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Global Debt Worries. How Will This End?

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https://www.scmp.com/comment/opinion/article/3039970/huge-public-corporate-and-household-debt-looks-new-normal-global

I am not saying that China has a greater debt problem than the United States but some think it does. What do you think about debt problems worldwide? How will this end? All I can predict is inflation, but I don't see it and I have been expecting it for years. I do see taxes rising steadily to meet promises made to government employees and the rest of the population however. Those promises and lack of facing reality will eventually cause economic disasters of some kind I am sure. This is especially concerning when Democrat candidates want to double our federal spending (wild guess). RCW

A teller counts yuan at a bank in Lianyungang, in east China's Jiangsu province, in August 2015. Photo: AFP

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I believe the figure of global debt currently sir is the equivalent of over $30,000 per man, woman and child on the planet. The potential for economic disaster you reference will occur before 2022 in my opinion. 

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10 minutes ago, Papillon said:

I believe the figure of global debt currently sir is the equivalent of over $30,000 per man, woman and child on the planet. The potential for economic disaster you reference will occur before 2022 in my opinion. 

I agree on the impending disaster, but why within the next 2 years? Serious question.

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10 minutes ago, Papillon said:

I believe the figure of global debt currently sir is the equivalent of over $30,000 per man, woman and child on the planet. The potential for economic disaster you reference will occur before 2022 in my opinion. 

Yep agreed, I think Gerry Maddoux has been saying there is an almighty recession around the corner  for a while now which I think is more than likely.

Scary times

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2 minutes ago, Rasmus Jorgensen said:

I agree on the impending disaster, but why within the next 2 years? Serious question.

With respect sir, how long would you consider these types of figures to be feasible globally? To use your term of 'impending', that suggests your knowledge of the slowing growth and countries already verging on a recessionary state I imagine, so this status quo cannot remain indefinitely. Therefore I simply propose the 'disaster', however we choose to define this, as within the shorter term. Merely opinion sir. 

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1 minute ago, Papillon said:

With respect sir, how long would you consider these types of figures to be feasible globally?

I actually think that it can continue for a lot longer - look at Japan. 

2 minutes ago, Papillon said:

To use your term of 'impending', that suggests your knowledge of the slowing growth and countries already verging on a recessionary state I imagine, so this status quo cannot remain indefinitely. Therefore I simply propose the 'disaster', however we choose to define this, as within the shorter term. Merely opinion sir. 

Agree.  We may already be in a recession and just refuse to acknowledge it. 

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3 minutes ago, Rasmus Jorgensen said:

Agree.  We may already be in a recession and just refuse to acknowledge it. 

Recession is defined as 2 quarters of falling GDP so a country is either in recession or it isn't.

A government can try to "fudge" the figures where possible but not ad infinitum.

Some European countries are already in recession along with several others around the globe. I would agree with a 2 year timescale but it is my best guess

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2 minutes ago, Rob Plant said:

Recession is defined as 2 quarters of falling GDP so a country is either in recession or it isn't.

I should have been clearer. What I meant is that we may well be experiencing the "symptons" of a recession globally, although the numbers suggest otherwise. 

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Quote

There is no such thing as a medium of exchange. 

A sale and purchase is the exchange of a commodity for a credit. 

Credit and credit alone is money.

The monetary unit is an abstract standard for the measurement of credit and debt. It is liable to fluctuation and only remains stable if the law of the equation of credits and debts is observed.

A credit cancels a debt; this is the primitive law of commerce. By sale a credit is acquired, by purchase a debt is created. Purchases, therefore, are paid for by sales. 

The object of commerce is the acquisition of credits.

A banker is one who centralises the debts of mankind and cancels them against one another. Banks are the clearing houses of commerce.

A coin is an instrument of credit or token of indebtedness; identical in its nature with a tally or with any other form of money, by whomsoever issued.

The issue of money is not an exclusive privilege of government, but merely one of its functions, as a great buyer of services and commodities. Money in one form or another is, in fact, issued by banks, merchants, etc.

The depreciation of money in the middle ages was not due to the arbitrary debase­ment of the weight and fineness of the coins. On the contrary, the government of the middle ages struggled against this depreciation which was due to wars, pestilences and famines - in short to excessive indebtedness.

Until modern days, there never was any fixed relationship between the monetary unit and the coinage.

The precious metals are not a standard of value.

The value of credit does not depend on the existence of gold behind it, but on the solvency of the debtor.

Debts due at a certain moment can only be off-set against credits which become available at that moment.

Government money is redeemed by taxation.

The government stamp on a piece of gold changes the character of the gold from that of a mere commodity to that of a token of indebtedness.

The redemption of paper money in gold coin is not redemption at all, but merely the exchange of one form of obligation for another of an identical nature.

The "reserves of lawful money" in the banks have no more importance than any other bank asset.

Laws of legal tender promote panics.

The governments of the world have conspired together to make a corner in gold and hold it up at an excessive price.

The nominal value of the dollar coin exceeds the market value of the gold of which it is made. Coins can only remain in circulation for any length of time if their nominal value exceeds their intrinsic value.

The issue of coins in exchange for gold at a fixed and excessive price, without pro­viding taxes for their redemption, causes an inflation of government money, and thus causes an excessive floating debt and a depreciation of government money.

Large reserves of "lawful money'' in the banks are evidence of an inflation of the government currency.

The inflation of government money induces a still greater inflation of credit throughout the country, and a consequent general depreciation of money. 

The depreciation of money is the cause of rising prices.

Written in 1913, the year the Fed was created, published in 1914, and even truer today since gold is out of the picture. 

From The Banking Law Journal 1914

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1. Sovereign states can solve any debt problems, provided that debt is denominated in the domestic currency of the state. Solution chosen by the United States, European Union and Japan is to diminish debt by NIRPs (Negative Interest Rates Policy, real rates after deducting inflation). It is a feasible solution but eliminates very important market force mechanisms related to price of money. Money is scarce when it has price. When money is free: bad business or government decisions could be made, with punishment still present but prolonged to the detriment of the economy and society.

2. China is the only economy among the 10 largest to still keep positive real interest rates (I am not 100% sure about Brazil but their inflation is unstable often above 5%. Base rate in China is 4.15% at present and never was lower than 4.15% during last decade, and always higher than inflation rate.

3. Problems occur when debt is denominated in foreign currency (Turkey) or need to be financed by foreign lenders (US). Before that moment all is more or less cool.

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