
Global Debt Hits Record $233T - thisisit
https://www.bloomberg.com/news/articles/2018-01-05/global-debt-hits-record-233-trillion-but-debt-to-gdp-is-falling
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jdoliner
Does anyone actually believe that this debt will at some point be payed off?
It would be nice if we had different words for debts that actually might
someday be resolved and those that clearly never will be.

~~~
quadrangle
Apparently, near-100% of politicians and voters believe that "National Debt"
is actually something like personal debt and actually can or should be paid
off…

[https://modernmoneybasics.com/](https://modernmoneybasics.com/) (simplistic
but largely accurate intro)

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wu-ikkyu
Perhaps I misunderstand but are you implying governments being in perpetual
debt is a good thing?

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quadrangle
You're misunderstanding. The "National Debt" (this only applies at federal
level for currency-issuing governments, not state, local etc) is the effective
form of the currency itself.

Eliminating the "debt" that a currency-issuing government has in its own
currency is the _same thing_ as eliminating the currency.

The U.S. federal government "owes" dollars to creditors kind of like the way
the the score-keeper in a game "owes" points to a basketball team.

~~~
cwkoss
Currency doesn't have to be backed by debt.

Debt-backed currency has the fundamental flaw that, because debts charge
interest, the total amount of debt will always exceed the money supply. Our
currency is structured so that there are never enough dollars to pay off all
debts at any given time. Fundamentally, a portion of all debts MUST default,
creating a net effect where those who have enough capital to lend will, over
time, acquire more and more real property.

Our currency is built to transfer wealth from the have-nots to the haves.

~~~
quadrangle
You're conflating things here. Our overall financial system as a whole is as
you describe: set up to enrich the powerful and exploit others.

But that is not an issue with the nature of the _currency_. The way we use
"debt" in terms of _Federal government_ "National Debt" is related to the
currency and _not_ related to the credit market which is the usurious bulk of
our money. _Most_ money flowing around the economy is based in bank-credit and
has all the issues you describe. Currency is _different_. Of course, the
particular policies that we enact around the currency (i.e. how we use it) are
_often_ about enriching the powerful etc. although some things are at least
mixed in that respect.

Do check out [https://modernmoneybasics.com/](https://modernmoneybasics.com/)
(I'm guessing you have not because the distinctions that matter here are
clarified there in the intro video and in the follow-up links)

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igravious
Who owes all this money? And to whom do they owe it? I',m thinking this is
never getting paid back?

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quadrangle
If _all_ debts were paid back, fiat currencies would cease to exist. The only
savings left would be in the form of physical wealth / commodities…

Most of the economy would grind to a halt. Our current economy runs on debt
fundamentally.

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wu-ikkyu
Is it theoretically even possible for all debts to be paid with the given
supply of money vs. what is supposedly owed?

For instance when interest is charged on a loan, the money needed to pay the
interest fee is not created by the bank.

~~~
quadrangle
My understanding: bank credit isn't fiat currency. It can be paid back with
other credit effectively. But at the end of the day, it's possible, of course,
to have absurd debts and credits from banks that will be impossible to ever
repay.

If I loan you $1 at 1000% interest daily, then after a short time, you are
just going to default on the loan, period. There's no way you'll pay it back.
So, yeah… at some point, even if you got another loan to pay the loan and etc
etc. the whole house of cards will crash at some point if it's too much credit
based on nothing. That house of cards could be just me never getting paid
back, oh well. But if I convinced tons of other people to give me products and
services that I then had debt for based on the idea that I have this
expectation of your payback… then the house of cards could reach through the
whole economy eventually.

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wu-ikkyu
If bank credit isn't backed by fiat currency (fractionally reserved or
otherwise), then does it have any real basis to it?

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jganetsk
It is backed by the fact there is plenty of demand for it. The demand comes
from the fact that people need to attain bank credit to pay off their debts to
the banks.

This is very evident when you think of how banks used to work: they would
actually issue paper notes denominated in the desired unit of account (the
national currency). To pay back your debts (or else suffer the consequences),
you had to acquire and return the notes to the bank. That generated demand for
the notes. People who were not banks would start accepting the notes because
of the demand.

Then banks decided they could make money by accepting notes from other banks
as payment (for a fee). At the end of the day, banks would exchange and retire
notes collected this way.

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jdoliner
Debt is the American way, we've been in debt since well before the country was
officially founded. And our founding fathers all had issues with personal
debt. When George Washington was elected our first President he was flat broke
and had to take out a loan to afford the trip from Mount Vernon to his own
inauguration in New York City. (Washington DC didn't exist yet.)

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neolefty
In related news, Global Savings hits record $233 Trillion?

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nopriorarrests
Under gold standard, debt = savings, correct. But with government fiat, I not
sure thats the case. Fed bought what, billions of USG debt, without saving
this money first, they just printed it. Its not like they earned that money
and instead of consumption they invested it into federal debt.

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quadrangle
No, one party's debt is _still_ another's savings basically, even with a fiat
currency. These caveats apply:

* If we're talking _private_ debt or debt from governments other than the fiat-issuer level then there's _some_ risk of default which means the savings could be lost.

* Without a gold standard, increase in fiat currency can diminish savings through _inflation_.

But simply: savings in gold ≠ savings in fiat currency, but they are both
savings still.

~~~
dragonwriter
> Without a gold standard, increase in fiat currency can diminish savings
> through inflation.

That's true with a gold _standard_ as well, since all that means is that
printed currency is backed by a peg to gold, usually with some form (perhaps
not open to all currency holders, though) of redemption pledge.

It's even true with non-debased gold _currency_ , not just gold-backed
representational currency, as demonstrated by the Spanish colonial experience.

~~~
quadrangle
Oh sure, inflation can happen with gold too, like when we find more gold…

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seibelj
The great thing about government debt is that they can print more to pay it
back

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electic
Right. Correct me if I am wrong, but that causes inflation. The end result is
we all pay for it either way.

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jhallenworld
I think it's much more complicated. The US government has been printing tons
of money in the form of "QE" and "QE2", but with little or no inflation. I
believe the reason is that all of this money has not ended up in the hands of
the general public in the form of higher wages.

When all of our wages collectively go up, you can bet the cost of goods will
also go up, with no change in affordability since the same amount of your work
in man-hours is needed to both produce and purchase the goods.

I think we are long overdue for wage inflation, even with the associated cost
increase of goods. The positive affect of it is to make fixed rate loans less
burdensome. Why enslave ourselves to the past?

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dragonwriter
> The US government has been printing tons of money in the form of "QE" and
> "QE2"

“printing” is inaccurate, and more importantly “has been” should be “was”; the
series of rounds of QE (QE1-QE3) ended in 2014.

> When all of our wages collectively go up, you can bet the cost of goods will
> also go up, with no change in affordability since the same amount of your
> work in man-hours is needed to both produce and purchase the goods.

This would be a tolerably reasonable argument based on the (inaccurate in both
cases, but understandable) ideas that prices are entirely driven by supply-
side concerns, and ultimately all costs are labor cost, in the case of a
_global_ wage increase, but domestic wage increase won't have that effect in a
global market _even with_ the inaccurate assumptions that would justify that
conclusion for a global increase.

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jhallenworld
Well QE is still going on in that the fed still holds all of the assets it
bought. Here is an article from last September saying that the fed is starting
to sell (or not turn over) the assets:

[https://www.ft.com/content/caf45d6a-9e28-11e7-8cd4-932067fbf...](https://www.ft.com/content/caf45d6a-9e28-11e7-8cd4-932067fbf946)

Of course I agree with you on the global wage increase, I ignored the fact of
multiple currencies.

I kind of think that all prices are related to (possibly delayed) labor costs,
along the lines of "how much work do I have to do to buy it?" and "I'll
extract that oil for you only if you are willing to pay at least what I have
to pay my employees to do it".

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dragonwriter
> Well QE is still going on in that the fed still holds all of the assets it
> bought

If that was true, it wouldn't be QE still going on; QE is a policy to increase
the effective money supply by buying assets, holding assets isn't increasing
the money supply, it's just not decreasing it. But, also...

> Here is an article from last September saying that the fed is starting to
> sell (or not turn over) the assets

So, they are actually _not_ still holding all the assets.

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Terr_
With two friends, I can quadruple that amount.

Just stand in a circle, and each person passes a pretty pebble to their left,
and an IOU for $223 trillion to their right...

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dang
Please don't post unsubstantive comments here.

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quadrangle
Ironic post, since yours has the less substance and the grandparent was on
topic with a meaningful point.

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dang
It's true that such moderation comments break some of the same rules they're
advocating. But this a necessary evil, for the same reason that many medicines
are toxic. If it's any comfort to you, I can tell you after writing 20,000 of
them that they are more tedious to write than to read.

Interpretations differ, but mine is that the comment is unsubstantive because
it is in equal parts obvious and dismissive. This is the sort of thing whose
general purpose is to make the writer, and some readers, get a cheap hit of
smart-feeling, while alienating the frankly more valuable part of the
audience.

You're right, though, that it really wasn't that bad a case, especially
relative to other top comments in this thread. I wouldn't have singled it out
except that it was the first one posted.

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quadrangle
I agree with most of what you're saying. In _this_ case, I think it's an
intellectually _meaningful_ position to point out the fundamental problems
with the premise of the initial article. The idea of summing "global debt" as
though it means something really is something _worthy_ of that sort of
critique and dismissal.

A bad comment would be "this is dumb" or "total debt is a stupid concept". The
OP in this thread gave an intellectually clear and logic basis for dismissing
the article.

