Comments on: Take a Guess At the World’s Networth

By: EarthPlus5Percent

EarthPlus5Percent — Thu, 21 Apr 2011 14:04:33 +0000

Money is borrowed into existence and additional interest is owed at creation. Therefore there is never enough money to pay off debt plus interest without borrowing more. It’s a scam.

By: Infinum

Infinum — Sun, 23 Jan 2011 06:58:16 +0000

@Jerry, if you have no money to pay the interest you have to exchange your work for it.

Work is a commodity that every person has and can use it to pay off his/her debts or to save and invest.

Problem starts when someone takes on too much debt. Many people did that in the recent years. Then if they can’t pay it back, and we know from experience that many of them can’t, they effectively become slaves. It is an unavoidable consequence of economic illiteracy.

Borrowing to spend increases one’s chances to become such slave. Borrowing to invest increases one’s chances to become rich. This is the basic truth of economics and history proves that it is so.

By: Leopold

Leopold — Sat, 22 Jan 2011 20:49:43 +0000

@Jerry
No Jerry, you forgot interest. If I lend you a dollar, you have one dollar in assets, and I have nothing (let’s say). But with interst, you owe me $1.05. And there’s only one dollar. Oops.

Conspiracy theorists will try to use this to “show” that banks will ultimately own everything. But banks hire people, they buy things, they consume things. Just like any business.

To put it in perspective, let’s say only auto mechanics can fix cars. If everyone has a car, it will eventually need to be fixed. So auto mechanics will utlimately own everything, right? Nooooo. And neither do banks.

So how do we resolve the dilemna where you have only $1 but owe $1.05? You give me $1. I know have $1, and I need something done. You wave your hand and say: Ohh, ohh, I’ll do it. So you mow my lawn for a dime. I pay you the dime, and you pay me back the nickel you owe me. No big deal, really.

But conpsiracy theorists will never be satisfied.

By: Chip

Chip — Fri, 10 Dec 2010 06:52:06 +0000

First “equity” markets aren’t the only types of assets – you have to include real estate, money market accounts, assets held in the form of precious metals, etc. Second, the bond market isn’t the only form of debt either (credit cards, mortgages, etc.). Bad accounting all the way around, I think…

By: Jerry

Jerry — Thu, 11 Nov 2010 04:43:19 +0000

Your numbers are nonsense. If I owe you a dollar, my balance sheet says minus one, and your balance sheet says plus one. What you call an asset is balanced exactly by what I count as a debt. The net balance between us is zero.

All that global debt is owed to somebody, and the net total, globally, is zero. It has to be. It’s basic accounting math. The only way that net number could be negative is if we owe that money to some other entity off the planet.

By: MoneyEnergy

MoneyEnergy — Sat, 23 Oct 2010 04:19:38 +0000

@Peter – yes, you could reduce it by an equal amount. Countries that owed “beyond that” amount would still owe whatever that surplus amount is. Imagine three people who owe each other money on their credit cards: Peter owes $10 on his card, Paul owes $5 on his card, and Mary owes $20 on her card. Reducing them by the lowest common amount ($5), Paul would become debt-free but Peter would now owe just $5 and Mary would owe $15.

By: Peter

Peter — Wed, 06 Oct 2010 01:32:16 +0000

There are countries in the world with surplus and no debt. Therefore, we cannot simply reduce everybody’s debt by an equal amount. Additionally, private investors are owed much of the debt and thus we cannot simply cut national debts. Notice in your example that you can only reduce by the smallest amount of debt owed by anybody, so if somebody is owed money and is not at all in debt to foreign countries, we cannot reduce debt. You are right, however, that there are “debt circles” that could be cancelled out easily.

By: Maria

Maria — Fri, 19 Mar 2010 01:20:48 +0000

Fascinating. The question is, who does the world owe this money to? Thank you for another great post.