10 ms·

You ask how any of this debt can ever be repaid. But is this really what we want to achieve? Repay the debt? If money is, like in the reddit post, an IOU (or a

by WA 14y ago

You ask how any of this debt can ever be repaid. But is this really what we want to achieve? Repay the debt? If money is, like in the reddit post, an IOU (or a certain unit of debt), then the idea is to balance out the amount of money (debt) with the growth of the economy. Too much and we got inflation. Too little and we cripple the economy. I'm very curious why debt should be repaid at all, care to explain? (Note: I think one's own debt is different than the debt in an economic scale)

necubi 14y ago
It's not a matter of repaying the debt. It's a matter of being able to afford future debt. Sovereign debt is generally sold as bonds, which either pay interest or are sold at a discount. The question is: how much interest should they pay, or how large should the discount be? Ultimately, bonds, like much else, are priced by the market. A $1000 bond is only worth $1000 if the issuer does not go bankrupt before the bond matures. Therefore, the bonds are discounted by some amount that correlates with how high investors think the risk is that it will be paid back in full. A concrete example: Spanish 10-year notes. At the start of the year, investors demanded about 5% interest to account for the risk that the Spanish government would not be able to repay its debts. This means that for the Spanish government to raise €1000, it has to pay investors €50 every six months. However, this week that rose to 7%, effectively increasing the amount of debt the Spanish government must take on to raise the same amount of money. This effect can create a death spiral (as we saw with Greece) where skittishness in the market raises the cost of borrowing, which unnerves investors even more. So there's no way for investors to force the government to pay back all the debt. However, they can make it impossible to raise more money in the future.
deleted 14y ago
[deleted]
zanny 14y ago
Here is the catch in the 21st century - we are creating debt in exchange for things that can create goods without human intervention. The entire monetary system is built off the idea of trading goods and services that are the products of human labor. Things like automated assembly lines are a precursor - when we had 3d printing, you remove all human factors in the creation of goods besides the raw resource acquisition, and sufficiently advanced printers can also decompose trash into reusable pieces so you don't even need raw materials any more besides power. All our financial woes and economic malnourishment is the product of this system, beneath government welfare overspending the budget, it is why corporations post record profits while laying off thousands and why all that money goes to the top of the management. When the actual consumable and usable goods are not produced by people, the sale of individual units breaks down. Look no further than media. Media is an upfront cost of creation, but reproduction is free. The current system is so broken because it tries to charge per unit as if unit production has an associated cost, where the cost is the funding, not the distribution. That problem only gets worse as we automate everything more and more (automated cars replace drivers, 3d printers replace small scale manufacturing...). That leads to a big one. Automated mining and farming. Fully, with no human intervention, where you can set off a robot with some pre-programmed track of land to till or dig and it will extract all the resources from that area for you. Once that happens everything goes out the window, because a single point of sale unit of production (plus maintinance, which then gets ursurped by the singularity making machines improve themselves) where once one of these machines is available, resources are no longer scarce. And then money breaks down. Because when human effort is no longer involved in the day to day operations of goods production, there is no continuous "cost" involved anymore, in the terms the Reddit thread describes, or how most people interpret goods and labor.
- gaius 14y ago
  Once you make movie A, the next million copies of movie A are essentially free. So we divide the cost of A by the number of units we expect to sell, rather than charging the full price of it to the first viewer, and giving it away to the others. Crucially, and this is where the whole utopian post-scarcity dream falls apart, the cost of making movie B doesn't significantly depend on the cost of movie A. Because a movie isn't a "thing". Movie B is a different thing than movie A.
  - tempuser008 14y ago
    And then we apply the same principle to a song. Once you record the first song, the next million copies of it distributed via internet is basically free. Or is it. It would be nearly free if there were no fat cats in the middle.
    - gaius 14y ago
      Distribution is free - but shouldn't the band be paid what they would have gotten with no record label in the way? That may mean songs on iTMS being 10p instead of 99p - don't creators of products you want deserve paying?
    - tempuser008 14y ago
      I don't mind paying 10 cents if that is the fair cost. I only hate the very greedy middle men.
  - hxa7241 14y ago
    Ideally, for informational-goods, we first find out (somewhat) what people want, take payment, make the product, then release it for free use and copying. The economic problem here is fundamentally one of information and cooperation. As far as we know what we want we should share the cost of producing it (i.e. production should be of what is known to be wanted, and cooperation should be on shared goals). And where we do not know (e.g. the future) we should not prevent unpredicted gains from what has been produced (i.e. by charging for copies). The practical problem is how to get information and how to promote cooperation -- this is where possible arrangements can vary. But the core theoretical structure is that our production should follow from information, and our consumption should not be hostage to lack of information -- this is what all arrangements should try to achieve.
jonhohle 14y ago
It is different, but there are similarities: the more debt accrued, the more resources that go into servicing that debt; the more debt accrued, the less likely you are to be able to secure additional debt. A US defective of $10T required 6% of the federal budget to service in fiscal year 2011. Currently, accrual of debt is outpacing both inflation, and increases in revenues. This might still be fine _if_ the additional debt has a positive impact on GDP growth, but that's not entirely obvious. Japan has been in a similar situation for two decades. 25% of their national budget is used for servicing loans.

by WA 14y ago

necubi 14y ago

It's not a matter of repaying the debt. It's a matter of being able to afford future debt. Sovereign debt is generally sold as bonds, which either pay interest or are sold at a discount. The question is: how much interest should they pay, or how large should the discount be? Ultimately, bonds, like much else, are priced by the market. A $1000 bond is only worth $1000 if the issuer does not go bankrupt before the bond matures. Therefore, the bonds are discounted by some amount that correlates with how high investors think the risk is that it will be paid back in full. A concrete example: Spanish 10-year notes. At the start of the year, investors demanded about 5% interest to account for the risk that the Spanish government would not be able to repay its debts. This means that for the Spanish government to raise €1000, it has to pay investors €50 every six months. However, this week that rose to 7%, effectively increasing the amount of debt the Spanish government must take on to raise the same amount of money. This effect can create a death spiral (as we saw with Greece) where skittishness in the market raises the cost of borrowing, which unnerves investors even more. So there's no way for investors to force the government to pay back all the debt. However, they can make it impossible to raise more money in the future.

deleted 14y ago

[deleted]

zanny 14y ago

Here is the catch in the 21st century - we are creating debt in exchange for things that can create goods without human intervention. The entire monetary system is built off the idea of trading goods and services that are the products of human labor. Things like automated assembly lines are a precursor - when we had 3d printing, you remove all human factors in the creation of goods besides the raw resource acquisition, and sufficiently advanced printers can also decompose trash into reusable pieces so you don't even need raw materials any more besides power. All our financial woes and economic malnourishment is the product of this system, beneath government welfare overspending the budget, it is why corporations post record profits while laying off thousands and why all that money goes to the top of the management. When the actual consumable and usable goods are not produced by people, the sale of individual units breaks down. Look no further than media. Media is an upfront cost of creation, but reproduction is free. The current system is so broken because it tries to charge per unit as if unit production has an associated cost, where the cost is the funding, not the distribution. That problem only gets worse as we automate everything more and more (automated cars replace drivers, 3d printers replace small scale manufacturing...). That leads to a big one. Automated mining and farming. Fully, with no human intervention, where you can set off a robot with some pre-programmed track of land to till or dig and it will extract all the resources from that area for you. Once that happens everything goes out the window, because a single point of sale unit of production (plus maintinance, which then gets ursurped by the singularity making machines improve themselves) where once one of these machines is available, resources are no longer scarce. And then money breaks down. Because when human effort is no longer involved in the day to day operations of goods production, there is no continuous "cost" involved anymore, in the terms the Reddit thread describes, or how most people interpret goods and labor.

gaius 14y ago
Once you make movie A, the next million copies of movie A are essentially free. So we divide the cost of A by the number of units we expect to sell, rather than charging the full price of it to the first viewer, and giving it away to the others. Crucially, and this is where the whole utopian post-scarcity dream falls apart, the cost of making movie B doesn't significantly depend on the cost of movie A. Because a movie isn't a "thing". Movie B is a different thing than movie A.
- tempuser008 14y ago
  And then we apply the same principle to a song. Once you record the first song, the next million copies of it distributed via internet is basically free. Or is it. It would be nearly free if there were no fat cats in the middle.
  - gaius 14y ago
    Distribution is free - but shouldn't the band be paid what they would have gotten with no record label in the way? That may mean songs on iTMS being 10p instead of 99p - don't creators of products you want deserve paying?
  - tempuser008 14y ago
    I don't mind paying 10 cents if that is the fair cost. I only hate the very greedy middle men.
- hxa7241 14y ago
  Ideally, for informational-goods, we first find out (somewhat) what people want, take payment, make the product, then release it for free use and copying. The economic problem here is fundamentally one of information and cooperation. As far as we know what we want we should share the cost of producing it (i.e. production should be of what is known to be wanted, and cooperation should be on shared goals). And where we do not know (e.g. the future) we should not prevent unpredicted gains from what has been produced (i.e. by charging for copies). The practical problem is how to get information and how to promote cooperation -- this is where possible arrangements can vary. But the core theoretical structure is that our production should follow from information, and our consumption should not be hostage to lack of information -- this is what all arrangements should try to achieve.

jonhohle 14y ago

It is different, but there are similarities: the more debt accrued, the more resources that go into servicing that debt; the more debt accrued, the less likely you are to be able to secure additional debt. A US defective of $10T required 6% of the federal budget to service in fiscal year 2011. Currently, accrual of debt is outpacing both inflation, and increases in revenues. This might still be fine _if_ the additional debt has a positive impact on GDP growth, but that's not entirely obvious. Japan has been in a similar situation for two decades. 25% of their national budget is used for servicing loans.