Hacker News Board Hacker News, browsed like a classic message board
Live data from Hacker News

Debt Worldwide Hits Record $86k per Person

bloomberg.com

Post reply on HN
Print view View original

241–250 of 287 posts

Re: Debt Worldwide Hits Record $86k per Person

#241

Post by weberc2 »

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…

What is the relationship to money and wealth or money and productivity? Surely we wouldn’t say that incurring debt increases wealth and paying debt destroys it? Also, does “creating money” via incurring debt drive inflation (more money in the system)?

Re: Debt Worldwide Hits Record $86k per Person

#242

Post by slededit »

nradov wrote: post #239
slededit wrote: post #238

Earlier quoted context omitted.

Inflation does hurt the underlying companies, and thus stocks are not immune. Except in cases with extremely high inflation most contracts are not inflation adjusted. By the time a company is paid the merchandise sold is worth significantly more in fiat terms. In high inflation an entity is loathe to trade assets for dollars and so the economy will slow.

Your point is generally false as long as inflation remains at a reasonable level (no hyperinflation). You can chart out stock market index returns versus inflation if you don't believe me.

I was speaking of relatively high inflation (>10%). The fed has been extremely good at keeping inflation stable so we have not seen this in a long time.

This is not a criticism of current fed policy with respect to its relatively low inflation targets. While the effects I mentioned still occur, they are vastly outweighed by other concerns at low inflation levels.

Re: Debt Worldwide Hits Record $86k per Person

#244

Post by candiodari »

thescriptkiddie wrote: post #123
graeme wrote: post #66

Doesn't debt have to sum to zero globally? A debt held by one person is an equal asset owed another. Or perhaps this is a measure of the number of debts outstanding, divided per person, but not accounting for assets.

Not necessarily. The value of debt as an asset is often less than the amount owed, because there is a non-trivial risk that the debt will not be paid back in full. Furthermore, if you are a central bank, you can effectively borrow money from your future self.

That wouldn't affect the balances though. So if you simplify to liabilities (as you say, non-discounted) + assets = 0, that would be true.

Re: Debt Worldwide Hits Record $86k per Person

#245

Post by Eridrus »

rcMgD2BwE72F wrote: post #212
sdinsn wrote: post #33

It's kind of silly to spread corporate and government debt across all people. Also, the article makes no mention of what assets are valued at.

>It's kind of silly to spread corporate and government debt across all people. Why? The most indebted (how may have billions the bank) still need to have others work for them in order to repay their debt. Billionaires earned billions because "people" work for them (or buy from them, in the end that's the same thing).

There's a real difference between taking out a loan to buy consumables/non-revenue generating depreciating assets and corporate debt that is taken out on the expectation that there will be a higher return on them.

In a sense rising corporate debt is a vote of confidence in the growth of the economy as lenders are expecting to be paid back with interest.

Government debt is somewhere in between IMO, since it has stimulative effects and the government captures some of that through taxes.

Re: Debt Worldwide Hits Record $86k per Person

#246

Post by anonymouzz »

Joeri wrote: post #232
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 really how it works. The bank takes savings deposited and issues most of it as loans keeping enough on hand to issue to people withdrawing their savings (fractional reserve banking). The interest on the loans pays the interest on the savings (which is why one tracks the other). They also borrow money from the markets (or the central bank) at low interest rates to reissue as higher-interest loans. Nowhere i…

This is how the system works. There's a limit to that practice (the money multiplier), which is one of the reasons why banks need to rotate money as you said (another being cross-bank transfers). See this link: https://en.wikipedia.org/wiki/Money_creation#Credit_theory_o...

It's a very counter intuitive concept that underpins the entire economic system. It was even a subject of a (failed) Swiss referendum recently: https://en.wikipedia.org/wiki/2018_Swiss_sovereign-money_ini...

Re: Debt Worldwide Hits Record $86k per Person

#247

Post by anonymouzz »

weberc2 wrote: post #241
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…

What is the relationship to money and wealth or money and productivity? Surely we wouldn’t say that incurring debt increases wealth and paying debt destroys it? Also, does “creating money” via incurring debt drive inflation (more money in the system)?

My view on this is that wealth is something real that actually impacts people's lives. At the same time money is not, it's the story told around wealth so that we can all agree on how one "wealth" compares to another. The goal is to not let this story go wild (e.g. into super-inflation) so that people don't lose trust in money.

Keeping those two in check is the main goal of any central bank, ever since the gold standard was generally abandoned and money became entirely abstract. In my opinion no one really knows how to do it (although it's been okay-ish so far), the FED for example often uses national unemployment rate to decide how much dollars should be thrown at the system.

Re: Debt Worldwide Hits Record $86k per Person

#248

Post by claytonius »

moreira wrote: post #208
posix_me_less wrote: post #204

Earlier quoted context omitted.

> 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…

Not quite... https://www.history.com/this-day-in-history/fdr-takes-united...

Re: Debt Worldwide Hits Record $86k per Person

#249

Post by [deleted] »

umeshunni wrote: post #129
pjmorris wrote: post #118

Earlier quoted context omitted.

For the downvoters: if it's a different number, where did the rest of the money go?

Asset values are not static. e.g if you borrowed $100K for to buy your $110K house 10 years ago, you may have $86K remaining on your mortgage today and your house might have appreciated to $134K.

[deleted]

Re: Debt Worldwide Hits Record $86k per Person

#250

Post by usefulcat »

Joeri wrote: post #232
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 really how it works. The bank takes savings deposited and issues most of it as loans keeping enough on hand to issue to people withdrawing their savings (fractional reserve banking). The interest on the loans pays the interest on the savings (which is why one tracks the other). They also borrow money from the markets (or the central bank) at low interest rates to reissue as higher-interest loans. Nowhere i…

But they're able to loan far more than they have in deposits, no? In which case how are they not "creating money" by lending?
Post reply on HN