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Yeah, bubble days were wild, but that’s also not your run of the mill real estate. If anything the bubble period should be an object lesson in what happens when

Yeah, bubble days were wild, but that’s also not your run of the mill real estate. If anything the bubble period should be an object lesson in what happens when you allow this kind of unchecked investment (ie it destroys your entire economy).

TangoTrotFox 8y ago
More generally, I really wonder how our entire economic system, which is based on ever increasing levels of debt, is going to cope when the premise of infinite exponential growth comes to be shown to be impossible? What happens when there are trillions of dollars of interest bearing debt yet the gross economic expansion is no longer even keeping up with the interest? On the other hand I think there's a very good argument that space could open up sufficient development and opportunity that we could return to infinite exponential growth. If the 'new world' spurred the world economy for centuries, one can only imagine the potential of everything from asteroid utilization to colonization of entirely new planets and all of the discoveries and advances this will all bring.
- adventured 8y ago
  > I really wonder how our entire economic system, which is based on ever increasing levels of debt Actually our entire economic system is built on increasing assets and income. A fractional share of which is stacked against debt and interest expense. Asset growth has outpaced debt growth, income growth has outpaced interest cost increases. If that weren't the case, the world would have imploded a long time ago given the debt increase over the last 20 years. China is a particularly potent example of this in action. Their debt accumulation has been very dramatic the last ten years. Despite that, there's no indication their vast income and asset expansion is unable to offset it. Their income expansion continues to exceed the additional interest cost by about a 2x to 3x margin. Or take the US. US Government interest expense was $458 billion in 2017. It was ~$350b commonly in the mid to late 1990s. The US economy is 2.5 times larger than it was in 1996, and the public debt is about three to four times larger; meanwhile interest costs have increased by about a quarter. US household wealth was $30 trillion in 1995/96. It's $100 trillion today. Wealth has increased by $70 trillion. Debt has gone from $6 trillion to $14 trillion. Net wealth has gone from $24 trillion, to $86 trillion. Wealth expansion has far outpaced debt expansion. In 1996, household debt was equal to about 20% of household assets; today it's 14%. US household debt service payments as a percentage of disposable income are the lowest they've been in four decades. The premise that either the US or global economy is built on unsustainable debt, is false.
  - TangoTrotFox 8y ago
    The numbers you're offering illustrate the exact point. Our systems work okay when you have exponential growth which can keep pace with the growth of debt. But assuming infinite exponential growth is unreasonable. The question is not if, but when the exponential growth ends. I tend to believe we're getting extremely close to that point already. ---- On a more fundamental level money itself is debt. It's how nearly all money is actually 'made.' Think about how banks function. #1 deposits $100 in a bank. That bank is required to only hold onto 10% of this deposit, and so they can and do lend $90 to #2. #2 spends that money which ends up getting deposited at another bank. That bank now lends out $81 to #3 (keeping 10% of that $90 on hand). And this process repeats over and over. In the end $100 of 'real' money ends up creating $1000 of debt. And now add in interest -- that single $100 can actually end up creating thousands of dollars of debt. The vast majority of all money in our economy is somebody else's debt. This is one of the main reasons inflation is seen as so important. It decreases the value of older debts, and also works as a penalty for simply holding onto assets as opposed to spending them and keeping the scheme going. The next issue is that now a days nearly all wealth is in the form of financial assets which naturally inflate their 'real' value. The current market cap of Apple is $920 billion. And that's made a lot of people a lot of wealth. But the issue is that if any substantial amount of that was attempted to be liquidated, the price would obviously plummet - precipitously. And of course this is the same for all financial assets. And then we get to financial policy. When having literally 0 interest rates was insufficient to get those assets to inflate enough on their own to show growth, we turned to quantitative easing which is effectively buying things with monopoly money in a last-ditch desperate effort to make their price go up. Is this indicative of a sustainable and healthy system?
    - tim333 8y ago
      You could actually liquidate quite a lot of apple - they have about $100bn cash and $50bn annual income and are looking to buy back stock. But I see your point for similar stuff.

TangoTrotFox 8y ago

More generally, I really wonder how our entire economic system, which is based on ever increasing levels of debt, is going to cope when the premise of infinite exponential growth comes to be shown to be impossible? What happens when there are trillions of dollars of interest bearing debt yet the gross economic expansion is no longer even keeping up with the interest? On the other hand I think there's a very good argument that space could open up sufficient development and opportunity that we could return to infinite exponential growth. If the 'new world' spurred the world economy for centuries, one can only imagine the potential of everything from asteroid utilization to colonization of entirely new planets and all of the discoveries and advances this will all bring.

adventured 8y ago
> I really wonder how our entire economic system, which is based on ever increasing levels of debt Actually our entire economic system is built on increasing assets and income. A fractional share of which is stacked against debt and interest expense. Asset growth has outpaced debt growth, income growth has outpaced interest cost increases. If that weren't the case, the world would have imploded a long time ago given the debt increase over the last 20 years. China is a particularly potent example of this in action. Their debt accumulation has been very dramatic the last ten years. Despite that, there's no indication their vast income and asset expansion is unable to offset it. Their income expansion continues to exceed the additional interest cost by about a 2x to 3x margin. Or take the US. US Government interest expense was $458 billion in 2017. It was ~$350b commonly in the mid to late 1990s. The US economy is 2.5 times larger than it was in 1996, and the public debt is about three to four times larger; meanwhile interest costs have increased by about a quarter. US household wealth was $30 trillion in 1995/96. It's $100 trillion today. Wealth has increased by $70 trillion. Debt has gone from $6 trillion to $14 trillion. Net wealth has gone from $24 trillion, to $86 trillion. Wealth expansion has far outpaced debt expansion. In 1996, household debt was equal to about 20% of household assets; today it's 14%. US household debt service payments as a percentage of disposable income are the lowest they've been in four decades. The premise that either the US or global economy is built on unsustainable debt, is false.
- TangoTrotFox 8y ago
  The numbers you're offering illustrate the exact point. Our systems work okay when you have exponential growth which can keep pace with the growth of debt. But assuming infinite exponential growth is unreasonable. The question is not if, but when the exponential growth ends. I tend to believe we're getting extremely close to that point already. ---- On a more fundamental level money itself is debt. It's how nearly all money is actually 'made.' Think about how banks function. #1 deposits $100 in a bank. That bank is required to only hold onto 10% of this deposit, and so they can and do lend $90 to #2. #2 spends that money which ends up getting deposited at another bank. That bank now lends out $81 to #3 (keeping 10% of that $90 on hand). And this process repeats over and over. In the end $100 of 'real' money ends up creating $1000 of debt. And now add in interest -- that single $100 can actually end up creating thousands of dollars of debt. The vast majority of all money in our economy is somebody else's debt. This is one of the main reasons inflation is seen as so important. It decreases the value of older debts, and also works as a penalty for simply holding onto assets as opposed to spending them and keeping the scheme going. The next issue is that now a days nearly all wealth is in the form of financial assets which naturally inflate their 'real' value. The current market cap of Apple is $920 billion. And that's made a lot of people a lot of wealth. But the issue is that if any substantial amount of that was attempted to be liquidated, the price would obviously plummet - precipitously. And of course this is the same for all financial assets. And then we get to financial policy. When having literally 0 interest rates was insufficient to get those assets to inflate enough on their own to show growth, we turned to quantitative easing which is effectively buying things with monopoly money in a last-ditch desperate effort to make their price go up. Is this indicative of a sustainable and healthy system?
  - tim333 8y ago
    You could actually liquidate quite a lot of apple - they have about $100bn cash and $50bn annual income and are looking to buy back stock. But I see your point for similar stuff.