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Debt Worldwide Hits Record $86k per Person
191–200 of 287 posts
Re: Debt Worldwide Hits Record $86k per Person
#192Earlier quoted context omitted.
The problem is that if everyone were to try to collect all the debts owed to them, there would not be enough currency to fulfill it all. We freely create debt, but the result is a deficit that can only be resolved by creating enough value to offset the debt. And if that is somehow infeasible, economic collapse occurs.
Or society works because people do things for others without expecting repayment and there’s enough social pressure for the vast majority to not exploit that system. Problems really only arise if debt is systemically expected, like a housing market that works only on a foundation of mortgages.
there’s enough social pressure for the vast majority to not exploit that system
Re: Debt Worldwide Hits Record $86k per Person
#193Earlier quoted context omitted.
I'll give a crack at some cliffnotes: A debt is a very natural thing for humans, because we feel compelled to provide value to people who can't pay us yet. Even before money people had gifts and favors - we give with the expectation that we'll be given something in the future - or we say 'you owe me one' when someone has helped us through an issue without sending us an invoice. So the genius of fiat currency is that…
The problem is that if everyone were to try to collect all the debts owed to them, there would not be enough currency to fulfill it all. We freely create debt, but the result is a deficit that can only be resolved by creating enough value to offset the debt. And if that is somehow infeasible, economic collapse occurs.
Currency is debt. If you have a 20$ bill that means essentially that the government owes you the equivalent in value. If everyone converted all their debt to currency that just means the state buys all the debt and prints sufficient government IOU’s (bills) along the way. If there is not enough value to cover the debt, the notes just lose value as others refuse to trade them at their previous rate.
Re: Debt Worldwide Hits Record $86k per Person
#194To anyone wondering what debt "means", or if some debts will ever be repaid, or wondering about "jubilees" where debts are forgiven, I recommend David Graeber's book "Debt: The First 5000 Years". I am not sure if some of the ideas about debt that Graeber argues are correct, but he does discuss a lot of interesting examples of debt from societies throughout history. https://www.mhpbooks.com/books/debt/ https://en.wiki…
While I'm very sympathetic to the themes of the book, I found it so verbose, unstructured and meandering as to be unreadable.
I liked his talks as Morea easily digestible, but the book was full of useful tidbits. As an alternative to the real way debt is used today though, I suggest John Perkins books and The Tower of Basel
Re: Debt Worldwide Hits Record $86k per Person
#195Earlier quoted context omitted.
The answers are very complex. In the book, Graeber shows that debt is as much a cultural/social norm as any other abstract, social construct we've invented throughout history. What debt meant in early Buddhist Nepal or Sumeria or aboriginal Australia, and what it means in modern western economies is completely tied in with governmental/religious/familial etc. structures that existed in the given time. He goes into gr…
One of those examples of debt as a social construct is in my opinion the following, which shows that even in Western economies there can be a different meaning for this concept. In English language there's a clear separation between debt and guilt. Debt is used for money, guilt for (e.g.) the legal system when talking about criminal activities. Those are 2 different words with 2 different meanings. But in Dutch langu…
Some churches in the US also use "debt" in this way during the Lord's prayer (i.e. not referring to financial debts):
"And forgive us our debts, just as we also forgive our debtors." (Matt. 6:12)
Re: Debt Worldwide Hits Record $86k per Person
#196Earlier quoted context omitted.
My understanding is that reserve banks create money out of thin air and then 'loan' it to governments. Then governments use the money to pay for public projects. A lot of the money ends up going to large corporations through significant government contracts, grants and subsidies. When a government takes a loan from the reserve bank and puts it into circulation by giving the money to corporations to pay for public pro…
> My understanding is that reserve banks create money out of thin air "Money creation in the modern economy" (Bank of England, PDF) https://www.bankofengland.co.uk/-/media/boe/files/quarterly-... Quote: In the modern economy, most money takes the form of bank deposits. But how those bank deposits are created is often misunderstood: the principal way is through commercial banks making loans. Whenever a bank makes a lo…
This is semantics used to distract from the fractional reserve system in fiat currency, and is mostly false.
Re: Debt Worldwide Hits Record $86k per Person
#197Earlier quoted context omitted.
I feel this way every time someone recommends a study or a book to me. If you can't summarize it for a 5 year old, then you are either lazy or don't understand it yourself. For example, instead of telling me to read a 500 page book, you can say "the Big Bang is this really crazy but suprisingly plausible theory that our universe just suddenly exploded from nothing into this really hot and dense and chaotic realm, and…
The two-sentence summary is ”Cultures around the world (historical and current) have an incredible variety and richness of traditions/practices related to debt. Debt is of central importance in every human society, predates and provides the conceptual foundation for economic exchange and property rights and many other cultural practices/institutions, and the culture-specific details are fascinating to read about.”
That covers the first clause, but not:
> or if some debts will ever be repaid, or wondering about "jubilees" where debts are forgiven,
Re: Debt Worldwide Hits Record $86k per Person
#198Earlier quoted context omitted.
My understanding is that reserve banks create money out of thin air and then 'loan' it to governments. Then governments use the money to pay for public projects. A lot of the money ends up going to large corporations through significant government contracts, grants and subsidies. When a government takes a loan from the reserve bank and puts it into circulation by giving the money to corporations to pay for public pro…
The idea is that the public projects increase everyone's wealth by a greater amount than the interest on the debt. If you take money out of the equation and just consider that we have a large pool of labor to make use of, government's purpose in spending on projects is to allocate some of that labor towards long-term goals that no company would involve itself in as the pure profit potential is too risky, distant, or…
But it doesn't increase everyone's wealth equally... What's worse is that it doesn't even increase everyone's wealth in a fair way. It does not reward value creation. It rewards rent seeking (value capturing). It's not about who can create value in the most efficient way; it's about which corporation has the most friends in government and can get the biggest contracts.
Re: Debt Worldwide Hits Record $86k per Person
#199Earlier quoted context omitted.
This might be true. However it's fact that poor people lose the most from inflation. Which is better?
The poor don’t have savings. If you spend as much or more than you make inflation benefits you by devaluing the debt you owe. If you have a large 401k on the other hand it deflates the value of your retirement savings. You may have to work in old age.
But it also deflates the value of assets that generate monetary profits. If the value of cash goes down, then the value of cash-generating assets also goes down.
When the value of today-money goes down, the value of tomorrow-money goes up relatively. That explains why tech companies and speculative investments do well during expansionary monetary policy. It aslo explains why advertising and brand become so important. Because if the value of money goes up in the future, then the value of each customer will also go up; even if you have to make a net loss today to pay for advertising to get those customers.
Re: Debt Worldwide Hits Record $86k per Person
#200Earlier quoted context omitted.
> My understanding is that reserve banks create money out of thin air "Money creation in the modern economy" (Bank of England, PDF) https://www.bankofengland.co.uk/-/media/boe/files/quarterly-... Quote: In the modern economy, most money takes the form of bank deposits. But how those bank deposits are created is often misunderstood: the principal way is through commercial banks making loans. Whenever a bank makes a lo…
This is semantics used to distract from the fractional reserve system in fiat currency, and is mostly false.
I don't understand your comment, especially the "distract" part.
First, it isn't false at all, commercial banks create money, just as they say in the paper. Second, if you make the bold claim that the people of the Bank of England wrote a paper that is false you should provide more than a single sentence - especially when commenting here on HN.