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Debt Worldwide Hits Record $86k per Person

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Re: Debt Worldwide Hits Record $86k per Person

#201

Post by kijin »

ssalka wrote: post #184
jazzyjackson wrote: post #170

Earlier 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.

A owes $100 to B. B owes $80 to C. C owes $80 to D. D owes $90 to E. Total debt is $350.

A pays $100 to B. B keeps $20 and pays $80 to C. C pays $80 to D. D adds $10 of his own money to pay $90 to E. Everyone's debt has been repaid, but only $110 of currency is needed for all these transactions to take place -- assuming all debts are paid in cash. All you need is sufficient liquidity.

I could loan you five quadrillion dollars provided that you also loan me five quadrillion dollars. No currency has changed hands, but we've just increased the world's total outstanding debt by ten quadrillion dollars!

Re: Debt Worldwide Hits Record $86k per Person

#202

Post by [deleted] »

kijin wrote: post #201
ssalka wrote: post #184

Earlier 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.

A owes $100 to B. B owes $80 to C. C owes $80 to D. D owes $90 to E. Total debt is $350. A pays $100 to B. B keeps $20 and pays $80 to C. C pays $80 to D. D adds $10 of his own money to pay $90 to E. Everyone's debt has been repaid, but only $110 of currency is needed for all these transactions to take place -- assuming all debts are paid in cash. All you need is sufficient liquidity. I could loan you five quadrillio…

[deleted]

Re: Debt Worldwide Hits Record $86k per Person

#203

Post by markvdb »

slededit wrote: post #181
spectrum1234 wrote: post #173

Earlier 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.

Both your comment and the parent comment are right. How so?

Two things:

* Poor means less access to more expensive debt. Rich means more access to cheaper debt.

* Rich means one can use debt leverage to grow one's assets. How does that influence the value of necessities for the less rich...?

Re: Debt Worldwide Hits Record $86k per Person

#204

Post by posix_me_less »

talltimtom wrote: post #193
ssalka wrote: post #184

Earlier 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.

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.

> If you have a 20$ bill that means essentially that the government owes you the equivalent in value.

This may be true in some theoretical sense, but in practice, it is hard to believe. How would I go around to make the government accept my 20$ and give me some equivalent of that? What could government possibly give me for my 20$?

Dollar bills are for buying things. I could go to a store and buy a bottle of expensive wine for that bill. But I wouldn't say the store owes me.

Re: Debt Worldwide Hits Record $86k per Person

#205

Post by anonymouzz »

nonbel wrote: post #137
shoo wrote: post #132

To 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…

> "To anyone wondering what debt "means", or if some debts will ever be repaid, or wondering about "jubilees" where debts are forgiven" Can you just give the answers to these questions?

Shortest possible answer: debt is money.

Or you could say it's dual to money - creating debt creates money, paying debt destroys money. There's literally less money in the world when you make your mortgage payment (bank just sends much of your payment to /dev/null), and there's literally more money in the world when you take a mortgage (bank pulls it out of thin air).

If all debt would be repaid then almost all of the money as we know it today would disappear.

Re: Debt Worldwide Hits Record $86k per Person

#206

Post by Geee »

jazzyjackson wrote: post #170
nonbel wrote: post #137

Earlier quoted context omitted.

> "To anyone wondering what debt "means", or if some debts will ever be repaid, or wondering about "jubilees" where debts are forgiven" Can you just give the answers to these questions?

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…

Each IOU is actually a promise to work. Before money it could have been 'I will work for you 30 years' and if someone believes that, they can trade that promise for a nice house for the person to live in. A promise is basically analogous to a debt.

In todays world, the promise is made to a lender (a bank), which then creates a fungible IOU, i.e standard currency for that promise, which can be exchanged for equivalent amount of work.

The whole system is a collective promise to work, and that keeps the society running.

Re: Debt Worldwide Hits Record $86k per Person

#207

Post by fulafel »

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.

It was even more concretely debt based when bank notes were IOUs against gold.

Re: Debt Worldwide Hits Record $86k per Person

#208

Post by moreira »

posix_me_less wrote: post #204
talltimtom wrote: post #193

Earlier quoted context omitted.

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.

> If you have a 20$ bill that means essentially that the government owes you the equivalent in value. This may be true in some theoretical sense, but in practice, it is hard to believe. How would I go around to make the government accept my 20$ and give me some equivalent of that? What could government possibly give me for my 20$? Dollar bills are for buying things. I could go to a store and buy a bottle of expensive…

The answer is gold. Your $20 is worth a certain amount of gold, and that is what the government owes you. $20 in gold. These days you'd be hard pressed to get the government to give you gold, of course, but that is the answer to your question.

As an example, British pound notes have the wording "I promise to pay the bearer on demand the sum of five [ten/twenty/fifty] pounds", which dates back to a time when you could actually exchange the notes themselves for gold.

Re: Debt Worldwide Hits Record $86k per Person

#209

Post by Ir0nMan »

anonymouzz wrote: post #205
nonbel wrote: post #137

Earlier quoted context omitted.

> "To anyone wondering what debt "means", or if some debts will ever be repaid, or wondering about "jubilees" where debts are forgiven" Can you just give the answers to these questions?

Shortest possible answer: debt is money. Or you could say it's dual to money - creating debt creates money, paying debt destroys money. There's literally less money in the world when you make your mortgage payment (bank just sends much of your payment to /dev/null), and there's literally more money in the world when you take a mortgage (bank pulls it out of thin air). If all debt would be repaid then almost all of th…

That's not how this works. That's not how any of this works.

Re: Debt Worldwide Hits Record $86k per Person

#210

Post by robertAngst »

Ir0nMan wrote: post #209
anonymouzz wrote: post #205

Earlier quoted context omitted.

Shortest possible answer: debt is money. Or you could say it's dual to money - creating debt creates money, paying debt destroys money. There's literally less money in the world when you make your mortgage payment (bank just sends much of your payment to /dev/null), and there's literally more money in the world when you take a mortgage (bank pulls it out of thin air). If all debt would be repaid then almost all of th…

That's not how this works. That's not how any of this works.

Don't just say No.

You need to explain why.

Also, I agree that the person you replied to was oversimplifying.

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