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posted by cmn32480 on Friday January 06 2017, @11:12AM   Printer-friendly
from the lotsa-red-ink dept.

Global debt levels rose to more than 325 percent of the world's gross domestic product last year as government debt rose sharply, a report from the Institute for International Finance showed on Wednesday.

The IIF's report found that global debt had risen more than $11 trillion in the first nine months of 2016 to more than $217 trillion. The report also found that general government debt accounted for nearly half of the total increase.

Emerging market debt rose substantially, as government bond and syndicated loan issuance in 2016 grew to almost three times its 2015 level.

Source: Reuters


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  • (Score: 4, Interesting) by Rosco P. Coltrane on Friday January 06 2017, @01:44PM

    by Rosco P. Coltrane (4757) on Friday January 06 2017, @01:44PM (#450203)

    1/ It generates money for lenders, who basically don't do anything of value in society.

    2/ National debts don't die with their owners, like personal debts do. What happens is, people who have done nothing to be saddled with debt inherit the debt incurred by their parents.

    3/ The fractional reserve system is setup so money is created by debt. If you cancel the debt, you cancel money and society collapses.

    1/ and 2/ are the reasons why newer generations are so pissed off about it. 3/ ensures that they won't be able to free themselves from it peacefully. Something will give at some point. Not in my generation, but soon.

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  • (Score: 5, Interesting) by AthanasiusKircher on Friday January 06 2017, @03:21PM

    by AthanasiusKircher (5291) on Friday January 06 2017, @03:21PM (#450246) Journal

    While I'll happily agree there are lots of things screwed up about our financial systems, this seems based on some fundamental (but popular) misconceptions.

    1/ It generates money for lenders, who basically don't do anything of value in society.

    Tell that to the person who used a credit card to buy Christmas gifts for their kids last month because of a temporary financial shortfall, with plans to pay it off over the next couple months. Tell that to the young couple who takes out a mortgage and gets to raise a family in a house, rather than shelling out for rent for many years hoping to try to save enough to buy a home someday.

    Do people abuse debt? Obviously. But lenders provide an essential service that just about everyone on the planet is willing to pay for at some point. Do lenders overcharge or do shady stuff? Obviously too. But that doesn't mean ALL lenders are useless, and SOME fees are necessary to pay for the service and to account for risks of default.

    Also, another way to view lenders is just as a formalized and more anonymous kind of "investor." Investors drive economic growth and development, essentially by lending out their money to others with expectation of a return. Lenders just formalize that agreement for the exact rate of return a bit more.

    2/ National debts don't die with their owners, like personal debts do.

    National debts are very complex instruments. People act like they're a sort of "household budget item" like a mortgage, but it's a lot more complicated than that. In particular, sovereign states with control over their currency often carry debt for all sorts of convenient reasons, and they are capable of paying off bits of it at any point by distributing more currency. Obviously doing this suddenly or unexpectedly can lead to inflation risks, but ultimately sovereign government debt is a kind of complex "balance sheet" with different columns that can be shifted when needed. (Those who will scream "Weimar Republic! Zimbabwe! Hyperinflation!" in response should read about the detailed causes of hyperinflation, which almost always involve government debts denominated in FOREIGN currencies and a subsequent inflationary spiral created by shifting exchange rates in an attempt to pay off debts. Debts owed in the sovereign currency itself very rarely have such dire effects.) Much more problematic are things like the EU states, where nations have entered into what I think is ultimately a truly bizarre and disastrous financial agreement to give up their sovereign currencies while not having control over fiscal policy throughout the EU. The problems with Greece, Spain, etc. a few years back are not going to go away, and they're likely to get worse in the future (if not in those countries, in some other EU nation that decides to act stupid with money). In such a problematic union, then growing national debts are indeed something to be VERY concerned about.

    3/ The fractional reserve system is setup so money is created by debt. If you cancel the debt, you cancel money and society collapses.

    This is a fundamental misunderstanding of the nature of money, but given that it's tied up in the view from mainstream economics textbooks, I can't fault people for it. The reality is that from a historical and anthropological perspective, DEBT is actually the fundamental monetary instruments of societies. It always emerges BEFORE standard currency. The most famous example is probably the multitudes of Babylonian debt records we have going back centuries before currency emerges there (one of the first places with standard currency in the world). Money actual emerges as a way of denominating debt, not the other way around. The standard economics textbook version of money is that originates as a standard within barter economies, but historical and anthropological evidence suggests that TRUE independent barter economies never existed. Instead, societies without money tend to start by developing elaborate systems of indebtedness ("You did that task for me last year, so now I repay it by doing these two things for you.") Those debts eventually become formalized in records, first in stuff like "bar tabs" and informal individual recordkeeping, then on broader scales. Such formal enumerations of debt eventually tend to settle on some standard debt denomination, which is then taken to be a standard for "currency." But we know historically a number of cultures adopted such denominating elements even when those elements were NOT an actual medium of exchange. (E.g., even if your society denominates debt in "cattle," it doesn't mean people actually go around exchanging cattle all the time -- it just means that's a convenient unit for denominating debt.) Eventually, in more complex economies, or larger ones where not everyone may be trusted with such debt units -- a need for physical money to denominate debt emerges. E.g., if the bartender deals with a customer from out of town, they can't just depend on they guy to "repay someday," so a bar tab no longer makes sense. That's the one case (i.e., dealing with external transactions, where no ongoing societal relationship exists) that barter DOES tend to exist in pre-money societies, and it often becomes the impetus for introducing physical coin or whatever rather than just carrying debt records.

    If we were more honest about the history of money and the way it emerges as a denomination of debt, we'd have a much different perspective on how to deal with such headlines. Human civilization depends on indebtedness. If no one is ever in any debt to anyone else, then no one is every doing anything to help anyone else, and that's not usually a good sign in a culture. Over the millennia, we've formalized such indebtedness and eventually denominated it into money, but at its heart it's still the same thing it was thousands of years ago -- a way to help someone get what they need now, with expectation they'll repay the favor later. Obviously it can be abused and get out of control, and debt has been used to justify a lot of nasty things throughout history... though so has the question for money.

    • (Score: 2) by AthanasiusKircher on Friday January 06 2017, @03:31PM

      by AthanasiusKircher (5291) on Friday January 06 2017, @03:31PM (#450253) Journal

      By the way - I should be clear that I agree with you at least to the extent that so many people believe the things you said (including lots of powerful people with lots of money) that we should be concerned about these things. My point is that a lot of the responses to various crises of debt are caused more by the myths we believe about money than how it actually functions.

      • (Score: 2) by Unixnut on Saturday January 07 2017, @01:48AM

        by Unixnut (5779) on Saturday January 07 2017, @01:48AM (#450547)

        Tell that to the person who used a credit card to buy Christmas gifts for their kids last month because of a temporary financial shortfall, with plans to pay it off over the next couple months. Tell that to the young couple who takes out a mortgage and gets to raise a family in a house, rather than shelling out for rent for many years hoping to try to save enough to buy a home someday.

        Just to point out, that the reason people have to go into debt in order to do things like buy a house, is precisely because the debt system allowed those assets to swell in value to the point where you need ever increasing mortgages. It is a self reinforcing circle. If there was no ability to borrow such vast sums of money, assets would drop down in value until people were able to afford them.

  • (Score: 1) by fustakrakich on Friday January 06 2017, @06:04PM

    by fustakrakich (6150) on Friday January 06 2017, @06:04PM (#450319) Journal

    There's nothing like a 'little' war to zero out the books. Replace the old lenders with new ones. All that money that went to the Royal Family now goes to the 'Founding Fathers'. Next thing you know you got a 'Whiskey Rebellion' on your hands.

    --
    La politica e i criminali sono la stessa cosa..
  • (Score: 2) by VanessaE on Saturday January 07 2017, @05:31AM

    by VanessaE (3396) <vanessa.e.dannenberg@gmail.com> on Saturday January 07 2017, @05:31AM (#450623) Journal

    Otto: You mean I've been a capitalist for three hours and already I owe $10,000?
    Mac: That's what makes our system work: Everybody owes everybody.

    (Horst Buchholz and James Cagney, after going over a list of expenditures, One, Two, Three)

    I used to think this was just a joke, but now I have to wonder.