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i still dont understand how the debt system works. if someone lends you a dollar and expects 2 dollars back - then somewhere in the system the extra dollar need

i still dont understand how the debt system works. if someone lends you a dollar and expects 2 dollars back - then somewhere in the system the extra dollar needs to exist. All the debt in the world is more than the available money due to interest. So debt can never go away right?

SketchySeaBeast 8y ago
Yeah, but it doesn't necessarily have to. If the US can keep servicing the interests on the loans via an economy that's growing proportionally faster than the debt it doesn't matter.
gamegoblin 8y ago
This is not necessarily true for fiat money (currencies that are printed by some entity and can be created from nothing).
Retric 8y ago
Think of juggling you don’t touch all the balls at the same time. Debt is useually paid back over time. I borrow 100$ and pay you 1$ in interest and 1$ in principle. You now spend, loan, or invest that 2$ to somone that I can trade somone for to get one of these 2$ to pay you another 2$. Over time I end up paying you 200$ even if there are never actually 200 different dollars around at any one time. The only confusing bit is assuming when you loan banks actual money (A.K.A. deposit money) the amount listed in your account is also actual money vs a simple IOU. The difference is only important when the bank runs out, so mostly it’s irrelevant until something unusual happens and it’s not.
kinghajj 8y ago
That's exactly correct, from my understanding. Though it's biased, there's a great documentary called 'Money as Debt' that explains the process in an understandable way.
gregcrv 8y ago
This is one of the best videos to understand the economic machine: https://www.youtube.com/watch?v=PHe0bXAIuk0 https://www.youtube.com/watch?v=PHe0bXAIuk0
millstone 8y ago
Not necessarily. For example, if I owe you two dollars, I can pay you one dollar, you can hire me and pay me a dollar (perhaps the same one), and then I can pay you the dollar again. So a single dollar can pay for two dollars of debt. The number of times a dollar is spent is called its velocity, and it's on the order of 5, meaning on average each dollar is spent 5 times in a year.

SketchySeaBeast 8y ago

Yeah, but it doesn't necessarily have to. If the US can keep servicing the interests on the loans via an economy that's growing proportionally faster than the debt it doesn't matter.

gamegoblin 8y ago

This is not necessarily true for fiat money (currencies that are printed by some entity and can be created from nothing).

Retric 8y ago

Think of juggling you don’t touch all the balls at the same time. Debt is useually paid back over time. I borrow 100$ and pay you 1$ in interest and 1$ in principle. You now spend, loan, or invest that 2$ to somone that I can trade somone for to get one of these 2$ to pay you another 2$. Over time I end up paying you 200$ even if there are never actually 200 different dollars around at any one time. The only confusing bit is assuming when you loan banks actual money (A.K.A. deposit money) the amount listed in your account is also actual money vs a simple IOU. The difference is only important when the bank runs out, so mostly it’s irrelevant until something unusual happens and it’s not.

kinghajj 8y ago

That's exactly correct, from my understanding. Though it's biased, there's a great documentary called 'Money as Debt' that explains the process in an understandable way.

gregcrv 8y ago

This is one of the best videos to understand the economic machine: https://www.youtube.com/watch?v=PHe0bXAIuk0 https://www.youtube.com/watch?v=PHe0bXAIuk0

millstone 8y ago

Not necessarily. For example, if I owe you two dollars, I can pay you one dollar, you can hire me and pay me a dollar (perhaps the same one), and then I can pay you the dollar again. So a single dollar can pay for two dollars of debt. The number of times a dollar is spent is called its velocity, and it's on the order of 5, meaning on average each dollar is spent 5 times in a year.