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

nopriorarrests 9y ago
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.
- quadrangle 9y 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.
  - dragonwriter 9y ago
    > 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 9y ago
      Oh sure, inflation can happen with gold too, like when we find more gold…
- nerfhammer 9y 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 https://fred.stlouisfed.org/series/TREAST
- jganetsk 9y ago
  Finacial liabilities of the Fed (physical currency and bank reserves) are financial assets in the private sector. Therefore, yes, debt = savings.
fallingfrog 9y 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.
cwkoss 9y 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.

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.

quadrangle 9y 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.
- dragonwriter 9y ago
  > 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 9y ago
    Oh sure, inflation can happen with gold too, like when we find more gold…
nerfhammer 9y 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 https://fred.stlouisfed.org/series/TREAST
jganetsk 9y ago
Finacial liabilities of the Fed (physical currency and bank reserves) are financial assets in the private sector. Therefore, yes, debt = savings.

fallingfrog 9y 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.

cwkoss 9y 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.