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Money is debt. Imagine an island with two residents. Alice and Bob. There is no difference between these two scenarios: 1: Alice has 1 seashell. Bob has 0 sea

Money is debt. Imagine an island with two residents. Alice and Bob. There is no difference between these two scenarios: 1: Alice has 1 seashell. Bob has 0 seashells. 2: Alice has 0 seashells. Bob has 0 seashells. Bob owes Alice a seashell. Either way, Alice can go to bob and exchange her wealth for an apple. In scenario 1, she gives him a seashell. In scenario 2, she pays by voiding his debt. Either way, Alice owns 100% of all wealth.

6gvONxR4sf7o 7y ago
Isn't scenario 1 equivalent to 3: Alice has 0 seashells. Bob has 1 seashell. Bob owes Alice a seashell. Once all the accounts are settled by Bob paying Alice the seashell he owes her, it becomes scenario 1, so this seems a better match for scenario 1 than scenario 2 does.
- founderling 7y ago
  Maybe. What I wanted to emphasize is that a dollar "In the bank" means nothing else then "The bank owes you a dollar". And banks do not lend money they don't have. And where do they have it from? From other customers. Ergo: Your $1 in wealth is someone elses $1 in debt.
  - 6gvONxR4sf7o 7y ago
    I agree with that, but it doesn't answer the question of how to account for negative wealth in a X% of americans own Y% of wealth calculation. In scenario 2, Bob has negative net wealth. In scenario 3, Bob has zero net wealth (which is why 1 and 3 are equivalent, not 2). Supposing we had a scenario where once all accounts are settled, Alice has 2 seashells, and Bob had -1 seashells, does alice have 100% of all wealth? 200%? (Equivalently, Alice has 1, Bob has 0, and Bob owes Alice 1) (edit for everyone else: this thread is confusing because I changed my comment to respond to founderling's edit, but founderling responded to my original comment before I changed it... ¯\_(ツ)_/¯)
    - deleted 7y ago
      [deleted]
    - founderling 7y ago
      Alice has 2 seashells, and Bob had -1 seashells does alice have 100% of all wealth Yes. Bob has no buying power at all.
  - AnthonyMouse 7y ago
    > And banks do not lend money they don't have. Actually that is exactly what banks do. You go to the bank and take out a loan, they credit your account with $1000 and then you owe them $1000 and they owe you $1000. The thing balancing the cash in your account isn't some other customer's cash, it's the debt you owe them. The amount of physical cash in their vault as a result of you taking out the loan hasn't changed at all. They're required to have a certain amount of cash in reserve to cover cash withdrawals, but that amount is not 100%.

6gvONxR4sf7o 7y ago

Isn't scenario 1 equivalent to 3: Alice has 0 seashells. Bob has 1 seashell. Bob owes Alice a seashell. Once all the accounts are settled by Bob paying Alice the seashell he owes her, it becomes scenario 1, so this seems a better match for scenario 1 than scenario 2 does.

founderling 7y ago
Maybe. What I wanted to emphasize is that a dollar "In the bank" means nothing else then "The bank owes you a dollar". And banks do not lend money they don't have. And where do they have it from? From other customers. Ergo: Your $1 in wealth is someone elses $1 in debt.
- 6gvONxR4sf7o 7y ago
  I agree with that, but it doesn't answer the question of how to account for negative wealth in a X% of americans own Y% of wealth calculation. In scenario 2, Bob has negative net wealth. In scenario 3, Bob has zero net wealth (which is why 1 and 3 are equivalent, not 2). Supposing we had a scenario where once all accounts are settled, Alice has 2 seashells, and Bob had -1 seashells, does alice have 100% of all wealth? 200%? (Equivalently, Alice has 1, Bob has 0, and Bob owes Alice 1) (edit for everyone else: this thread is confusing because I changed my comment to respond to founderling's edit, but founderling responded to my original comment before I changed it... ¯\_(ツ)_/¯)
  - deleted 7y ago
    [deleted]
  - founderling 7y ago
    Alice has 2 seashells, and Bob had -1 seashells does alice have 100% of all wealth Yes. Bob has no buying power at all.
- AnthonyMouse 7y ago
  > And banks do not lend money they don't have. Actually that is exactly what banks do. You go to the bank and take out a loan, they credit your account with $1000 and then you owe them $1000 and they owe you $1000. The thing balancing the cash in your account isn't some other customer's cash, it's the debt you owe them. The amount of physical cash in their vault as a result of you taking out the loan hasn't changed at all. They're required to have a certain amount of cash in reserve to cover cash withdrawals, but that amount is not 100%.