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Protest meme? (imgur.com)

submitted ago by coconutcookie7

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[–]mastermog 256 points257 points ago

Isn't this guy missing the point - the world is in debt to itself.

If I owe my sister $10, and I owe my brother $20, and that brother owes that sister $5 - I can say that my family is debt of $35.

There is nothing saying that debt has to be external to the context of the debt itself. Obviously the world's economy goes far deeper than this.

[–]buttproblems 174 points175 points ago

Of course, you should also recognize that your family has assets in the amount of $35 as well. This is his point. There are two sides to every debt - an asset and a liability. The sum of all these assets and liabilities is zero.

[–]fourpac 53 points54 points ago

Good comment. You're exactly right that the sum should be zero, but that assumes that the assets are real and properly valued. As we have seen, there's nothing to stop bankers from creating "assets" out of thin air. As long as the money created in this process holds value, though, it becomes the asset in such a transaction and can, theoretically, be returned with interest if other banks are creating money this way. If faith in the value of created money fails, it all falls apart, though. The fact that trillions in debt doesn't seem to affect people makes me think that we, as a people, are either getting smarter by being aware of the process or dumber by being lazy consumers.

[–]ceakay 4 points5 points ago

They don't create assets out of thin air. They leverage what assets they do possess and work out how many of those assets they can loan out. i.e. A/B/C each deposit $1000. D comes by and needs a loan, the bank says, sure, I can loan you $2000 by taking from A/B/C's deposits because the 3 of them aren't likely to need those deposits at the same time. The bank now has $1000, but also has incoming payments per month from interest charges, say $100 a month. E comes along as says I need a small loan too. Bank looks at its numbers, finds that A/B/C combined only take out $50 a month combined, figures it can use the interest charges from the first loan to cover than, and loans out the $1000 to E.

It's the same $3000 dollars, but it's created an additional $3000 through leveraging money that's just sitting there. This is obviously a simplified version.

The recent economic crash is that US banks had $6000 loaned out against their $3000 in assets. This could happen because banks also loan and leverage each other. Normally, this is OK, but unforunately, too many banks in the US over-valued the houses they were loaning money out for, and they were loaning the money out to people who couldn't actually afford to pay their interest charges. It created this huge interconnected mess that collapsed the global economy when people couldn't move money any more (because there wasn't any).

This is my best attempt at ELI5. I'm sure someone more familiar with economics could do a better job.

[–]fourpac 1 point2 points ago

I love that we are having these conversations. I agree with you and that's exactly what I was saying. Overvaluations are essentially creating an asset out of thin air. There are also a lot of other methods of manipulating securities to create assets. It's actually pretty mind-boggling how little regulation there is on these sorts of things.

One thing to keep in mind for your example is the concept of fractional reserve banking (which you touch on with the reference to banks lending out $6000 against $3000 in assets). The Federal Reserve sets that at around 10% for U.S. banks. That leads to a lot of "funny money" creation.

[–]buttproblems -2 points-1 points ago

Sure, those values can change over time, but it's a basic principle of accounting that at any given time the assets and liabilities are necessarily equivalent.

[–]Noxider -3 points-2 points ago

It is a shame that fourpac's comment has gone over your head. THISS ISS ECONOMIICS

EDIT: Taken out THISS ISS ECONOMIICS. EDIT2: Put back in THISS ISS ECONOMIICS.

[–]johnzx6r 1 point2 points ago

As an accountant who minored in econ, I can confirm that this definitely went over his head.

[–]--Braj24 3 points4 points ago

As a regular guy, it went over my head too

[–]buttproblems -1 points0 points ago

His comment has not gone over my head. And your CRUISE CONTROL has added nothing. I was simply point out that, as an accounting identity, total global debt will sum to zero, which is one way to interpret the sign the guy is holding. Your comment has no economic content.

[–]Noxider -1 points0 points ago

A basic lesson in economics will indeed prove you wrong. Goverments dating back a thousand years knew this and used it to generate revenue for war.

[–]buttproblems 0 points1 point ago

What basic lesson is that? Can you actually make a comment with content or are you just going to issue taunts that merely make reference to the existence of the field of economics? And you also edited your stupid comment, coward. Say something with substance or go away.

[–]Noxider 0 points1 point ago

I will start off with your first point; I was alluding to was government bonds, which I thought you would pick up on. I apologise for that. I was also busy, and didn't think it was worth my time as you would probably be the only person that read it.

Second part. I edited the comment because it was meant as a joke. But you replied to it earnestly so I decided to take the joke part out. Editing a comment is not cowardly. It can be done to make spelling corrections, allow better clarity. Reddit makes a big issue about EDITing, which is incredibly understandable. I could have left the EDIT tag, but again since you were the only person reading it I could not be bothered. But I feel in this case it did not substract or change the comment. You might say why bother anyway. But I just got bored of the joke I made, and got rid of it (if only we could do the same in real lfe), another time I may have left it in. I would describe this as whimsical rather than cowardly.

I have aired this discussion to three family members who are all accountants (sounds like a fun family I know) and they looked at me rather quizzically in responce to your anecdote.

EDIT: At a whim I have returned all info to previous comment, including history of changes.

EDIT2: Just re read your comment and realised you kinda sound like an xbox gamer raging at someone :)

[–]centerbleep 1 point2 points ago

maybe this is a good time to remind of the result of the first audit of the federal reserve? $16,000,000,000,000.00 had been secretly given out to US banks and corporations and foreign banks everywhere from France to Scotland.

[–]WhizardHat 2 points3 points ago

From "France to Scotland" is like saying from 1 to 3 or from A to E.

[–]FordSVT1 0 points1 point ago

England.

[–]carriagereturn 0 points1 point ago

everywhere from France to Scotland

Some of it must have landed in the Chunnel. brb

[–]CannedMango 10 points11 points ago

Of course in the analogy with the world, uncle Pete has borrowed over $20,000 from the family the past 10 years, and is on vacation in Italy while everyone else punches pennies. Fuck you Pete!

[–]meddlingbarista 9 points10 points ago

I'm so mad at Pete I could punch a penny right now.

[–]hawkon147 0 points1 point ago

For some strange reason this comment just made my day.

[–]CannedMango 0 points1 point ago

Haha... Damn you autocorrect!

[–]RadiolarianChert 0 points1 point ago

It's nothing like that easy.

The market value of a debt instrument (it's value as an asset) will change as market conditions change. Which is to say more or less constantly.

The value of the asset can go to zero. In that case the buyer could have lost billions. The magic of the market can make money go poof.

There are many other issues. For example, the burden of servicing the debt (i.e. the interest payments) is non-trivial. It can add up to more than the redemption value of the debt instrument. That isn't accounted for in your simple 'two sides to ever debt' model. This can be a very big problem when trying to restructure debts. Just ask the World Bank how it's going in Africa.

Many forms of debt are much more complex than bonds. They're derivative instruments. Assigning value can be mind boggling difficult. Derivatives simply don't fit your model. Ask just about every body who's tried to assign meaning values how the last debt crisis worked out.

What did Warren say?

In my view, derivatives are financial weapons of mass destruction...

[–]buttproblems 2 points3 points ago

While the value of debt or debt instruments can change over time, it is still a basic principle of accounting that total assets and liabilities are equal at any given point in time.

[–]RepostThatShit 0 points1 point ago

They really aren't, though. Every debt that someone accrues is an asset for another person, that's true, but the reverse is not true: there is not a corresponding debt for every asset.

The total sum of assets and debts is never less than zero.

[–]buttproblems 0 points1 point ago

I didn't say that. I said that debts have two sides and that those sides sum to zero. I never said there aren't other assets.

[–]RadiolarianChert 0 points1 point ago

It gets more complex. Assests can turn into liabilities. I can buy debt, it can come on to my books as an asset and then it can morph into loss. Toxic assets are real, they can sink a portfolio, even one as big as an international bank or brokerage.

The process of my asset turning into a liability doesn't turn the debtors liability into an asset. Accounting doesn't work that way. Economics doesn't work that way.

[–]RadiolarianChert 0 points1 point ago

When I buy debt I'm trading cash for a promise. The market assigns a value to that promise. That promise may be backed the the 'full faith and credit' of the debtor, but it's just a promise.

The value of that promise will change over time. It can deflate. It can become worth less, and less, and less, until it becomes literally worthless.

You're not addressing the change in value of the debt. You're not addressing the economic impact of that change. You're not addressing the economic impact of servicing the debt.

You're reducing a complex set of issues to a useless fiction and telling the people who actually have to grapple with those issues that the issues don't even exist.

In your theory of economics, I issue debt and you buy it. It enters your books as an asset and mine as a liability. Then, the market value of that debt decreases (for example, interest rates go up). Therefore the market value of the debt that you bought (your asset value) decreases. Magically that decrease shows up on my books as an asset. I would pay money to see you try to convince an auditor of that.

[–]buttproblems 0 points1 point ago

No, I'm not speaking to the change in value over time, though I already acknowledged it. You are having some issues here with reading comprehension. Look at my previous comment: "basic principle of accounting." I'm not issuing an economic theory or reducing anything. I'm merely point out that from an accounting perspective, the sign is technically correct. That's totally blowing your gasket for some reason, but it's not an issue with what I've written.

[–]callupchuck 92 points93 points ago

I thought the answer was aliens.

[–]Mister_Meowgi 13 points14 points ago

Is such a thing even possible? Yes it is.

[–]evolvish 10 points11 points ago

"Ancient astronaut theorists believe..." At least 5 times per episode

[–]feckyooworld 2 points3 points ago

i want that job.

[–]InfamousAnarchist 0 points1 point ago

I recently learned he graduated from my college.

[–]axcobb 0 points1 point ago

Are the astronaut theorists ancient or are the ancient astronauts being theorized about?

load more comments (2 replies)

    [–]AnonymousAutonomous 4 points5 points ago

    Obviously, ever since they started mining that big ass diamond in space because they found out it is worth something to us.

    [–]centerbleep 0 points1 point ago

    *diamond in the sky

    FTFY

    [–]dubdubdubdot 0 points1 point ago

    I thought the answer was the IMF

    [–]Zerobrine 0 points1 point ago

    Time lords? :D

    [–]evilbob 1 point2 points ago

    I thought it was the lizard people.

    [–]adjecentautophobe 10 points11 points ago

    The point is that there is another side to the equation that people that throw out this talking point dont ever bring up

    The world owes $40 trillion. The world is also owed $40 trillion.

    Is a wash. Its all about distribution. Saying the world owes $40 trillion is misleading.

    [–]RadiolarianChert 1 point2 points ago

    Debts have to be serviced in terms of periodic interest payments. There's no guarantee that a debtor nation can service its debts. Some times the burden of servicing the debts drains so much real money from their ecomony that they don't meet their internal needs for developing their economy.

    IOW, some developing nations borrow too much. They send so much cash out of the country to pay the interest on their borrowing that they do a poor job in growing their economy. This leads to more borrowing (at higher interest rates) -- and the problem gets worse. The lenders are losing money and the developing nation isn't growing. Its economy may even be contracting. Its citizens may be becoming less well off.

    At some point the World Bank steps in and brokers a debt restructuring. The people who bought the debt accept lower interest rates and/or partial payments. Wealth just evaporated from the world economy. This is not a good thing.

    load more comments (1 reply)

      [–]tsilb 3 points4 points ago

      So transfer some of that debt around. You owe both your siblings $15. If only the smartest people in the room could do basic arithmetic, maybe we'd even have a balanced budget and eventually fix the problem altogether.

      [–]mastermog 2 points3 points ago

      Exactly, I couldn't agree more - but I don't think its that simple

      [–]NaChoBizness 0 points1 point ago

      You all are missing the point: home budgets work on a level of inelastic money supplies, whereas national budgets operate on elastic ones. The dynamics are very different.

      This is part of the problem, most people think they understand a situation they haven't spent more than 5 minutes to learn about, and most of their knowledge comes from sources which confirm their own biases. Which means that at the end of the day, the reality of things, and what people think that it's happening are not necessarily the same thing.

      For example; Some individuals who have become so concerned about the Federal debt around 2008, are in many cases the same people who voted for a party who claimed "deficits don't matter" during the 2 terms they were in power. The same people/politicians, who are making an issue out of the debt, are the ones partially responsible for a big chunk of said debt. And funnily enough, through all this there has been almost no mention of the private debt levels, which are at least one order of magnitude larger taking into account the whole derivative brouhaha.

      Debt is just an abstract concept, just as the rest of the economic system. As such, you are for the most part being manipulated, since for it to work, people need to have "faith" on the system. Interestingly enough Capitalism (and most other isms really) operates in a similar matter as religion operates.

      [–]NumberofBeastis616 21 points22 points ago

      I think that's exactly the point he's trying to make. In your analogy, your family is 35$ in debt, but if you were to get all "give peace a chance" with each other and pool your resources like a great big team, then all the debt would be gone and you would be free to master all the mogs you want. Together. With love.

      He's not wrong per se, just very unrealistic.

      [–]archonemis 3 points4 points ago

      Yeah, because we're all paying through the nose to the banks and we're the ones with fifteen houses, sail-boats and private jets.

      [–]torokunai[!] 0 points1 point ago

      Actually his point is not "unrealistic" at all.

      For every debtor there is a creditor.

      These creditors are like those people in Romney's Boca Raton dinner party. More money coming at them than they know what to do with.

      In the US, the top 5% is collecting over 30% of the national income. That's one out of twenty people collecting one out of 3 of the dollars. They made the biggest gains in income in 2010 . . .

      http://thinkprogress.org/economy/2012/03/05/437441/one-percent-2010-income/

      and it's only getting worse. The economics we've built since 1980 is essentially a great money pump siphoning trillions out of the paycheck economy into the 1% economy -- and we're using debt -- both public and private, to keep this BS economy from seizing up.

      Well, now we're also doing outright printing with QE3.

      Much of what was borrowed 2001-now should have been taxed. The Bush tax cuts were a body blow to this nation's long-term prospects as an egalitarian, meritocratic society.

      [–]RadiolarianChert 0 points1 point ago

      This sign reduces a very complex set of issues to a ridiculous fiction.

      This is fantasy. The ecomony doesn't work that way. The value of a debt instrument floats. It's not static. With too much borrowing, the value of debt, and even the value of the money that services that debt, decreases.

      Real losses happen. It's not zero sum. Wealth is destroyed from the economy.

      This harsh reality has lead to cripplinlg debt loads in some developing nations and corresponding loses to the nations/institutions/individuals that bought those debts.

      The market disruptions associated with these events further hinder economic growth.

      Don't get me wrong. I am not saying that all debt is bad. Debt is essential to an economy. But it needs to be balanced by growth.

      [–]torokunai[!] 0 points1 point ago

      Wealth is destroyed from the economy

      Nope. Money -- and credit/debt -- is not wealth.

      That is this guy's underlying point.

      Money is a claimcheck on wealth, not wealth itself.

      Money does not create wealth, neither does credit or debt.

      Wealth is that which satisfies human needs and wants.

      Money is only intrinsically good for toilet paper, wallpaper, and other paper applications, or, in the case of coinage, for whatever applications you can find for loose coins, like table-leg levelers, etc.

      Credit is the temporary transfer of spending power from saver to consumer, but this has nothing to do with what wealth really is.

      But it is easy to confuse money with wealth, since money commands it.

      [–]TheSystem_IsDown -2 points-1 points ago

      Hey, we all know you want us to click that think progress link and everything, but it just reveals your bias as much as a link to limbaugh's site or something. Think with balance.

      [–]mastermog 1 point2 points ago

      Woo hoo free to master all the mogs!

      [–]aleisterfinch 6 points7 points ago

      It goes beyond this.

      Let's say that your home economy is a closed system (as the world's is). $30 appear on your table out of nowhere. You all want that thirty. You agree that your sister will take it, but she'll owe both you and your brother $12 each (the ten that could have been your share, plus $2 in interest).

      Suddenly the amount of debt in your internal economy is more than the amount of money. This is really strange.

      That's the point he is making, and it makes sense, and it's also a natural effect of fractional reserve banking. The fact that it's true calls into question a lot of common feelings about debt. If we are going to run economies that rely on it to function, for instance, perhaps our policies and attitudes should shift in regards to it.

      [–]iscrew4ners 0 points1 point ago

      What do you mean? There is $24 in debt, and $30 in actually money.

      [–]aleisterfinch 0 points1 point ago

      Actually, you're right. I was drunk when I wrote that little parable. If you want to make it apply to fractional reserve banking then you have to have someone at the end be owed the $30 back.

      [–]quzox 2 points3 points ago

      I can say that my family is debt of $35

      It feels slightly dishonest to say that. What you should do is, for each member in the family, say who owes what to whom and then make sure the net assets vs. liabilities is equal to zero.

      [–]Coolguyzack 3 points4 points ago

      drop everyone's debt by 5 bucks. lol problem solved. I'll take my nobel prize now. What's that? Well who owed you the million? I'll just get it from them?

      [–]cincyfan04 -2 points-1 points ago

      Problem not solved. You are assuming an interest free scenario. Add in interest, and the numbers change over time. The guy that owes the least and is owed the most wants the interest to build.

      [–]Coolguyzack 5 points6 points ago

      lol that was my joke...

      [–]cincyfan04 5 points6 points ago

      Ah fuck. I was assuming a certain level of ignorance in this thread

      [–]Coolguyzack 1 point2 points ago

      It's all right. Sarcasm through the internet IS hard. hahahahahahahaha

      [–]torokunai[!] 0 points1 point ago

      Too much money has been flowing up, and not enough downwards.

      This is not a big happy family. Romney's opinions on the 47% made that clear.

      What was borrowed 2001-now should have been taxed (or tariffed).

      [–]archonemis 1 point2 points ago

      The banks.

      I would argue that you're missing the point.

      [–]ollinator117 1 point2 points ago

      watch this and you will be enlightened my friend.

      [–]cannedmath 1 point2 points ago

      Countries could decrease their debts "virtually" by clearing debts they have to each other.

      Also, don't be a fool. This is just the language used in the media to over-sensationalize the news. The world is NOT in debt to anything or anyone. Nations are and they could very easily find solutions for it if they wanted.

      [–]RadiolarianChert 0 points1 point ago

      The Nobel committe is eagerly awaiting your next posting -- the one where you solve the world's debt crisis and re-invent economic theory as we currently understand it.

      [–]cannedmath 0 points1 point ago

      'k.

      [–]sweYoda 0 points1 point ago

      We are in debt to the banks who created the money out of thin air.

      [–]RadiolarianChert 0 points1 point ago

      Banks don't work that way.

      Do you have any idea what the rules are for issuing debt?

      [–]spermracewinner -1 points0 points ago

      Most of our debt is with banks and financial institutions. They own us.

      [–]qasman 0 points1 point ago

      I was going to say, if a retard like me can figure that out in 10 seconds sitting on Reddit, this guy clearly hasn't even tried thinking about it throughout the several hours he presumably spent making the poster, getting ready for the protest and taking part in it as well.

      [–]IRONic__MAN 0 points1 point ago

      You are forgetting a massive thing my friend, interest. When money is created by the fed it is done so with interest. Say $10 is printed, they will ask for $11 back. That $1 doesn't exist and that is this blokes point

      [–][deleted] ago

      [deleted]

      [–]RadiolarianChert 0 points1 point ago

      That's not how debt instruments work.

      They have a value assigned by a market.

      They have a valued related to their interest payments.

      That value is further dependent on a group of other factors. Some factors can be controlled by the issuer. Things like their ability to generate wealth. But that's still dependent on the market's assigning value to the goods/services that they prodce.

      There are factors outside of the issuer's ability to control. Things like the market rate of interest.

      When I buy a debt instrument I'm making a bet on the issuer's ability to service the debt (make interest payments) and on their ability to repay to face value of the instrument. IOW, I'm trading real money for the promise of money.

      That trade can go wrong. I can lose real money. When that happens wealth evaporates from the economy.

      This is only scratching the surface of what's going on.

      The protestor's sign makes about as much sense as an emu on acid.

      [–]Morphyism 0 points1 point ago

      How is that useful exercise?

      load more comments (7 replies)

        [–]joeyisapest 7 points8 points ago

        Nathan Phillips Square, Toronto

        [–]BkJay 6 points7 points ago

        This is about the depth of understanding of economics that many of these OWS protestors have. (Making the assumption that this was spawned by OWS and related, though not in NYC - could be wrong)

        [–]torokunai[!] 0 points1 point ago

        OWS is rather clueless yes, but the man's point is important.

        When you follow the money, you'll see the 5% own so much of the world's productive assets and the 95% are getting really screwed overall -- in access to land, natural resources, health care, and now even education.

        [–]mouser58907 2 points3 points ago

        "getting really screwed overall" is a very subjective term. I think there are many people out there that would rather live a 99%er's life in America than where they live now. For instance, people who struggle to eat.

        [–]ravsau 33 points34 points ago

        You know who.

        [–]mattyice18 1 point2 points ago

        I bet he has a high paying accounting job.

        [–]iloveboba 4 points5 points ago

        Our children.

        [–]Ingenium21 1 point2 points ago

        Good thing I ain't having any. I get to borrow all the money!

        [–]palerthanrice 4 points5 points ago

        Oh fuck I hate it when memes creep into real life.

        [–]coconutcookie7[S] 1 point2 points ago

        You're one of the few comments on here that doesn't mention economics. I thought this picture was funny because it's a condescending Wonka at a protest.. in real life, just like you said. I didn't care what the poster actually said hah. Thanks for seeing it the way I did!

        [–]Caustic_Marinade 50 points51 points ago

        No one knows how banks work apparently?

        The world is 40 trillion dollars in debt to banks. The banks created this money from nothing, and loaned it to people in the world, at interest. This means that if there is 40 trillion dollars in debt, there might be only 35 trillion dollars of actual money in the world. Furthermore, every time these loans are paid back, the money disappears. It was created from nothing and ends up as nothing.

        This means that if everyone was to pay off their debts there would be no money in the world and we would still be a few trillion dollars in debt.

        [–]torokunai[!] 31 points32 points ago

        The banks created this money from nothing,

        No, this is not how banking actually works. Banks lend out their deposits. This is why when banks go bust their depositors get nothing.

        What happens though is that when banks lend money, that money exists in two places at the same time -- the deposit account and the borrower's account.

        When the borrower's account is then used to lend to a second borrower, the money exists in three places at once.

        This is the money multiplier effect of fractional reserve lending. But nowhere was it necessary for banks to lend from nothing.

        [–]Caustic_Marinade 3 points4 points ago

        I was simplifying it for brevity.

        Banks do not lend out their money in the normal sense of that word. If a bank has $10 on reserve, they can give someone a loan for 90% of that. But they do not take $9 out of their reserve and hand it to someone. Instead, they are allowed to create $9 and loan it out. The total money in this universe just went from $10 to $19. If you want to describe it as "existing in two places at once" that's fine I guess, but the end result is the same.

        Most banks can only give out loans up to 90% of the money in their reserves. The federal reserve bank is not constrained by this, however. The federal reserve has the power to create money from nothing and loan it to other banks, or to the government. When I said banks create money from nothing, this is what I meant.

        [–]Chii 0 points1 point ago

        which is really interesting, because who controls the Feds, and why is it in their interest to not inflate the economy by printing more and more money? (i.e., as a citizen, why should they trust the Feds to do the "right" thing?)

        [–]Caustic_Marinade -1 points0 points ago

        You shouldn't trust them, but you can't really do anything about it so it doesn't matter.

        [–]Chii 0 points1 point ago

        thats what everybody believes, but citizens in a democratic country gets to vote, and if there is a politician that is willing to shed light on the issue, then it can be changed...oh what am i saying...obviously, everyone in important places have already been bought out =(

        [–]Caustic_Marinade 0 points1 point ago

        Ron Paul recently passed legislation to audit the fed. That's a step in the right direction. But I don't agree with many of his positions on other topics, so I personally wouldn't vote for him for president.

        [–]boxedlogic 1 point2 points ago

        So... where did the depositor's money come from?

        [–]etrnloptimist 4 points5 points ago

        At the end of the day, it comes from the work needed to extract minerals from the ground and food from the soil. All other work is meta-work.

        [–]Sadraukar -1 points0 points ago

        What about ideas?

        [–]etrnloptimist 4 points5 points ago

        Ideas are productivity multipliers -- they allow us to extract more utility out of the raw materials we extract from the earth.

        [–]Chii 0 points1 point ago

        only if they are put to work...(see patent lawsuits).

        [–]Sadraukar 0 points1 point ago

        Interesting way of looking at things. Thanks!

        [–]neayaa 1 point2 points ago

        That's where value comes from, not where money comes from.

        The first money in a fiat system is basically created by someone taking out a loan from a bank (usually the government). This is obscured by the fact that historically non-fiat money had existed before and was slowly converted to fiat by taking away the mineral (gold) backing.

        load more comments (5 replies)

          [–][deleted] ago

          [deleted]

          [–]torokunai[!] 2 points3 points ago

          It's called Leveraging

          leveraging is borrowing money from somewhere else and investing it.

          not actually money creation out of nothing.

          [–]FeepingCreature 0 points1 point ago

          No, this is not how banking actually works. Banks lend out their deposits.

          And by deposits you mean borderline-fictional deposits containing money taken from other deposits.

          [–]Fu_Man_Chu 0 points1 point ago

          They lend from MOSTLY nothing. That is to say the majority of the money they lend out is not physically matched by actual dollars they have on hand.

          You're glossing over a pretty big issue in regards to the money multiplier.

          [–]wolfram184 -1 points0 points ago

          thank you, thank you, thank you.

          [–]nickiter 0 points1 point ago

          Banks lend out their deposits

          That's the old savings-and-loan or "thrift" model. Banks can now issue debt with only a fraction of the actual capital available (or none at all.) That fact was one of the key factors which enabled the financial crisis.

          [–]CertusAT 13 points14 points ago

          Modern economics, nobody wins but the banks.

          [–]daliusd 2 points3 points ago

          You can always propose or use alternative. There are many alternatives: bitcoin, becoming amish, creating a sect and etc. Banks are not so big winners because everyone eventually dies...

          [–]sweYoda -1 points0 points ago

          Gold and silver.

          [–]daliusd 0 points1 point ago

          Shotguns with ammo and cans of food.

          [–]TheSelfGoverned -1 points0 points ago

          Relevant

          [–]aDildoAteMyBaby 0 points1 point ago

          What happened to arbitrage? The federal funds rate? All that important stuff that makes them lend money in the first place?

          [–]Sirspen 1 point2 points ago

          Your comment made me realize how stupid this part of the economic system is. Those who create the money expect more of it to be paid back to them, while they are the only source of it.

          [–]after_hour 5 points6 points ago

          Please do not take his comment as an accurate portrayal of the banking system. It's so wrong that it hurts

          [–]centerbleep -1 points0 points ago

          indeed. it is entirely virtual. here's an experiment: compare the total u.s. debt to yearly u.s. gnp

          [–]Jesusisrippin 1 point2 points ago

          normal banks don't print money, federal do. and any money loaned from federal banks is in the form of govt bonds. There is more money in the world than physical notes. But there isn't more debt than money.

          [–]centerbleep 0 points1 point ago

          "we can always print more money..."

          [–]johnzx6r 0 points1 point ago

          To be even angrier, you should look up the "money multiplier", your 5/35 number is way off. If banks are required to hold 10% of their liabilities to prevent bank runs, every $10 printed becomes $100.

          [–]Caustic_Marinade 0 points1 point ago

          Yeah I know. There is also way more than 40 trillion dollars of debt in the world.

          [–]johnzx6r 0 points1 point ago

          I meant 5 to 35 ratio, not the total of 40

          [–]bushwakko -1 points0 points ago

          That remaining debt being unpaid and unpayable interest. The only way for it to be paid back is for some more money to be borrowed, and that money must end up in the pocket of the ones owing interest. problem solved shifted!

          load more comments (2 replies)

            [–]lsdsoundsystem 10 points11 points ago

            Bad meme is bad

            [–]MostToastRoast 2 points3 points ago

            Then you've never seen an Instagram meme before. They kinda go like this:

            top: that 10 year old

            Conspiracy Keanu

            bottom: has a better phone than me

            [–]MinorThreat89 0 points1 point ago

            Impressive.

            [–]thinly_veiled 8 points9 points ago

            I think he means, "To whom is the world in debt?"

            [–]soroman 10 points11 points ago

            I'm not saying it was aliens...

            But it was aliens

            [–]pureviper 2 points3 points ago

            in a world economy, just like in any closed economy, SAVINGS=INVESTMENT so saying the world is $40 trillion in debt means $40 trillion are borrow from some people by other people.

            [–]torokunai[!] 4 points5 points ago

            from some people by other people

            problem is this relationship is very asymmetric.

            The people doing the borrowing are trying to stay alive, and the people doing the lending own all the natural resources, land, and other high-margin monopolies of life's necessities.

            [–]wolfram184 1 point2 points ago

            the biggest borrowers on the planet are the governments of the United States and western European countries.

            [–]neayaa 0 points1 point ago

            Who are therefore creating most of the money. If they were to pay back their debts, shit would fall apart.

            But at the same time the debt is used to justify tax hikes and cuts in social systems, while banks get bailed out and make billions.

            [–]pureviper 0 points1 point ago

            debt isn't USED TO JUSTIFY tax hikes. this may not be intentional on your part, but the way you say sounds like they acquire a lot of debt on purpose so they could have an excuse to raise taxes, which is not the case. we got ourselves in this situation due to a multitude of different reasons and now a tax hike is a needed solution.

            [–]neayaa 0 points1 point ago

            If you think that state debt actually needs to (or can) be payed back in full by the population of a country, then you're absolutely thinking inside of the box and believing what they want you to believe.

            Central banks can't exist without states owing money to them and supporting them.

            Debts can renegotiated and the monetary system can be reformed to something more sane than the status quo.

            [–]Moo3 1 point2 points ago

            92 comments and nowhere has China been mentioned? As a Chinese I'm severely impressed!

            [–]9212 1 point2 points ago

            6 hours and nobody wrote "Implessed?"

            [–]Radico87 3 points4 points ago

            To itself. Sounds like a drug addict to me.

            [–]sweYoda -1 points0 points ago

            No, we are not in debt to our self. We are in debt to banks.

            [–]torokunai[!] -1 points0 points ago

            To itself

            Nope. The financial elite have nothing in common with the plebes.

            Even Romney is hired staff to them, the paid entertainer at his $50,000-person fundraiser.

            [–]SwggrBck 2 points3 points ago

            We're indebted to the bankers who issue the world their respective currencies. Almost every present nation has a central bank that is tied to the Bank of Rothschild, which loans/"creates" money from thin air with debt, or "interest" attached to it. That poster is both horrible, because it tries to confound the average Joe in a moment of "....wait, who ARE we in debt to exactly?" thus shows the ignorance of the vast majority of the population who don't know how fractional reserve banking works, and it is good because if the person who sees it is a critical thinker, he or she will do a bit of research and learn how the world is "a college of corporations; inexorably determined by the immutable by-laws of business. The world is a business, Mr. Beale."

            [–]_IBM_ 2 points3 points ago

            fractional reserve lending

            [–]InsanitySK 2 points3 points ago

            The rothschild's owned Central banks obviously.

            [–]Nightmathzombie 2 points3 points ago

            International banks...ergo we are all slaves, as the fruits of our labor is supposedly owed to a select few.

            [–]torokunai[!] 0 points1 point ago

            http://en.wikipedia.org/wiki/File:Pyramid_of_Capitalist_System.png

            well, in the 21st century we seem to be getting enough food at least, but give it 10-20 years . . .

            [–]KDIZZLL2 -2 points-1 points ago

            Satanic elite, otherwise known as zionist jews.

            [–]rogueleaderr 1 point2 points ago

            Space ghost.

            [–]Harutinator -1 points0 points ago

            Aliens

            [–]Mirago 0 points1 point ago

            Don't people protest at the old city hall side?

            THAT'S WHERE I ICE SKATE.

            [–]GenKan -1 points0 points ago

            So by changing the laws to make banks non-profit organizations.... hmmmmmmmm

            [–]BlackGold09 0 points1 point ago

            You know what I have to say to that: peanut butter is the new bill cosby

            [–]Cickle_Funts 0 points1 point ago

            Its in $ the rest of the world so i'll keep my £'s.

            [–]wanttoseemycat -1 points0 points ago

            Look out guys, this shlub in the leather jacket has world finance figured out.

            [–]Dandermen -1 points0 points ago

            Really this is the truth. I often wonder if we just wipe all of the debt off all of the balance sheets and start over again what would happen? Does everything just collapse? Do we gradually get right back to present economic circumstances again? Do banks go hog wild and start issuing credit cards and handing out loans to regain power and control? Certainly the rich would have less control over us, at least for a while.

            [–]bukejit 0 points1 point ago

            china

            [–]chbrules 0 points1 point ago

            Money as debt: http://www.youtube.com/watch?v=rC720Cl3N-0

            (Film starts at like 0:17 for some reason)

            [–]AnotherDrunkCanadian -1 points0 points ago

            Today I learned that there are communists on the internet.

            I wonder how many of them are posting from their iPhone 5...

            [–]jsmith223 0 points1 point ago

            Can't we just forgive the debt we have to eachother? /mindblown

            [–]potentpotables 0 points1 point ago

            The governments of the world owe private lenders the money. It's not that complicated.

            [–]corporateswine 0 points1 point ago

            That awkward moment when your grade 9 math teacher appears on reddit...

            [–]ckasten 1 point2 points ago

            GO PACK GO

            [–]gedSGU 0 points1 point ago

            isn't it china guys ?

            [–]C0mmun1ty 1 point2 points ago

            God I wish memes didn't exist.

            [–]alragusa 0 points1 point ago

            OK cool..so I don't have to pay off my mortgage/credit cards/student loans/car loans?

            [–]No_Easy_Buckets 0 points1 point ago

            *54 trillion actually. So says the FRED!

            [–]limendime 0 points1 point ago

            those damn aliens

            [–]WaterOx 0 points1 point ago

            "Debt's just a made up number, man!" - Idiot Hipster

            [–]great_gape 0 points1 point ago

            China

            [–]gunslinger1415 0 points1 point ago

            Where is this taken?

            [–]jbDUBS -1 points0 points ago

            I think this guy has an answer... http://i.imgflip.com/26am.jpg

            [–]seeker135 0 points1 point ago

            No one ever asks the banks to offer a discount. The international Banksters are the root of the debt problem.

            EDIT: Sp.

            [–]Dew25 1 point2 points ago

            Money Changers - cool movie about banks

            [–]seeker135 -1 points0 points ago

            Thanks, I'll look it up!

            EDIT: Turns out I've read three of his books, so I guess I like his style. It may be a bit dated, but usury and greed never change. Thanks again.

            [–]torokunai[!] 0 points1 point ago

            largely bullshit probably designed to throw people off the true scent.

            kinda like all the rothschild bullshit.

            [–]Dew25 0 points1 point ago

            Is this your opinion? True scent? You sound half baked. It's a cool documentary that shows banks in a different light and shows the value of money on a scale that people don't normally have the capacity to envision on their own.

            [–]torokunai[!] 0 points1 point ago

            IIRC this movie was complaining about money being debt and savers taking all the money via compounding interest.

            this is true as far as it goes, but it fails to follow the money -- to understand that money is a societal construct and not an actual natural resource of limited supply.

            I'm the first to say that debt is way, way out of control, and that the US economy has been abusing debt take-on since ca. 2000 to hide very deep and systemic corruption in our trade, real estate, medical, and now educational systems.

            We're about as screwed as the Soviet Union was in 1980, but nobody yet understands that if we claw-back the trillions the 1% control, we can regain more balance in the system.

            The movie in the cite did not get into that at all IIRC, which is why I consider it diversionary.

            [–]xgunwingx 0 points1 point ago

            what I'd want to know is where the fuck they got $40 trillion dollars to lend

            [–]Youngmanandthelake 4 points5 points ago

            Well you see, they borrowed some cash to lend out...

            [–]Nightmathzombie 1 point2 points ago

            Probably most of it comes from the guys who "Lend it" which is conveniently the same guys who print it. I'll take a lot of shit and DV's for this but most of the banking/currency systems in the world are essentially legalized slavery.

            [–]archonemis 0 points1 point ago

            See "Central Banking" and "Fractional Reserve Lending" for details.

            [–]torokunai[!] 0 points1 point ago

            http://www.funnyordie.com/videos/ed6bcd878d/beavis-and-butthead-candy-sale-from-dirttron

            [–]mrkingsize 1 point2 points ago

            the future

            [–]Travie6492 0 points1 point ago

            I've asked this question so many times. If everyone is in debt to themselves, why can't they forget that the debt exists and pretend it doesn't? Cut out that money from existence and pretend to have money?

            I don't know. I guess at that point, money would stop being powerful and would just start being pieces of fabric again.

            [–]torokunai[!] 1 point2 points ago

            If everyone is in debt to themselves,

            cuz the poor are in debt to the wealthy.

            The 99% vs 1% movement got a lot right, even though they couldn't really get everything together.

            [–]TheSelfGoverned 0 points1 point ago

            I guess at that point, money would stop being powerful and would just start being representations of labor.

            FTFY

            [–]CorpseFool 1 point2 points ago

            Communist.

            [–]archonemis 0 points1 point ago

            The correct answer is: Banks.

            [–]SchizoStarcraft -1 points0 points ago

            It's poor people in debt to rich people... Too bad rich people run shit...

            [–]TailSpinBowler -1 points0 points ago

            is it China?

            [–]after_hour 1 point2 points ago

            It was painful to read all of these comments. Does no one understand what a government bond is? That much of the debt of governments is owed to the citizenry?

            http://en.wikipedia.org/wiki/United_States_public_debt#Public_and_government_accounts

            $10.34 trillion of Treasury notes, bills, and bonds in the USA alone. NOT personal debt owed to banks. This anti-banking circle-jerk is getting out of hand.

            [–]laidymondegreen -4 points-3 points ago

            I came up with a plan by which all of the debt is cancelled out against all of the other debt, and then whoever didn't get all of theirs cancelled (the countries that borrowed the most) pays off the rest of their (now minimized) debt as they can. That seems completely obvious, though, so there've got to be reasons why it won't work.

            [–]freshmas 1 point2 points ago

            What happens to the guy who loaned a bunch of money and owes nobody? Who pays for the other guy who owes more than he'll ever make?

            [–]laidymondegreen -1 points0 points ago

            If you loaned a bunch of money and owe nobody, great, you get your money back. The idea of my plan is that every country in the world participates, and a bunch of very smart economists sit down and say "Spain owes Germany x dollars, the U.S. owes China x dollars" all down the list, and they balance it all out on paper so that almost all of the debt is cancelled. Then they produce a list of the countries that still have debt (those that borrowed the most without lending much/any). Something would have to be done about those countries, as they probably wouldn't be able to pay their debt back, but then you'd have a few countries in serious trouble and the rest all nicely balanced, rather than everyone in a panic and lots of countries in serious trouble.

            I am definitely not an economist, though, so probably there are a lot of serious holes in the plan.

            [–]Nightmathzombie -1 points0 points ago

            The problem is the guy lending the money didn't actually"Earn it" he just printed it.

            [–]rasterbee 5 points6 points ago

            The amount of paper and coin currency in the world pales, immensely immensely pales, in comparison to the true wealth and debt of the world's economies.

            [–]torokunai[!] 1 point2 points ago

            you sir are one of the few people in this thread who understand

            [–]TheSelfGoverned 0 points1 point ago

            Yes, which is why we have digital money.

            [–]neayaa 0 points1 point ago

            That could just means that the 'printing' happened electronically. Of course the situation is a bit more complicated, but essentially money is still created from nothing and this fucks over some people in various ways while making the system itself quite unstable.

            [–]lalijosh -3 points-2 points ago

            We are the parents that took out credit cards in their kids' names when they were infants, ran up $50,000 of debt on each one, and didn't make any payments. When they become adults, they will have to work for the rest of their lives in poverty to pay it off.

            God help us when we grow old and are at their mercy.

            And this will happen sooner than you think. By 2020, it will take 1/5 of the American budget each year, more than it pays for its military, to pay for just the interest on its debt. That's just to keep the debt from getting larger. Forget about ever paying it down without turning the U.S. into a third world country.

            This is not guesswork. This is not an opinion. These are the numbers on a fucking piece of paper that anybody can read. We are completely fucked.

            And we have screwed up so bad there is nothing we can do at this point to stop it from happening. It does not matter who we elect. But, we could elect Romney to, at least, slow down the spending in order to lessen the crap our children will have to go. Instead, we are going to reelect Barack Obama who took a $10 trillion dollar problem, made it $16 trillion, and has nothing to show for it.

            When we are old, our children will take what money we have and roll our wheelchairs out into the cold to die. I cannot blame them.

            [–]ZorglubDK 0 points1 point ago

            Really?

            Romney's might somewhere, in his very hollow campaign statement, want to limit spending. But lowering taxes will surely not do anything remotely good to the us debt..

            [–]lalijosh 0 points1 point ago

            I am not talking talking about taxes. I am talking about our debt. We are at the point where taxes are irrelevant.

            We are not reducing our debt.

            We are not even reducing the deficit to slow the growth of the debt.

            We are not even reducing the growth of the deficit to slow the acceleration of the growth of our debt.

            We are in a car heading at high speed straight towards a concrete wall. We're eight feet away and we're pushing the gas pedal further in.

            [–]ZorglubDK 0 points1 point ago

            I have to give you that. Your debt isn't being handled - and the the future of it is looking very frightening.

            But I disagree strongly on blaming Obama for it climbing from 10 to 16 trillions. Some of it is his doing of course, but having to stop a freight train running wild is a hard task - and I would personally place the majority of the blame on the congress.

            Thinking Romney will make things better is foolish. He might cut spending with one hand, but the other would sure as hell be signing tax credits for the corporate world.

            Imho what America needs is a president and congress that's willing to buckle down; limit spending, raise taxes on both middle~upper class but definitely also companies and capital gains, take a hard look at the defense budget and other expenses. But unfortunately such politicians will never be elected in the current world, at least not numbers that would make a difference.

            [–]CozenOne 0 points1 point ago

            Well at least we don't have to pay back ALL of it!

            load more comments (9 replies)

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