> My net worth decreases by $20, and yours stays constant. The above is not correct. When I forgive your $20 loan, my net worth decreases by $20, and yours inc

> My net worth decreases by $20, and yours stays constant. The above is not correct. When I forgive your $20 loan, my net worth decreases by $20, and yours increases by $20. That's accounting 101. The $20 debt is your liability and my asset. It contributes –$20 (negative $20) to your net worth, until it is forgiven or settled. Then it stops contributing –$20. When it was lent in the first place, you also gained a +$20 cash asset at the time, but that's not relevant at the time of forgiveness as you aren't paying it back . (The question of whether money is "printed" is subtler. As the comment I'm replying to says, we usually say government or bank issued loans are "printed" when they are lent out in the first place. It'd be a strange extension to the metaphor to call the same money "printed" for a second time when forgiven.)