Debt Worldwide Hits Record $86k per Person • Hacker News Board

Re: Debt Worldwide Hits Record $86k per Person

#271

Post by sytelus » Sun, Dec 16, 2018, 7:46 AM UTC

If everyone is borrowing then who owing? The trick is to borrow against the future generations. Assume that it was legally allowed to borrow $1000 against the income that would be generated by your kids 10 years later. You can use this to accumulate infinite amount of debt by extending to grad-kids and so on. This is more or less what is happening.

Government made promises to pay pensions/medical benefits to large quantity of people but doesn't have that kind of money from tax income. So they borrow from the future generation by printing more money promising to pay itself back. The net result is inflation like phenomenon which rises cost of services but not the income for the new folks who enter the job market. So this debt indicates amount of hardship future generations will encounter, at least at the start of their careers.

Re: Debt Worldwide Hits Record $86k per Person

#272

Post by Someone » Sun, Dec 16, 2018, 8:30 AM UTC

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”

That was true in the days of the gold standard (https://en.wikipedia.org/wiki/Gold_standard), but nowadays, i don’t think it is true anymore.

You can’t bring your 20$ bill to the government and get goods in return whenever you want to make such an exchange.

Also, a lot of money gets created by banks, not the government (in the USA, all the money, I think. Isn’t the Fed independent?)

Re: Debt Worldwide Hits Record $86k per Person

#273

Post by posix_me_less » Sun, Dec 16, 2018, 10:12 AM UTC

asadjb wrote: post #226

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 government accepts the $20 as a legal way to pay your taxes, or other government fees.

That is true. But if the only way a government owes me something is that it has to accept dollar bills to erase my tax/fee duty, then I think this proves my point - the government does not owe me equivalent of those bills, it only has to accept them for limited set of "services".

Re: Debt Worldwide Hits Record $86k per Person

#274

Post by posix_me_less » Sun, Dec 16, 2018, 10:15 AM UTC

Someone wrote: post #272

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” That was true in the days of the gold standard ( https://en.wikipedia.org/wiki/Gold_standard ), but nowadays, i don’t think it is true anymore. You can’t bring your 20$ bill to the government and get goods in return whenever you want to make such an exchange. Also, a lot of money gets created by banks, not the governm…

> a lot of money gets created by banks

Interesting, how does that work? Can a bank create money to pay its own taxes? That sounds too convenient...

Re: Debt Worldwide Hits Record $86k per Person

#275

Post by posix_me_less » Sun, Dec 16, 2018, 10:39 AM UTC

jganetsk wrote: post #253

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…

"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." That's a misunderstanding. A $20 bill is the government's liability, not the store's liability. You and a third party are using government liabilities as a currency. Every $20 bill is on the liability side of the central bank's balance sheet. Every entity accepts its own liabilities as a form of payment. Go…

Interesting video, but can't help to notice it paints too simple and dandy picture and probably has an agenda behind it. If you read the comments, not everybody believes in this "the government created the money so there is no problem in creating some more" idea. In principle yes, the government has that power. But in practice, this is being prevented by powerful people in and out of government and only gets a pass in special cases (like saving the big banks yes, funding public healthcare no).

Re: Debt Worldwide Hits Record $86k per Person

#276

Post by posix_me_less » Sun, Dec 16, 2018, 10:54 AM UTC

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…

This is like summing up temperatures of stars. It makes no sense to do that.

When you have a group of subjects that are indebted to another, separate subject, then it makes sense to calculate the total debt.

Re: Debt Worldwide Hits Record $86k per Person

#277

Post by posix_me_less » Sun, Dec 16, 2018, 11:05 AM UTC

kiliantics wrote: post #266

anoncoward111 wrote: post #171

Earlier 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…

As someone working in cosmological astrophysics, I think that is a very misleading summary of what the big bang theory is... However, luckily for us, people who go around misunderstanding the big bang theory because of bad tweet-length explanations (by experts or non-experts) are not a great danger to the rest of us. They aren't basing their politics or personal finance decisions on that misunderstanding. The thing w…

> a very misleading summary

That depends on the person on the receiving end. For an expert on the topic, it may be misleading. For average Joe on the street, it is completely fine.

Do you have a better 5-sentence explanation for what Big Bang is? Joe isn't going to read a book about it.

Re: Debt Worldwide Hits Record $86k per Person

#278

Post by posix_me_less » Sun, Dec 16, 2018, 11:15 AM UTC

nonbel wrote: post #134

beatgammit wrote: post #87

Earlier quoted context omitted.

I'm guessing it's the latter. I owe hundreds of thousands on my house, but my house is worth significantly more than my debt, so my net debt is zero. I'm guessing this is just all debts added together, and then divided by the number of people. And it's probably including national debt, which is ~$58k/person in the US (which is surprisingly slightly below average for countries with debt).

> "I owe hundreds of thousands on my house [...] my net debt is zero." > "my house is worth significantly more than my debt" You realize the value of your house dropping by 50% in a year would not be very surprising? And that would be mild, it is all up to which group of people the federal reserve chooses to benefit.

> value of your house dropping by 50% in a year would not be very surprising?

That's crazy, does that happen often in the U.S.?

Re: Debt Worldwide Hits Record $86k per Person

#279

Post by posix_me_less » Sun, Dec 16, 2018, 12:13 PM UTC

perfunctory wrote: post #74

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…

> how does a world where debt monotonically increases indefinitely work? Assets also increase monotonically. One cannot talk about debt without talking about assets. You should look at the whole balance sheet. > debt has just become a standin for currency debt IS money. If all the debt in the world is repaid there will be no money.

You would still have to pay taxes. Presumably, in money.

Re: Debt Worldwide Hits Record $86k per Person

#280

Post by Someone » Sun, Dec 16, 2018, 6:39 PM UTC

posix_me_less wrote: post #274

Someone wrote: post #272

Earlier quoted context omitted.

”If you have a 20$ bill that means essentially that the government owes you the equivalent in value” That was true in the days of the gold standard ( https://en.wikipedia.org/wiki/Gold_standard ), but nowadays, i don’t think it is true anymore. You can’t bring your 20$ bill to the government and get goods in return whenever you want to make such an exchange. Also, a lot of money gets created by banks, not the governm…

> a lot of money gets created by banks Interesting, how does that work? Can a bank create money to pay its own taxes? That sounds too convenient...

They could (think of it: a bank could just tell government that it has more money in the bank now, or tell another bank that they transferred an x amount to the government’s account there), but regulations forbid it and various controls work hard to prevent it.

A bank creates money when it borrows you money that isn’t fully backed by saving account(s). See https://en.m.wikipedia.org/wiki/Fractional-reserve_banking, which, a.o. says:

”Because banks hold reserves in amounts that are less than the amounts of their deposit liabilities, and because the deposit liabilities are considered money in their own right, fractional-reserve banking permits the money supply to grow beyond the amount of the underlying base money originally created by the central bank.”

The amount by which a bank can do that is regulated, and, in the end, under control of the central bank. The central bank won’t be involved in every minor fluctuation of the amount of money in circulation, though.