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Right, of course. But ultimately debts are paid back through energy creation, natural resource extraction, tangible assets, and human labor. The accounting de
by 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 agoWorld GDP is $75 trillion. So governments worldwide have promised less than one year of labor.
- pjc50 11y agoif 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 agoLook 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.