[Economics] Modern Keynsianism for beginners:

[davywavy]

Global net debt is US$260 trillion. If that were US$261 trillion, the economy would be growing.

Two weeks later:

Global net debt is US$261 trillion. If that were US$262 trillion, the economy would be growing.

Two weeks later:

Global net debt is US$262 trillion. If that were US$263 trillion, the economy would be growing.

Comments

[drplokta]

Global net debt is $0. If I owe you £10, then I have a debt of £10 and you have a debt of £-10 (or an asset of £10), so net debt is £0. Every dollar that is owed is owed to someone.

[drplokta]

Perhaps you're referring to net government debt? Which is exactly offset by net private savings. Remember, if you complain about high levels of government debt then you're complaining about high levels of private saving -- they're just different ways of expressing the same thing.

[davywavy.livejournal.com]

No, I'm referring to public and private debt combined. Happy to clarify.

[(Anonymous)]

So, who do we owe all that money to?

[davywavy.livejournal.com]

What's this "we" business, Paleface?

[(Anonymous)]

Whilst I accept your argument you have no moral obligation to pay for it, HMRC do a good line in bully boys, so pay for it you shall.

[belak-krin.livejournal.com]

So more debt is a growing economy and thats good?

Does this mean that there are millions of people out there who are waiting for their collective US$262 trillion invoices to be paid?

How can global debt outstrip global income? Why do the aliens have all the money?

...I don't think i should take up a career in economics.

[davywavy.livejournal.com]

More debt is what allowed Brown to claim that GDP was growing from about 2002 onwards; it's money in the economy and that's counted on the figures. It's a reason to ignore GDP as a meaningful measure of anything.

And it's easy to lend more money than income; doing so is the fundamental basis of banking. It's how the italians got started, all those years ago. It's based on the idea that not everyone will want their money at the same time, so you lend multiple people the same money.

[(Anonymous)]

So, I have a fiver, which I lend you. That debt becomes an asset which I can lend again, and again, and again...

I guess as long as I lend it wisely, I'm golden. I just create money. Once I've lent it 15x or so, I'm making 100% return.

I like this game, how do I get in?

[davywavy.livejournal.com]

It works right up until I tell your creditors I'm not paying you back.

Are you sure you want in?

[(Anonymous)]

Clearly I won't lend money to people who lack the wherewithal and character to pay me back, that would be stupid.

[davywavy.livejournal.com]

So right now, you wouldn't be lending money to anyone?

Curiously, that's exactly where we find ourselves.

[(Anonymous)]

So, we're in trouble because the banks have stopped being idiots? Or because they started in the first place?

Community reinvestment act. Jus' sayin'.