Reading this

http://www.bbc.co.uk/news/business-24541140

I was pretty impressed with the numbers, however then I started wondering. Almost everyone is in debt, so who’s loaning the money?

Can’t help but feel I’m about to start thinking about a house of cards…

China own everything. When they call it in there will be an almighty poostorm

In general it’s owed to the future us and our descendants. But yeah, a lot of them are Chinese…

Here’s an interesting infographic of US debt – all 17 Trillion dollars of it!!! For the US, China is owed a relatively small amount, don’t know if that is the case for the UK. Bizarrely the US owes most money to itself.

It’s owed to the “man” – Economics only works when you restrict the supply of cash, hence things go up and down in price (not value) based on supply and demand. If you don’t cap debt, Govt’s simply make more money but this goes to devalue everything – then you get massive inflation for everything to try and keep up. Ask the Argentinian’s – they know all about it…

2.00 onwards for the bit about the US economy but the whole sketch is very good!

Government issue bonds with interest rates, repayable in so many years. The bonds tend not to be high yield but are safe, so are largely bought and traded amongst institutional investors, like pension funds.
So if you’ve got a pension fund – it’s probably you
Wiki on goverenment bonds

My simplistic view is that it’s all numbers, the money doesn’t exist, just a whole load of IOU’s that are in some kind of in perpetuity. 🙂

My simplistic view is that it’s all numbers, the money doesn’t exist, just a whole load of IOU’s that are in some kind of in perpetuity.

Since we left the gold standard, that’s really all it is. Money isn’t real, any more than poetry is real – it’s a human construct that we’ve invented.

Yeah, it’s pretty much China: They buy the currency (or bonds), lending the money to the US and other western countries.

What happens to this?

We buy goods from China with it.

Then the Chinese have the money to buy more western currency / bonds with…

Good game, good game (if you’re Chinese).

China own everything. When they call it in there will be an almighty poostorm

Owe the bank a million your in trouble, owe the bank a trillion, their in trouble!

China’s fiscal deficit is a greater proportion of their GDP than the US

Well it’s a well know fact, sonny Jim, that there’s a group of the five wealthiest people in the world known as the pentaverate, who run everything in the world, including the newspapers. And meet tri-annually at a secret country mansion known as, the Meadows.

So who’s in this pentaverate?

The Queen, The Vatican, The Gettes, The Rothchilds and Col. Sanders before he went tets up. Oh, I hated the Col. with his wee beady eyes, and that smug look on his face, Oh your gonna buy my chicken, Oohh.

How can you hate, the Col.?

Because he puts an addictive chemical in his chicken that makes you crave for it nightly, smartass!

The question is not who owns the debt (that’s easy see above), it’s more who is going to pay it back or more importantly how (if at all) they will pay it back.

To stop the debt expanding govs need to run budget surpluses ie raise more in tax than they spend. How often does that happen? To merely stabilise the debt we need to run a surplus now in the region of 1-2% of GDP. Are we doing this?

The answer is that, as in the 2-3Qs of 20 Century, it won’t be paid back. It will simply be eroded by inflation. The polite way of saying that the gov will simply steal the money by stealth.

If you keep interest rates below inflation/GDP then the debt takes care of itself. Simple until you realise what this actually means!!!

What would happen if say, tomorrow, every country got together and and said, “Eff you, we’re not paying it back anymore”?

It is owed to a bank, that borrowed it from a bank, who borrowed from a government, who borrowed from a bank, who borrowed from a bank who had speculated on the stock exchange, and borrowed against that ‘security’ from another bank who had got theirs from the US Gov. bonds…. etc etc, repeat to fade…

DD individual countries (including us) have done this. It’s simple stealing. Not paying back what is owed. If everyone did it then not only would there be chaos but theft on a grand scale.

Solutions to debt: grow, default, restructure, repress. The UK has done all in the past with repression being our favourite trick.

SO, it’s not real money, borrowed against the non real money, in the hope that we ourselves can at some point pay ourselves back.

So we all must be trillionaires right?

So I CAN afford that Ibis Mojo!

And the Chinese owe a shed load as well, so really it’s not all them either is it.I still don’t get it.

I have no idea what a bond is, what yeild is, and all the other muck spouted out in these reports. All I know is who my debt is owed to, and unfortunately they know where I live 😆

Boarding Bob…. do you have a son with a head the size of a planet?

Bond: Government backed IOU. You give them a grand and, at the time you buy it, they guarantee the percentage of interest that you will get. But… It’s all to do with tempting people. If you’re a good risk, people buying the bonds don’t earn as much, but the money is safer. If your economy is up the poo river, then you have to offer higher yields to tempt people to buy your debt. If it goes over some magic number, people just will not buy them because they would be too risky. That happened to Italy (I think) or Greece (pretty sure) in the last lot of trouble. I think the magic number is 10%, but I could be wrong and it may vary by country.

It’s like gambling.

It’s like gambling.

Exactly that. It got very clever a few decades ago when banks were recruiting not bankers but PhD Maths graduates who all came up with very clever ways of splitting and selling debt – repackaged loans, credit swaps, all sorts. Even includes banks creating money out of thin air almost and then lending it to themselves. I bought this book:

which explains it all pretty well although there’s still lots of it that goes way over my head. The whole thing starting with the American sub-prime mortgage scandal basically came about because banks got bored of doing basic banking and all got too clever for their own good.

There’s a world trade deficit, sooner or later the clangers are going to take back what’s theirs.

It isn’t actually a problem unless you have to suddenly pay it all back, which they don’t.

Looking the 2nd graph in the OP’s link, it’s quite worrying that the UK is one of the few countries forecast to increase debt as % of GDP over the next few years, and is already one of the highest. And for all the talk of the size of the US national debt, by that measure ours is almost as bad and is increasing more quickly…

Exactly that. It got very clever a few decades ago when banks were recruiting not bankers but PhD Maths graduates

I recall reading somewhere that these people had been employed by governments for and during the Cold War era to devise very clever ways of outsmarting the Eastern Block and that as the soviet pact countries became westernised, the governments released these clever dudes to the banking sector. Hence, the traditional banking rule books were ripped up and new rules developed.

If you keep interest rates below inflation/GDP then the debt takes care of itself. Simple until you realise what this actually means!!!

could you spell it out for us economic illiterates

This pretty much explains the global ponzi scheme commonly referred to as the economy
[video]http://www.youtube.com/watch?v=jqvKjsIxT_8[/video]