Person

#99

Post by chewz »

jklein11 wrote: post #94
jdoliner wrote: post #2

Does anyone actually still believe that these debts will all someday be repayed? Does anyone even believe that the amount of debt will go down, rather than up, over the course of any length of time? Even a day? I don't, which raises the question: how does a world where debt monotonically increases indefinitely work? Can that happen forever, in which case debt has just become a standin for currency (that allows people…

>>Does anyone actually still believe that these debts will all someday be repayed? I believe that all debts will be repaid. They will either be repaid by the borrow or by the lender, when the borrow can't pay and the lender has to bail them out.

That's quite rare for debt to be repaid or defaulted upon.

Most of the debt is usually just rolled over. Think credit cards, treasury bills, commercial bonds etc.

Re: Debt Worldwide Hits Record $86k per Person

#100

Post by avip »

aurailious wrote: post #98
avip wrote: post #93

Earlier quoted context omitted.

I find it difficult to reconcile this POV with environmental concerns. That elusive "debt" is 100% convertible to real resources (land, water). We have more debt because we consume too many things we don't need. How is that good?

Is education something we don't need?

Education can be bought for $1.50 in late fees at the public library.
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