
Debt Worldwide Hits Record $86k per Person - rfinney
https://www.bloomberg.com/news/articles/2018-12-13/debt-worldwide-hits-record-184-trillion-or-86-000-per-person
======
shoo
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://www.mhpbooks.com/books/debt/)

[https://en.wikipedia.org/wiki/Debt:_The_First_5000_Years](https://en.wikipedia.org/wiki/Debt:_The_First_5000_Years)

~~~
nonbel
> _" 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?

~~~
anonymouzz
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.

~~~
Joeri
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 in that system do they create money out of
thin air or send money to /dev/null (although I get the impression they do
some of that in derivatives markets).

~~~
usefulcat
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?

~~~
dragontamer
It's an issue of details.

Mortgages make MBS, mortgaged backed securities, which are traded around. You
can buy these, or SLABs, student loan backed securities.

Neither are money. M0 money can only be made by the US Fed. M1 or M2 money can
be made by banks out of savings accounts or checking accounts, due to the
fractional reserve system.

By lending money to a bank through the savings account mechanism, the bank
owes YOU money, because the bank spends roughly 80% of it on other things.

That's why there is a distinction from M0 pure cash, and the M1 or M2 virtual
'nearly money' in the system. I think credit cards are a higher order of money
as well...

------
graeme
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.

~~~
thescriptkiddie
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.

~~~
vesrah
Aren't all loans effectively borrowing money from your future self? :)

~~~
TrinaryWorksToo
Not if you default or die. Technically, you're only borrowing from your future
wealthier self.

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wufufufu
I'm ignorant on this, but to me there are two kinds of debt. 1) Personal debt,
like I took out a car loan and I can get the car repossessed or the loan sold
to debt collectors. 2) Debt that exists just to create more money i.e. the IMF
or Fed Reserve decide to have an expansionary monetary policy and they lend
from... what exactly? The purpose is to just control inflation.

I'm guessing this is the second kind of debt, but the title makes it sound
like the first.

~~~
jondubois
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 projects,
the government is effectively diluting the value of everyone's money and
giving it to corporations. This process creates public debt for which the
government will need to take additional loans from the reserve bank to keep
meeting the interest repayments; which will further dilute the value of
everyone's wealth while increasing corporate wealth; and the cycle will keep
repeating.

~~~
cecilpl2
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
difficult to capitalize on.

~~~
spectrum1234
This might be true. However it's fact that poor people lose the most from
inflation. Which is better?

~~~
slededit
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.

~~~
nradov
Inflation generally doesn't hurt the value of stocks in a 401(k). You still
own the same percentage of the underlying public corporations. Inflation only
hurts your bond holdings. This is one reason why it's best to keep at least
some of your retirement fund assets in stocks even as you approach retirement
age rather than shifting entirely too bonds.

TIPS also provide a way to hedge against inflation in retirement funds.

~~~
slededit
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.

~~~
nradov
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.

~~~
slededit
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.

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sdinsn
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.

~~~
rcMgD2BwE72F
>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).

~~~
Eridrus
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.

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ctdonath
There's a reason ancient Judaism included a "Year of Jubilee", where all debts
were forgiven every 50 years.

~~~
lotsofpulp
If all debt was forgiven every 50 years, why would any lender lend money with
a term going past the year before the jubilee?

~~~
mamcx
Well, in part the ideas was not get into big debts. People could self-sustain
much more easily in the past. No need to buy iPhone each year help on that.

Is important to note that the jubilee was a measure against the worst case
scenarios: Persons that sell themselves as slaves (or sons of slaves), people
that lost the hereditary land and things like that.

This also means the society was based around this expectations.

~~~
paulddraper
> People could self-sustain much more easily in the past.

Why? Why has the ability for debt-free self-sustaining decreased?

~~~
mamcx
People live form the land or livestock. Even without much money you could get
food. Plus, was part of the Law that anyone could harvest from any field after
the first pass from the owners, as measure against starvation.

If you live in a rural area, even today, you will see that is normal and easy
to share and get food _free_ or very cheap (in fact, a lot of food will not
get in the supermarket for lack of ways to fully utilize the capacity!).

Is kind of simply to maintain a live if your are friendly in the community.

------
ChuckMcM
Sigh, Bloomberg how far you have fallen.

In the article this is the IMF talking, so we're talking about sovereign debt
not commercial debt like credit cards or mortgages or car loans.

Sovereign debt is nominally repaid through the execution of the economy. A
country borrows by selling debt securities, with fixed maturity dates and then
redeems those securities once they mature.

Consider this really simple example in the US; The treasury department sells a
note that has a face value of $10,000 and a maturity date 10 years from now,
to Alice for $8,188. If you figure out what interest rate you would need to
have $8,188 equal $10,000 in 10 years (monthly compounding) you would find
that the "equivalent" interest rate or yield to be 2%. So they have "borrowed"
$8,188 dollars from Alice, who, 10 years from now, will turn in her note and
they will give her $10,000. They might end up selling two notes to Bob and
Charlie just before Alice shows up at the window in order to have cash to give
Alice but in either event the note that Alice bought gets "redeemed" (or
retired) and it is off the books, it has been "repaid."

Over the course of the year revenues come in, and sometimes there is already
enough cash in the drawer to pay off Alice without selling any more notes, in
which case the total amount of notes out there goes down. The amount of
revenue is proportional to the economic output or GDP of the country because,
well everything gets taxed a bit. This is easiest to understand when looking
at income taxes since the more income (the more people working the more people
have incomes or more income) the more taxes you get. So more economic activity
results in more revenue for the state, which means selling fewer notes. If
spending levels are kept constant, and the economy grows, then you reach a
point where you don't need any note sales to pay your bills.

So the IMF is responding to the news that the US deficit (which is that the US
sold more notes than they had expected revenue) for the month of November was
a record[1] to $205B. What does it mean to you and me? Well it probably means
a some point someone in Washington DC will have to raise taxes if they want to
keep the debt ceiling down.

[1] (warning autoplay video) [http://fortune.com/2018/12/13/us-budget-deficit-
record-novem...](http://fortune.com/2018/12/13/us-budget-deficit-record-
november/)

------
intrasight
Debt doesn't concern me. As another poster said "The total government debt =
total private sector savings, to the last cent. That is an accounting truth".
What does concern me is obligations - specifically underfunded public pension
obligations. There is no accounting balance here - a day of reckoning will
surely come.

"Mitchell and Friedberg warned that the pension hole will swallow public- and
private-sector employees alike, because all income earners will pay for it.
Mitchell ran a simple calculation to illustrate her point: If the shortfall
were $5 trillion, divide that amount by the 158 million workers in the
American labor force for an obligation of about $32,000 per worker."

[http://knowledge.wharton.upenn.edu/article/the-time-bomb-
ins...](http://knowledge.wharton.upenn.edu/article/the-time-bomb-inside-
public-pension-plans/)

~~~
afterburner
> public pension obligations. There is no accounting balance here - a day of
> reckoning will surely come.

These scare stories are solved by a modest rise in taxes. The obligations are
summed over many decades and projected into the future.

~~~
assblaster
Modest rise in taxes... Across the board to person in the United States? To
only the 50% of people who are taxpayers? To only the top 10% who pay 70% of
the taxes already? Tax those who do not generate income traditionally but
rather earn based on investments? Seizure of personal assets?

Depending on how you go about this, you could create economic stagnation
because of burdensome pension programs.

Alternatively, you could cut benefits, or privatize the investments rather
than simple redistribution from one payroll tax payer to one pensioner.

I'm in favor of privatization combined with benefit reduction and increased
minimum retirement age.

The combination of these three could easily solve any pension shortfall and
generate long term wealth for every American.

------
jdoliner
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 to have negative amounts of
currency). Or does it eventually go kabloie? Unfortunately I don't have an
answer, but I suspect we'll find out within our lifetime.

~~~
aurailious
> 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 itself is a very good thing. Too
much, and too little, of a good thing is bad.

So in either case all debts being paid off will almost certainly never happen.

> Does anyone even believe that the amount of debt will go down

In absolute terms due to inflation it always goes up.

> (that allows people to have negative amounts of currency)

You say this like its a bad thing. Debt isn't a bad thing. Debt allows people
to own homes and cars and pay for education and invest in business. Debt means
you are optimistic about the future.

~~~
joobus
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.

~~~
isoprophlex
People downvoting this comment: please provide reasons for disagreeing. You
are not adding to the discussion by silently downvoting.

~~~
pfranz
I started a reply, but honestly, I just don't feel like it's worth the energy
to follow up with the replies I'd get. Probably because of the tone of the
response.

I don't see debt as all that much different than insurance. Sure, society can
get by without it, and you may never need it, but society in general benefits.
If I run a business any large expenses would be amortized over the lifetime of
that thing. I could pay for it upfront, but that might never happen and if I
could it wouldn't be the best use of my resources. Ideally, I'd "pay rent" in
order to borrow money upfront, now that I have that machine it's easier to pay
back since that fixed cost will benefit me for the next 20 years. That's the
scenario where all debt is never paid back.

Financial tools, like anything else can be good or bad depending on the
circumstances and motivations at play. Payday loans (generally seen as bad)
aren't all that different from micro-loans lauded in third-world countries.
Let's say there's an older woman who walks out of town to buy goods and
carries them back to town every day to sell (arbitrage). If she gets a small
loan to buy more goods up front, invest in a wheelbarrow, or a booth at the
market she can do more business and more easily pay off that loan benefiting;
her, the person offering the loan, the sellers and the buyers--society in
general. If she cannot pay back the loan she can get into a debit spiral.
There are situations where that is beneficial to the person giving her the
loan at the expense of her and the rest of society.

------
sytelus
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.

------
zygotic12
Issac Newton changed the world for the better by creating fractional reserve
banking. But it's like an elastic band as we noticed in 2008. To get any
perspective on this a breakdown by age groups would be more revealing. My
goggle fu failing me.

------
randyrand
And what are assets per person?

~~~
pjmorris
$86,000 per person.

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

~~~
umeshunni
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.

~~~
pjmorris
But the 134K is only a validated if someone buys the house with 134K cash
and/or credit. And that 134K is typically measured in terms of comps - nearby
houses of similar size and similar condition... that were purchased with cash
or credit. Currency is a ledger... one man's debt is another man's credit.

------
ryanmercer
Um, am I doing math wrong?

184 trillion divided by 7.7 billion = 23,896

~~~
DeltaCoast
I think it may be an average amount between those who hold debt rather than
everyone in the world.

~~~
reirob
This would mean that only 2.14 billion are indebted? At the same time, how
does it include public vs. private debt?

I think it would be really interesting how the figure of $86,000 per person
was calculated.

------
me551ah
When I read the title my first reaction was 'Who tf does the world owe money
to, the martians?'.

Though reading the article and comments did make it a lot clearer to me.

------
rusanu
In unrelated news: average mortgage worldwide close to $86k per Person.

How much of the Worldwide debt is secured by collateral?

~~~
beatgammit
If you count national debt, you get ~$60k/person from that, so the average
mortgage would be closer to $20k/person.

------
singularity2001
Isn't worldwide accumulative debt 0.0 by definition?

------
vinyasmusic
Didn't know we owed money to World Bank of Earth 29.

------
verelo
Given i personally have 1.5 million, that feels nice and low.

~~~
jasongill
weird flex, but ok

~~~
yesforwhat
just a normal flex, really

~~~
verelo
Flex? Just openly sharing debt info that is relevant to the article, meanwhile
we have a whole bunch of people previously applauded for openly sharing their
salaries, and I’m the one flexing? Thanks for your contribution...it’s not a
flex, it’s just a fact.

------
intralizee
Similar to how the US bailed out the banks. How about the citizens are bailed
out. It would boost the economy. Restore faith in the system!

~~~
AnimalMuppet
That might be nice, but... how, exactly?

By writing off the debts? That's not so nice for those who are owed. A bunch
of those are pension funds, for example. If peoples' pensions get wiped out by
by all debts being forgiven, they won't be so happy.

By the government giving money to people? But where does the government get
the money? By taking on debt? Then the government's even more deeply in debt,
which means that we the people still are in debt, too.

Or does the government just create more money? This might be the least-bad way
of doing it, but it would still be hugely inflationary.

~~~
dragonwriter
> By the government giving money to people? But where does the government get
> the money? By taking on debt? Then the government's even more deeply in
> debt, which means that we the people still are in debt, too.

But it's a lot easier to pay off, especially if you prioritize high risk debt
to nationalize, so the government has a lower cost of borrowing (especially if
the government, instead of paying off distressed debt, instead purchases it at
current fair market value, since then the cost will be below the face value;
“healthy” debts don't need a correction.)

~~~
AnimalMuppet
That actually makes sense economically. Politically, though, what's going to
happen is that people aren't going to want to pay taxes to service the
government's debt (even if in advance they said they would). The consequences
of the much-larger government debt without increased taxes could be anywhere
from "somewhat negative" to "catastrophic".

------
qwerty456127
What if we just delete all the debt and start from zero? Won't the zero
(everything people have built and developed to the date) be better than if the
debtors had never taken the credits?

I would like a theoretical answer ignoring the ethical part and the fact
creditors will become less willing to lend money again if this happens.

~~~
iambvk
Why-Not depends on which side you fall into. There are two sides: People with
Debt and People collecting Payments.

People-Paying would love to start from zero.

People-Collecting would not want that.

If you think about it as two groups (theoretically): one group receives
monthly, recurring payments from the other group.

In practice, individuals move from one group to another group and back, etc.
based on life circumstances.

But here is a catch: Due to a bug or design, if an individual (or few
individuals or families) could always stay in the receiving-group, he can live
for free till end of time (or system halts/collapses.)

What will blow your mind is, are there such individuals or families in the
system by design?

