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The Masked Tulip

World Debt Clock

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What almost nobody points out about this is the fact that for every debt there must be a creditor to whom the money is owed- so why is it not called the world wealth clock?

After all somebody must sit there watching those numbers whizz around and feeling richer by the second- right? The fact is that the world has never been richer than it is today- never before in history have there been so many millionaires and Billionaires.

We truly live in a golden (or perhaps gilded?) age. Enjoy it while it lasts.

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What almost nobody points out about this is the fact that for every debt there must be a creditor to whom the money is owed- so why is it not called the world wealth clock?

Because bilateral/trilateral netting only works in theory. It is a zero sum game until it isn't. Some counterparties are more equal than others. In practice, a single default or refusal to roll credit can cause a wave that wipes out most creditors.

http://www.zerohedge.com/news/how-us-banks-are-lying-about-their-european-exposure-or-how-bilateral-netting-ends-bang-not-whi

To paraphrase that article, "If everybody is borrowing from each other, who’s ultimately going to pay for the losses"?

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To whom is this money owed to? Martians, Daleks?

Consumption borrowed from the future on the assumption that more wealth will be created tomorrow than today... It was true yesterday so must hold true infinitely into the future..

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Consumption borrowed from the future on the assumption that more wealth will be created tomorrow than today... It was true yesterday so must hold true infinitely into the future..

You mean people who exist in the future owe money to people who exist today.

I suggest we start writing the debt off, as the people alive today die off.

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Consumption borrowed from the future on the assumption that more wealth will be created tomorrow than today... It was true yesterday so must hold true infinitely into the future..

All it is, is an IOU......future paper promises, it can't be spent today and highly unlikely to be spent tomorrow......and the little one said 'roll over'. ;)

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Because bilateral/trilateral netting only works in theory.

Ah- a chance to use my new favorite quote;

"In theory there is no difference between theory and practice. In practice there is." (Yogi Berra)

Everything you need to know about Economics as a 'science' is contained in that one line. :lol:

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Consumption borrowed from the future on the assumption that more wealth will be created tomorrow than today... It was true yesterday so must hold true infinitely into the future..

Not true! The goods and services that are being consumed now must have been produced in the now to be consumed. You can't borrow goods and services from the future (unless you have a time machine).

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Not true! The goods and services that are being consumed now must have been produced in the now to be consumed. You can't borrow goods and services from the future (unless you have a time machine).

Reminds me of that episode of Doctor Who, when the Master turns the Tardis into a Paradox machine. Think we might need one soon! :lol:

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Not true! The goods and services that are being consumed now must have been produced in the now to be consumed. You can't borrow goods and services from the future (unless you have a time machine)

No- but you can arrange for somebody else'e future income to pay for them- which is what bankers do for a living.

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It's really messed up. I know the EU have looked into writing off these debts in the sense, Barclays owe DB money, and Dresdner owe Lloyds and they can write it all off in one and settle the countries debts, but obviously the amounts owed by each other will be different. What I don't understand is why everyone seems to owe everyone else money. It's like you borrow a tenner off me, and I borrow a fiver off you. Why?

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What almost nobody points out about this is the fact that for every debt there must be a creditor to whom the money is owed- so why is it not called the world wealth clock?

After all somebody must sit there watching those numbers whizz around and feeling richer by the second- right? The fact is that the world has never been richer than it is today- never before in history have there been so many millionaires and Billionaires.

We truly live in a golden (or perhaps gilded?) age. Enjoy it while it lasts.

If someone owes you a zillion pounds, and they can't afford to pay you even a penny unless someone else lends it to them first, then how rich are you?

At some point the music stops.

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Not true! The goods and services that are being consumed now must have been produced in the now to be consumed. You can't borrow goods and services from the future (unless you have a time machine).

The goods and services wouldn't have been produced or delivered if this borrowing hadn't taken place... QE is the perfect example .. If you say there is a creditor for every borrower, the central bank is the super creditor who doesn't need to produce wealth to make unlimited credit available.. Every other type of creditor has generated wealth before being able to offer credit.. The central banks don't monetise (yet), they offer monies as genuine credit to be paid back from future incomes..

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The point he is making is it is not "borrowing from the future" per se.

It all nets out. You borrow from someone. It is all in the present. It seems like the government is "borrowing from the future" because all its taxpayers are on the tab for the debt. But that debt is owed to someone in the here and now. It is always possible to repay all debts by either reallocating wealth and/or defaulting on those debts...pooofff, the future just disappeared and no one owes anyone anything.

The point I am making is that there is a zombie creditor out there... Who is unleashing unlimited credit and has the power to issue credit beyond the means of future repayers.. In the absence of this type of creditor, the goods and services wouldn't have been consumed.. This zombie creditor has awoken to issue credit only recently.. He has changed the rules on how credit links to wealth .. It needs not be related any longer

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The point he is making is it is not "borrowing from the future" per se.

It all nets out. You borrow from someone. It is all in the present. It seems like the government is "borrowing from the future" because all its taxpayers are on the tab for the debt. But that debt is owed to someone in the here and now. It is always possible to repay all debts by either reallocating wealth and/or defaulting on those debts...pooofff, the future just disappeared and no one owes anyone anything.

Slaves to the state. No choice. No signature. If you don't like it, you can feck off or go to jail.

Apparently, this is civilised.

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What almost nobody points out about this is the fact that for every debt there must be a creditor to whom the money is owed- so why is it not called the world wealth clock?

(snip)

It's already that. The debts when regarded as an accounting entry are an asset. If a mortgaged household drew up a balance sheet its debts would be liabilities to their creditors and thus credits. For the bank holding the mortgage the same loan gives rise to an asset.

Dragging wealth into the matter muddies the water.

I'll accept that if money acted as a store of value then the debt clock would represent the effective value of goods and services (i.e. wealth) into which the money price loans could have been converted, but with the kind of HPI episode that we have in the rear view mirror as a guide, and a policy response of negative real rates for people holding cash, I think we can safely abandon the idea that money is a store of value, ;) .

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If someone owes you a zillion pounds, and they can't afford to pay you even a penny unless someone else lends it to them first, then how rich are you?

At some point the music stops.

If the debt cannot ever be repaid then it does not exist- both the 'wealth' of the creditor and the indebtedness of the borrower are extinguished simultaneously- this is what it means to be bankrupt.

Yet the feeling is strong that somehow the debt is more 'real' than the credit it represents on the books of the lender- we seem far more comfortable with the notion that the creditors wealth is a mere illusion then we are with the notion that the borrowers indebtedness is also an illusion- the latter seems somehow 'immoral'- despite the fact that historically usury was considered itself immoral.

Yet we know for a fact that the 'money' we are being asked to pay back has largely been created out of thin air by banks, who did not work for that money or create any value to earn it- in fact in recent times they have been gifted vast sums from the very taxpayers they then lend that money to and demand repayment -at interest- from.

So I would suggest that the reason we talk always in terms of debt that is owed, rather than wealth that has been 'created' is because it's very much in the interest of the ruling elites to reinforce at all times the idea that debt-once created- is something that is both real and non negotiable.

And also calling it a 'wealth clock' might give rise to some awkward questions as to whose wealth it is and where that wealth came from.

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It's already that. The debts when regarded as an accounting entry are an asset. If a mortgaged household drew up a balance sheet its debts would be liabilities to their creditors and thus credits. For the bank holding the mortgage the same loan gives rise to an asset.

Dragging wealth into the matter muddies the water.

I'll accept that if money acted as a store of value then the debt clock would represent the effective value of goods and services (i.e. wealth) into which the money price loans could have been converted, but with the kind of HPI episode that we have in the rear view mirror as a guide, and a policy response of negative real rates for people holding cash, I think we can safely abandon the idea that money is a store of value,

But given that something like 90% or more of the 'money' in our system exists as bank credit rather than as currency it's entirely true to say-looking at the 'debt' clock- that the world has never been richer than it is to today- and the more debt that is created the more wealthy the world in aggregate becomes, since that debt-and the interest due on it- represents somebody's asset- and not only that, but they can package and sell that asset to third parties- so no one is denying it's reality. (Until they do of course- but the same can happen to paper currency)

If the debt is real-as we are assured it is- then the wealth it confers on the creditors must also be real- and that being so we are the richest society the world has ever seen. So why all the austerity?

So what the 'debt clock' actually represents is either; a vast amount of wealth that is being accumulated by some people- or an unpayable debt that-being unpayable- does not exist in the first place.

In either case there is no need for austerity at all since there is either more than enough money to go around or there is no debt to be paid off in the first place.

Edited by wonderpup

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If the debt cannot ever be repaid then it does not exist- both the 'wealth' of the creditor and the indebtedness of the borrower are extinguished simultaneously- this is what it means to be bankrupt.

Try that argument when your bank demands you make a mortgage payment, and see how long you have to wait until thugs turn up to throw you out of the house.

Yes, the debt is unpayable, but the bankers and their Keynesian hangers-on will do their best to keep the scam going until it finally collapses. They might be strung up on Westminster Bridge in the post-apocalyptic future, but at least they can buy a Porsche 918 today.

Pretty soon, they'll have to make quitting your job a capital offence, as the Romans did. Otherwise the productive will just go Galt.

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Try that argument when your bank demands you make a mortgage payment, and see how long you have to wait until thugs turn up to throw you out of the house.

Note that the debt at this point has ceased to exist- once my ability to pay it has ceased to exist.

Debt is a contingent phenomena- like an organism. Should the ecosystem change radically enough it cannot sustain and so must die. Debt- it turns out, is mortal.

And this is an heretical thought that the PTB are very anxious to suppress- hence we have a 'Debt Clock' and not a 'Wealth clock' because while wealth can be conceived to be ephemeral debt must always and everywhere be immortal, implacable and definitely not in any way subject to revision or alteration.

You see many politicians and economists talk about the burden of global debt and it's destructive impacts on lives and countries- what you will not hear any of them talk about is to whom this debt is owed and for whose benefit it must be paid back.

And if any of them did their careers (and possibly their lives) would end shortly afterward.

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Note that the debt at this point has ceased to exist- once my ability to pay it has ceased to exist.

Debt is a contingent phenomena- like an organism. Should the ecosystem change radically enough it cannot sustain and so must die. Debt- it turns out, is mortal.

And this is an heretical thought that the PTB are very anxious to suppress- hence we have a 'Debt Clock' and not a 'Wealth clock' because while wealth can be conceived to be ephemeral debt must always and everywhere be immortal, implacable and definitely not in any way subject to revision or alteration.

You see many politicians and economists talk about the burden of global debt and it's destructive impacts on lives and countries- what you will not hear any of them talk about is to whom this debt is owed and for whose benefit it must be paid back.

And if any of them did their careers (and possibly their lives) would end shortly afterward.

It's not the immortality of debt that's the problem but the rate of debt origination. Debt gets paid down all the time. In the normal scheme of things borrowers are able to repay principal + interest in a timely fashion. If a borrower fails to repay his debt in such circumstances then ownership of the collateral against which that debt is secured simply changes hands, with a potential loss to the creditor. As the rate of debt creation rises, however, it becomes impossible for borrowers to repay principal + interest and they are forced instead to roll over their debts on a continuous basis. Eventually a point is reached beyond which borrowers can no longer even service their debt interest repayments, they become obliged thereafter to take on ever greater amounts of new debt to satisfy their existing creditors. The threat of default is now systemic.

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It's not the immortality of debt that's the problem but the rate of debt origination. Debt gets paid down all the time. In the normal scheme of things borrowers are able to repay principal + interest in a timely fashion. If a borrower fails to repay his debt in such circumstances then ownership of the collateral against which that debt is secured simply changes hands, with a potential loss to the creditor. As the rate of debt creation rises, however, it becomes impossible for borrowers to repay principal + interest and they are forced instead to roll over their debts on a continuous basis. Eventually a point is reached beyond which borrowers can no longer even service their debt interest repayments, they become obliged thereafter to take on ever greater amounts of new debt to satisfy their existing creditors. The threat of default is now systemic.

I meant mortal in the sense that it can be killed off rather than paid off- not an idea one sees being discussed in polite circles.

What strikes me as odd is that no one seems to find it odd that so much time can be spent talking about debt and so little mention made of the creditors.

How many people would you have to stop in the street before you found a single one who knew to whom the national debt is owed?

The stock answer is 'pension funds'- but if that's true then the nations debt is owed to...the nation? How can we be in debt to ourselves? And if we are why is this a problem?

It seems to me that any discussion of who the nations creditors are is discouraged-certainly in the MSM. Perhaps austerity might be a harder sell if it turned out to be required in order to preserve the wealth of a handful of very rich people?

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