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$57 trillion in world debt is something quite unlike a savings glut. And that is just public debt, and it is growing quickly. http://www.economist.com/content

by bcg1 11y ago

$57 trillion in world debt is something quite unlike a savings glut. And that is just public debt, and it is growing quickly. http://www.economist.com/content/global_debt_clock http://www.economist.com/content/global_debt_clock But in general I agree with your overall statement... everyone talks about China's "ghost cities" as if they are some sort of quixotic or keynesian tomfoolery... but a simpler explanation is simply that China wants to urbanize and grow a middle class as part of the development cycle you mentioned. They probably need a "hard landing" in order to cool off their real estate market and clear out the dead wood of their malinvestment in order to realize that goal.

Eliezer 11y ago
If you save another dollar in the bank, that's another dollar of global debt that the bank owes you - it's how the accounting works.
- bcg1 11y ago
  Right, of course. But ultimately debts are paid back through energy creation, natural resource extraction, tangible assets, and human labor. The accounting details of fractional reserve banking in a debt based monetary system aside, that is a huge sum of human labor that governments have promised... and if that money ever gets paid off it will require the global workforce to work for decades to do it... I would hardly call that a "savings glut".
  - selectodude 11y ago
    World GDP is $75 trillion. So governments worldwide have promised less than one year of labor.
  - pjc50 11y ago
    if that money ever gets paid off it will require the global workforce to work for decades to do it How much of that is pensions? People work for decades, in the expectation of a pension, creating the pension liability; and are then going to require possibly decades of other people's work while they themselves are too old to work. Discussion of "paying it off" is meaningless when it can only be sensibly rolled over forever.
    - bcg1 11y ago
      Look that's why I said "if that money ever get paid off" not "when it gets paid off". And of course the only "not extremely bad" alternative is to continually roll over public debts forever. Financing tricks though don't change the value of the underlying assets, which is really the point that I'm making. I don't disagree at all with what you're saying. The problem is that eventually the debts can grow so large that the people who are expected to service the ever increasing principal and interest payments view the debts and overwhelming and/or odious, and choose to default. Then you get a deflationary spiral (i.e., Greece, Cyprus, etc), or alternatively currencies can hyperinflate to service the debt, which is essentially another form of default (i.e., Japan). We haven't really seen the current situation before, so don't know how this plays out... but we'll find out soon enough I think.
knowaveragejoe 11y ago
It's not intuitive, that's precisely what that is.
lkrubner 11y ago
"$57 trillion in world debt is something quite unlike a savings glut" That's also $57 trillion in savings. You do realize that someone owns the $57 trillion in debt, right? From the point of view of the owners, that is $57 trillion in savings. If you think debt is all bad, then you are not thinking coherently.
- pjc50 11y ago
  I can't upvote this enough. The balance sheet has two sides. The world is not in debt to aliens. Some of the debt is 'savings' in the ordinary sense: if people accumulate a portfolio of government bonds for their pension for example. But a lot of it is the accumulated wealth of the very wealthy.
- jld89 11y ago
  Nope... not necessarily. Not when hedge funds and speculative parts of banks create virtual imaginary money. Modern capitalism is NOT a zero sum game. It may be logical yes but it's not how it works right now. It's how it worked when the gold standard was around... I wish it was a zero sum game, but it's not.
fleitz 11y ago
Of course that debt it offset by about $300 trillion in assets

by bcg1 11y ago

Eliezer 11y ago

If you save another dollar in the bank, that's another dollar of global debt that the bank owes you - it's how the accounting works.

bcg1 11y ago
Right, of course. But ultimately debts are paid back through energy creation, natural resource extraction, tangible assets, and human labor. The accounting details of fractional reserve banking in a debt based monetary system aside, that is a huge sum of human labor that governments have promised... and if that money ever gets paid off it will require the global workforce to work for decades to do it... I would hardly call that a "savings glut".
- selectodude 11y ago
  World GDP is $75 trillion. So governments worldwide have promised less than one year of labor.
- pjc50 11y ago
  if that money ever gets paid off it will require the global workforce to work for decades to do it How much of that is pensions? People work for decades, in the expectation of a pension, creating the pension liability; and are then going to require possibly decades of other people's work while they themselves are too old to work. Discussion of "paying it off" is meaningless when it can only be sensibly rolled over forever.
  - bcg1 11y ago
    Look that's why I said "if that money ever get paid off" not "when it gets paid off". And of course the only "not extremely bad" alternative is to continually roll over public debts forever. Financing tricks though don't change the value of the underlying assets, which is really the point that I'm making. I don't disagree at all with what you're saying. The problem is that eventually the debts can grow so large that the people who are expected to service the ever increasing principal and interest payments view the debts and overwhelming and/or odious, and choose to default. Then you get a deflationary spiral (i.e., Greece, Cyprus, etc), or alternatively currencies can hyperinflate to service the debt, which is essentially another form of default (i.e., Japan). We haven't really seen the current situation before, so don't know how this plays out... but we'll find out soon enough I think.

knowaveragejoe 11y ago

It's not intuitive, that's precisely what that is.

lkrubner 11y ago

"$57 trillion in world debt is something quite unlike a savings glut" That's also $57 trillion in savings. You do realize that someone owns the $57 trillion in debt, right? From the point of view of the owners, that is $57 trillion in savings. If you think debt is all bad, then you are not thinking coherently.

pjc50 11y ago
I can't upvote this enough. The balance sheet has two sides. The world is not in debt to aliens. Some of the debt is 'savings' in the ordinary sense: if people accumulate a portfolio of government bonds for their pension for example. But a lot of it is the accumulated wealth of the very wealthy.
jld89 11y ago
Nope... not necessarily. Not when hedge funds and speculative parts of banks create virtual imaginary money. Modern capitalism is NOT a zero sum game. It may be logical yes but it's not how it works right now. It's how it worked when the gold standard was around... I wish it was a zero sum game, but it's not.

fleitz 11y ago

Of course that debt it offset by about $300 trillion in assets