Global Debt Hits Record $233T

https://www.bloomberg.com/news/articles/2018-01-05/global-debt-hits-record-233-trillion-but-debt-to-gdp-is-falling

by thisisit • 9 years ago

25 71 9 years ago

neolefty• 9 years ago

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

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.

quadrangle19• 9 years ago

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.

nerfhammer• 9 years ago

They don't just buy and print ad naseum.

Remember, when the Fed buys a bond from the Treasury money gets printed, but the Treasury has to pay the bond back and as that happens slightly more money gets destroyed.

The amount of debt the Fed owns changes over time, it doesn't increase continuously. It tends to just maintain a fixed amount of it. It's been going down slightly lately:

https://fred.stlouisfed.org/series/TREAST

jganetsk2• 9 years ago

Finacial liabilities of the Fed (physical currency and bank reserves) are financial assets in the private sector. Therefore, yes, debt = savings.

fallingfrog• 9 years ago

Educate me -why would that be the case? Don't banks lend out money on a fractional reserve basis- that is, money that nobody really has deposited in a savings account? Unless we are counting the value of the loan as "savings". Perhaps what I am missing here is that "savings" is really just another kind of debt with the arrow pointed the other way.

..If that's the case, it's interesting that we consider savings to be something solid and real but debt to be something which is speculative and can be cancelled, considering that they're really the same thing.

cwkoss3• 9 years ago

Presumably would be $233T less the interest rate that the debt was lent at, right?

So if the average debt is created with a 4% interest rate, there is ~ $9 Trillion more in debt than there is in savings. That's almost half the entire market cap of the S&P 500. Unsettling.

igravious• 9 years ago

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

sliverstorm• 9 years ago

Everybody & anybody. Governments, businesses, private individuals.

At the same time, though, the ratio of debt-to-gross domestic product fell for the fourth consecutive quarter as economic growth accelerated.

So, not all doom and gloom.

quadrangle19• 9 years ago

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.

wu-ikkyu5• 9 years ago

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.

seibelj• 9 years ago

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

electic• 9 years ago

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

quadrangle19• 9 years ago

It only causes inflation if (A) the currency distribution was already providing adequate aggregate buying power for existing supply, (B) growth in real wealth and productivity isn't happening along with the increase in currency, and (C) taxes aren't increased to offset the new money.

digi_owl• 9 years ago

It depends.

If the debt being repaid is in local (national) currency, perhaps but less likely than if it is in foreign currency.

If it is all local, then it becomes a question of whether the nation has the production capacity and investment opportunities to absorb the additional currency in circulation.

If it is all most mostly foreign, the exchange rate can go haywire leading to any imports exploding in price. And if the nation then is relying on imports for some stable or other, things can go very badly very quickly.

zamalek• 9 years ago

Marginal amounts of inflation are required for fiat currency to remain liquid. If currency were deflationary, people would be encouraged to hoard it. A deflationary spiral[1] is one example of what can happen in a deflationary market. Inflation is a feature; not a flaw.

[1] https://www.investopedia.com/terms/d/deflationary-spiral.asp

mfarris• 9 years ago

Mild to moderate inflation is usually considered useful in paying back debt, as the constant dollar value of the debt decreases.

Even with the low inflation we've had over the last 20 years, if you borrowed $1000 in 1997 with 0% interest and wanted to pay it back now, the 1000 "2018 dollars" you'd pay would only be "worth" 655 "1997 dollars".

The real danger is in deflation, which causes the constant dollar value of the debt to grow.

jhallenworld2• 9 years ago

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?

mamon• 9 years ago

And screw everyone else in the process...

quadrangle19• 9 years ago

Federal government debt only, and only those countries that have their own fiat currencies. But yes.

nopriorarrests2• 9 years ago

In fact, european central bank buys corporate bonds. To the tune of 110bln atm. (Have no link on mobile, but it is easy to google)

Terr_2• 9 years ago

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...

dang3• 9 years ago

Please don't post unsubstantive comments here.

quadrangle19• 9 years ago

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

Terr_2• 9 years ago

"Please respond to the strongest plausible interpretation of what someone says, not a weaker one that's easier to criticize."

The substance is this: The total value of "global debt" can be misleading -- or entirely meaningless -- when you don't consider all the cancellations in the graph. This is nontrivial when it comes to the network of "every economic entity that currently exists."

jdoliner2• 9 years ago

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.

quadrangle19• 9 years ago

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/ (simplistic but largely accurate intro)

wu-ikkyu5• 9 years ago

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

jdoliner2• 9 years ago

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.)

Global Debt Hits Record $233T

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