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[–]raananh 48 points49 points ago

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This joke will explain it:

"A rich tourist came to a small town in the middle of the financial crisis. He went into the local hotel, placed a 200-dollar bill on the counter and went upstairs to check out what kind of rooms the hotel had to offer. In the meantime the hotel manager grabbed the bill, walked over to the butcher and used the bill to pay his debt. The butcher then took the bill to the cattle farmer and paid his debt to him. Next, the cattle farmer took the bill to the cattle feed supplier and paid his debt there. The cattle feed supplier then paid his debt to the local prostitute. The local prostitute brought the bill back to the hotel and paid her debt to the hotel manager. The hotel manager put the bill back on the counter. Then the rich tourist returns down the stairs and proclaims that he didn’t like the any of the rooms. He grabs the bill and leaves the city. A pity, but more importantly, the town was now debt free and optimism was back."

Did anybody lose money here? Does anybody owe money to anyone?

The answer to both questions is "NO!"

[–]Cr4ke 3 points4 points ago

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So all we need is to temporarily steal a few trillion dollars from someone and then give them back. Got it.

[–]BlackSands[S] 8 points9 points ago*

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But in the joke we know who has the money - the tourist. In the real world it would appear no one has it. Perhaps it's been privatized?

[–]codebolt 3 points4 points ago

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Govt debt is issued as bonds. So they owe the money to the bondholders (I'd guess mostly private banks and other countries central banks). When the fed buys treasuries in the open market as it has recently, the money it buys the debt with is simply created.

[–]lee1026 9 points10 points ago

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The real world version of the tourist is the Fed, the ECB, the PBOC and the BOJ, all of which have been pumping endless amounts of money into the economy.

This is supposed to be how QE works in theory - the Fed prints a great deal of money, the money go in this circle, and then the Fed promptly takes the money out of the economy again.

[–]halligan00 0 points1 point ago

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Except that when the Fed prints money, it also crates US debt.

[–]mapgazer 0 points1 point ago

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Doesn't it actually decrease debt?

[–]halligan00 0 points1 point ago

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The new money is used to buy government debt -- which means that the us government owes the FED for that amount.

The new USG debt is 'high powered money' in that it can be used as FRB deposits by member banks, which then can lend out more money (in theory) which is, more or less, the goal of QE. When these commercial and retail banks lend the high powered money, they create still more money - they keep only a fraction of their deposits as reserves, the rest is bank-created money -- money that has a corresponding commercial or retail debt.

TL;DR: Quantitative Easing creates USG debt-backed high powered money. The high-powered money creates commercial debt-backed money.

[–]sidevotesareupvotes -2 points-1 points ago

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Yes, this is basically it. It's a fiat circle jerk and it's not working very well right now. Increasing amounts of debt for very little return. Something big will happen when it all ends and it won't be good.

[–]theotheredmund 0 points1 point ago

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Do you have reason to believe it's unsustainable?

[–]sidevotesareupvotes 1 point2 points ago

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Commodity and asset prices. Young people worldwide are priced out of houses. People everywhere are finding that essential goods are getting more and more expensive. Central banking policy is the main cause of riots worldwide.

[–]nostrademons 1 point2 points ago

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If you own any Treasury Bills, international government bonds, bond funds of those securities, municipal bonds, money market accounts, or expect to actually receive social security benefits, then the answer is - you do! (More likely, it's probably someone like your grandparents, as retirees own a good number of bonds.)

Everyone's debt is someone else's asset. In the case of government debt, it's sold off as bonds, and then the people who buy the bonds hold the asset. So whenever you hear about a bond fund or treasury bill purchases or are otherwise looking for very safe, liquid investments, you're usually buying some form of government debt.

[–]gathly 1 point2 points ago

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That's because you're statement breaks the world up into nations who have debt, but within those nations there are individuals who have private wealth. These wealthy individuals also buy government bonds in many countries.

[–][deleted] ago

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[deleted]

[–]cmsj 4 points5 points ago

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"because the machines now do most of it" - as they should. We have brains, we shouldn't be doing uncreative, repetitive assembly work in factories :)

[–][deleted] ago

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[deleted]

[–]RKBA 1 point2 points ago

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Job displacement because of automation is a topic that has been discussed for many years, and many books (including even science fiction) have been written about it. It's nothing new.

[–][deleted] 0 points1 point ago

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Why should we be poor because we don't work? Shouldn't the goal of humanity be to support ourselves comfortably without having to work?

[–]mordaunt0 0 points1 point ago

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that assumes we're all on the same side.

the fabulously rich have always made it explicitly clear that they don't even think they belong to the same species as the rest of us.

[–][deleted] 0 points1 point ago

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We outnumber them, lets steal their shit!

[–]mordaunt0 0 points1 point ago

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yea... if by "their shit" you mean stuff acquired via fraud, bribes, insider information, price fixing, collusion and other subversions of the legal process then sure.. let's go steal our shit back

[–]taligent -3 points-2 points ago

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I always knew you were always pretty clueless because of your dodgy submissions.

But the fact that you believe that robots are going to be replacing significant number of jobs puts you in a whole different level. It isn't going to be happening in any of our lifetimes. And possibly not for another generation or two after that. Way too much has to change before robots can be trusted to be anything more than glorified machines.

[–]gathly 0 points1 point ago

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well, good. I wasn't sure, but now that you've made this declarative statement, I am completely reassured.

[–]nostrademons 0 points1 point ago

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And the corporations are themselves owned by their shareholders, and the shares are typically owned by mutual funds and pension funds. I dunno if the general Redditor has zero assets or something, but a good chunk of the middle class (what's left of it, at least) actually owns a fair amount of stock indirectly through 401Ks, Roth IRAs, and individual investments.

[–]anonymoustroll 2 points3 points ago

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it's a joke that fails to acknowledge the centralized nature of lending.

The reality is that with interest and a central hub of lending (as mandated by law), the tourist would have been sucked in the debt whirlpool.

[–]qemqemqem 1 point2 points ago

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Your analogy is misleading because countries account for money they are owed on their balance sheets. Most countries are in the sort of debt where no one owes them money. It could be said that the citizens owe their governments money, and that it's likely that foreign governments owe money to the citizens, but that's not necessarily true, and there's a problem if it's not.

[–]winstonsmith 9 points10 points ago

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From your link:

Note that this list is gross debt, not net debt.

[–]Isenhatesyou 1 point2 points ago

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They even have a figure for the whole world. Presumably the net would have been 0.

[–]artviii 0 points1 point ago

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Capitalism is not zero sum.

[–]cos 0 points1 point ago

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I'm not sure what you mean by that statement. However, debts and credits are supposed to be zero sum. "Capitalism" isn't a synonym for "debts and credits". You could be clearer about what you mean.

[–][deleted] 7 points8 points ago*

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I'm no expert, but I had similar questions as you and so far I see no reasonable responses really explaining the issue clearly So I will try my best with my limited understanding, without any politicized agenda. (I'm not an economist, as you may tell from the language and way I explained things, but I read a lot and this is the understanding I've come to, and hopefully it helps your grasp on the situation. I hope real economists can reply and correct any inaccuracies or outright falsehoods here. I also request that any biased posters who have agendas to stay out)

The Federal Reserve issues bonds in order to raise money. Investors or savers, such as China, US taxpayers, or foreign investors, buy those bonds, effectively lending money to the US Gov't.

Where did that money come from? The US Central Bank (The Federal Reserve) has the power to expand and contract the Dollar Supply. They do this through fractional reserve banking. Yes, you're right, when there is more debt than money to pay it, people default on their loans, and that is what we call a contraction. The bank must write off that loan, essentially removing the money from the balance sheet. It's a tough time for the economy as there is less money flowing around, but its also inevitable under our current system. Loose money, tight money - these are the business cycles we must live and work with.

As for the world economy, we truly live in a global age: banks in China, Europe, the US, the Middle East, lend and borrow from each other daily. Why would a country borrow to such an extent that it seems as if they can never pay it back, like the US $15 trillion deficit, for example?

Pretend you're a student going to college. You borrow $200,000 in student loans (perhaps an unwise choice, but follow along), with the implicit expectation that you will pay it back with your future earnings. That, essentially, is what debt -and even money- represent. Money is a claim on resources. Debt is a future claim on resources.

So if foreign investors hold US debt, then they hold a future claim on the productivity of the US workforce. This is resolved when the US pays off its debts, based on tax income it receives in the future, not much unlike a student borrows money for college, then pays it off in the future.

How is it possible that EVERYONE owes so much money? Whose money is it?

This is a complicated question to which I initially wrote a reply but removed it as it was inadequate. I hope someone knowledgeable can illustrate this concept for us.

Now lets examine your observation that every country on the news is in some form of 'crisis'. We must consider that only countries in crisis would appear on the news, omitting the stable countries. If a country borrows money, you can be sure someone, somewhere, is lending or providing it. Therefore there must be lending countries or people. If a country cannot pay off its debts, the lenders lose that money, which is why you may have heard of the hubbub about China's desire to sell off their trillions of $ in US bonds: they are worried about the stability of the dollar.

Now lets talk about the stability of our currency, a subject that is never explained much in school (at least to me) - perhaps because this generation in the US is in a unique position to have never experienced such a phenomenon.

Currencies, from our vantage point, seem stable. Sure there is inflation - the steady, slow rise in prices from year to year - but there are no wild, drastic changes to the US dollar. At least there haven't been. We may not realize how lucky we are. In Argentina, their currency used to be so unstable that some grocery stores stopped printing prices on their food because from the time someone picked up some bread and brought it to the checkout line, the price had already jumped significantly. So why do currencies remain stable, while some fluctuate wildly?

Because the US economy is highly prominent and respected, and the US $ is backed by the US government, and based on the productivity of the US workforce. Because a currency is only as good as the government and working citizens that back it, countries simply do not expect the US to default on its debt. They have confidence in our system and our promises, so they expect to get their money back (with interest). I can't emphasize this point enough, because while simple, it truly is profound in its significance and so I will repeat it: the currency is only as good as the system and people that back it. If one day God forbid, the US system should become untrustworthy - either the government officials in charge act irresponsibly (borrow excessively, inflate excessively, etc.), or the citizens stop producing - then the faith and trust in our way of life, our system, and our future, will all be placed in jeopardy. Which means the dollar is in jeopardy, because the trust has been damaged. Money is inherently worthless: it functions only if people have faith in the institutions backing it.

How is this ever resolved? You may want to look at examples of currencies in history and how they fared. No one can predict the future, of course, but if you study other currencies' histories you can foresee most of the possible ways this can unfold.

One option available to the US government (or rather, the Central Bank), is the ability to inflate and contract the money supply at will. They were given this power in 1917 after several "shocks" during the late 19th century. With this power they thought they could fiddle with the money supply in order to prevent severe economic downturns. This 'central bank fiddling' is called Quantitative easing, and its a kind of 'monetary policy'.

(There are two ways the powers that be have to fiddle with the economy: monetary policy and fiscal policy. Monetary policy refers to actions taken by the central bank. Fiscal policy refers to actions taken by Congress, such as setting the tax rate, etc.)

Now on to the possible directions, and this is delving into the murky realm of speculation (and based again on my non-expert opinion).

  1. Lets first assume that the US doesn't default on its debt. Therefore the debt must then be repaid. So using the tools we have, the Central Bank could A) inflate the money supply. or the US Government could B) set higher taxes and/or reduce expenditures.

Lets look at option A. The Central Bank, as I explained, was given the power to combat severe economic downturns such as the one the US economy is currently in. The Fed is currently using quantitative easing to expand the money supply (which can lead to inflation. whether it always does, I'm unsure - perhaps an economist can explain). You should read the wikipedia page for QE, but basically the Fed sells bonds (they loan money) to give banks more reserves, which the banks are supposed to pump into the economy. This is supposed to lead the economy out of its downturn, which will put the US in a much better financial situation. Economic growth = greater productivity (theoretically at least) and thus greater ability to pay off debt.

So who pays for the debt? If the money supply inflates, lenders/savers end up paying for the debt through the decreased value of their loans/savings over time.

Option B is for the US gov't to take fiscal measures: increased taxes, reduced spending. In fact the gov't could pay the debt quite quickly if everyone contributed to the deficit. But as life goes, coordinating millions of actions is difficult, especially with such a divided citizenry as we have now. As you know, Congress is currently debating whether, and how, to increase the tax rate or reduce spending. And sometimes it may seem as if there is no progress being made at all, our political opinions are so divided. But if we assume the debt must be repaid, then it has to be repaid somehow, and if the US citizenry doesn't pay for it now either through increased taxes or reduced spending, then we must pay it in the future, meaning our children and possibly their children must pay for it.

2) The US defaults on its debt. I'll leave this to others to fill in. Lets just say that the only thing keeping us from devolving into anarchy is the combined trust and willingness to participate in the system we have. So what happens if the system collapses? If the dollar no longer is accepted? Examine the possibilities and that will be your answer.

[–]knowless -1 points0 points ago

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The fed can only inflate the money supply to pay debts for so long (quantitative easing), also, if (and they are) the fed does this, so will every other central bank on earth (they are).

It's just a matter of time, before everyone's stuck with worthless paper, it's why gold and silver are so high, because people are looking for traditional stores of capital.

The exchange rate between currencies corresponds to the value of gold in those currencies, this is not to say they are gold backed (they aren't), but instead that you can still view physical gold as having a specific value across cultures.

[–][deleted] 0 points1 point ago

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Why do you say the fed can only inflate the money supply for so long? Can they not do it forever?

[–]knowless 1 point2 points ago

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Inflation vs. rate of return on investment, If the rate of inflation is higher than the rate of return, then you are losing money, anyone who wants to make a buck won't stand for that, so they'll put their money in higher risk areas.

This of course is intentional, as the stock market died so they had to find a way to get companies money again to keep going, but this just hyperinflates stock values through rampant speculation (instead of the currencies value dropping), setting the world up for another round of market crashes when people realize that that company they bought in so high to in fact has no where near the earning potential they paid for...

If people find that the stocks they dumped their money into don't offer a better return than the traditionally conservative investments which weren't paying a decent return because of high inflation then the fed has failed.

[–]CineVosh 7 points8 points ago

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[–]black_pepper 0 points1 point ago

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If only.....

[–]cos 14 points15 points ago

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Despite all the gloom and doom alarmism you see in the comments, it appears to me that the answer is simple: You're looking at a list of debts, without the corresponding credits. The numbers on that table aren't net national debt, they're simply what people in that country owe others. Obviously people in other countries also owe money to people in each of those countries.

The article even says this explicitly, right above the table:

Note that this list is gross debt, not net debt.

Lots of people on reddit love any chance to preach their scenarios for how the currency system is and always has been broken and logically can't possibly work and is unsustainable. Whether they're right or wrong, what you're observing here is that they just love to say it over and over, regardless of whether it applies. Their pronouncements used to intrigue me enough to make me read more and think about what they were saying, but the endless non-sequitur repetition of the same points has made me learn to mostly ignore them.

[–]BlackSands[S] 0 points1 point ago

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ok, my quick google brought this up:

http://www.economywatch.com/economic-statistics/economic-indicators/General_Government_Net_Debt_Percentage_GDP/

Scroll down and the table on the right supposedly shows net debt. It's horribly unbalanced... Unless Norway's economy is significantly larger than I think it is. As I said originally: it seems like nearly every major country is in some kinda trouble (US, EU, China, Japan, etc.) and considering the share of the global GDP pie occupied by just those countries, I can't imagine the other countries are all the lenders. I don't really see how it can add up.

The explanation above in another comment regarding the fed etc. helps clear it up, but I'm still left wondering: if we're all in debt so badly, why don't we just get together, decide on a fair way to just ignore/invalidate the debt, and move on? And, if we're all in debt, what does the debt really signify?

[–]cos 0 points1 point ago

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This new table you've found lists total government net debt.

A portion of my savings is in municipal bonds. That means a bunch of local governments in the US owe me money in the future. On a chart like this one, that'd be part of the US total government net debt; the fact that I have a net credit wouldn't be reflected.

[–]sharlos 0 points1 point ago

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Yeah, I was going to say, Australia's public debt is only around 14% of our GDP.

A lot of misinformation and armchair economists in this thread it seems.

[–]tyrryt 2 points3 points ago

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Government spending is a component of GDP. Think about that, and you will see that it is deceptive to express government debt as a percentage of GDP.

[–]xpat 9 points10 points ago

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Do you want a blue pill or a red pill?

[–][deleted] 6 points7 points ago

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I would imagine that a great deal of the debt is owed not to governments but to the private sector. I remember seeing a breakdown of debt owed by different countries. The U.S actually owed the U.K a substantial amount of money but in turn the u.k owed the u.s money.

The conspiritard in me somehow thinks that the private sector owns much of the worlds wealth and is owed most of the debt. It is no surprise that governments are short of cash when they have sold off as much as they can and the wealthy individuals and companies seem to be so very efficient money vacuums who know every trick there is to avoid paying taxes and play the financial markets.

[–]DracoIce 2 points3 points ago

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People around the world are waking up to this reality thanks to the internet, education and the fact that everyone is racking up their own personal debt. The whole economic system is in a downward spiral.

The thing is, governments and financial analysts, etc etc, they all realized this years ago, yet did not inform the public, why? Because it would create mass panic. The push to war, the oil crisis, etc... There are parts of the picture we don't see, behind the scenes people are getting fucking rich by exploiting the economy (bailouts, CEO bonus's while the company is in debt, etc) because they realize it's not an infinite system, better get your cash now, buy gold, and gtfo.

If you take a step back and look at humanity as a species, it makes sense that some would do anything to ensure their own survival by accumulating what is necessary. What is different about humanity than most other species, is that some of our species don't mind if others die, in order to ensure our own survival. We don't think like a community.

I shake my head every day at human greed, and whenever I read about a Ceo's 10 million dollar salary, I think about the child somewhere on the other side of the world who can't eat today. Wtf is wrong with this picture?

Capitalism doesn't work, everyone seems to know this (now), but no one knows how to stop it.

Two things that need to happen:

  1. Corporations cannot be considered a person under the law. This is where the modern style corporation stems from, and with this legal standing they are able to be protected by laws, while simultaneously evading many repercussions since it's not an actual fucking person. The reason a law for stealing works to make me not steal, is because I don't want to go to jail. When a corporation steals, they can't (or don't) blame specific people and instead fine the corporation, which the corporation has already calculated was worth it. Everyone wins, well except actual people.

  2. Somehow, some way, we need to put a humanitarian, worldwide limit on how much fucking wealth can be accumulated by a single person, family, etc... Either we think of a new kind of system, or we put caps on earnings. I know, this is idealistic, but not having caps def isn't working it is? I'm not talking communism or socialism either, if anyone is going to point that out...what if we still kept the capitalist system, but that no one was able to make more than one million dollars a year? It's more than enough.

No one needs a 10 million dollar a year job, this kind of rich life has been driven into our fucking heads by the media, and the "American dream" kind of idealism, it's not working, we have proof and time for change. Real change this time, a new system, a new way of functioning. Hell, put scientists in power for a year, see how that goes, no other group can fuck humanity up as much as politicians have in the last 20 years.

When I can directly connect and talk to anyone in the world who is connected to the worldwide network of information which we are all currently using, there is no reason why basic things like food, water and shelter should be a limited resource. Our whole focus on our own survival is wrong.

Of course after all my ramblings, studies, thoughts and ideas, I really think humanity itself loves to push the limits. I just think we may have gone too far this time. Hell, we all seem to like a good shit show.

[–]firstsnowfall 1 point2 points ago

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Capitalism doesn't work

Our system is not capitalism.

[–]silverionmox -1 points0 points ago

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Then the USSR wasn't communist either.

[–]firstsnowfall 3 points4 points ago

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Yep. It wasn't. It was very authoritarian and there was a ruling caste which exploited the workers who did not own the means of production.

[–]purebacon 2 points3 points ago

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Because every major government started funding its activities through the Ponzi Scheme of an exponentially increasing money supply. Only the counties who control their own money supply will be able to pay off their debts, but they will make their currency worthless in the process. Eventually default is the only possibility, but TPTB have an uncanny ability to kick the can down the road so we may not see the true mess we're in for another 5-10 years.

[–]anonymoustroll 13 points14 points ago*

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how is this ever resolved?

It won't. Non-backed fiat currencies have a life span of about 40 to 50 years. The only thing keeping the current system in place is the global nature of the central banking systems. We've never had that before, so the usual modius operandi of going to world war for a distracting "reset" isn't going to work this time.

Since we're in uncharted waters, nobody is really sure what will happen, but the outcome will most likely be exactly the same with the only significant change being when is happens. Everyone is holding their breath and waiting for the music to stop with the first significant sovereign default that crashes an entire currency (be it the euro, dollar, yen or whatever).

Here's what will probably happen: We're going to get a lot of little but extremely important regionalized conflicts across the globe (think the two front war the pentagon has been planning for during the last decade x 10). In this maelstrom of conflict, several things will become crystal clear:

1 - the US can no longer afford to be the world's policeman and the GWOT is no longer economically feasible; in fact NATO can't even do it for their region... Asia, forgetaboutit. Everyone will Balkanize, concentrating on internal integrity and grabbing localized resources (think Spratly Islands, the Falkland Islands, disputed Arctic regions, various African and middle eastern conflicts, etc. etc. etc.).

2 - peak oil, global warming, water shortages, unsustainable population growth, fishery collapses and lots of other huge systemic planet wide problems are not only real, but manifesting much sooner than expected

3 - reserve currencies (let's call it the SDR since the dollar is really no longer the world's reserve currency) are no longer backed by access to cheap oil; the conflicts will tighten the already narrow oil supply chain to the point that the 1970s oil embargo looks like a funky disco dance.

The central bankers are already planning for this. They have contingency plans that involve trying to isolate the events that will cause a systemic collapse. The ultimate goal, of course, is a debt reset and a single world currency (probably non-backed fractional reserve fiat crap again) within the context of lots of wars, rioting, food/fuel shortages and general distractions that allow the establishment of a system of governance that transcends the current sovereign status quo.

[–]kellyandbryan 1 point2 points ago

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What can I do to protect myself and family? I have cash in the bank, which I realize is worth basically nothing, so what should I do with it now while people still believe it has worth?

[–]supercanuck 3 points4 points ago

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Listen to Warren Buffet:

"Nevertheless, I worry about inflation always because it is such an easy solution to things in the short term. The ultimate defense against inflation is your own talent, your own earning power. I mean, the best doctor in town, the best lawyer in town, the best musician, the best anything, whatever it may be, they will always command their share of resources of their society whether the currency is dollars or shekels or shark-sheet. "Next to your own talent the best thing to own is a business with talent. I mean, if you own Coca Cola, it will always be able to command, whatever the currency, a certain portion of people’s earnings or hourly earnings. So I always emphasize to students, develop your own talents, no one can take them away from you, no one can even tax you until you start bringing money in from them. And inflation can’t take your own talent away from you."

"If you know how to perform brain surgery, people are going to find you and they are going to figure out some way to giveyou whateverchicken they are producing and whatever the case may be. If you look at investments, the one thing you don’t want to have is investments that are tied to a currency unit as opposed to a producing business.

[–]taligent 1 point2 points ago

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a) The world is not going to collapse and go into a nuclear winter just yet. So you have some time.

b) Do what every successful investor has done since the beginning. Diversify and invest for the long term.

[–]purebacon -2 points-1 points ago

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Buy gold and silver and supplies for self sufficiency. Off-grid power, water, and a garden come to mind.

[–]silverionmox 0 points1 point ago

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Any hoard will just give you a false sense of security. The best you can have is fertile environs, good health and good relations with your neighbours.

[–]Will_Power 1 point2 points ago

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The central bankers are already planning for this. They have contingency plans that involve trying to isolate the events that will cause a systemic collapse.

Interesting. Can you elaborate on this?

[–]anonymoustroll 2 points3 points ago

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Recently?

http://www.zerohedge.com/article/imf-prepares-threat-international-monetary-system

If you want all the measures that have been undertaken and put in place over the last 2 years, that would quite a list (and would require a fair amount of research, some of which is not public information).

[–]BlackSands[S] 1 point2 points ago

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Your reply intrigues me - can you give me examples of your 40-50 year number?

[–]CineVosh 3 points4 points ago

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I get all my advice from anonymous trolls.

[–]anonymoustroll 0 points1 point ago*

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It's general knowledge

The dollar/SDR is backed by oil at the moment, so they've got a few more years before they'll have to execute a reset; however, once oil rich countries stop exporting due to peak oil, the game is up for the central banks. I'm thinking limited nuclear war and I really hope I'm dead or living in an extremely remote part of the world when in all kicks off (we've got about another 40 years with the peak oil scenario, but the reality is that the shit will hit the fan much sooner than that).

[–]taligent -2 points-1 points ago

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Quick. Go now. Make sure you find yourself a nice bunker before anybody else !

[–]silentflight 0 points1 point ago

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The closest thing to a single world currency is the Euro - now successful countries in Europe are bailing out countries like Ireland, Portugal, and Greece despite having no say so in how they spend their money. The US may police the world militarily now, but what you're suggesting would lead to financial policing that would be just as costly.

[–]Ortus 1 point2 points ago

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despite having no say so in how they spend their money.

Yes they have

[–]silentflight 0 points1 point ago

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They may advise them, is that what you're saying?

[–]ABsynth808 1 point2 points ago

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B/c banks tricked govts into loaning money from them at interest instead of printing their own money debt free.

http://video.google.com/videoplay?docid=-2550156453790090544#

[–]Cr4ke 0 points1 point ago

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Layman here. As far as I know, the loans are backed by the promise of future tax income, ie they will tax their citizens and use the money to pay back the loan installments.

On top of that, at some point they started figuring in the expected future growth of their economy, and corresponding bigger tax income.

This was kind of risky, since they're now forced to keep growing at the pace they promised, to pay back the loans. A period of stagnation or negative growth could be dangerous, and force them into bankruptcy.

[–]BlackSands[S] 4 points5 points ago

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Yeah I understand how a country can take on debts, but I'm confused. Who's loaning all the money? These are "external" debts, so they're borrowed from outside the country, right? How can every nation be in debt? If no one can pay it, how does it work?

[–]dopplerdog 3 points4 points ago

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Every nation can be in debt. If you get a whole lot of private investors buying up state bonds, then that's what you have - countries being in debt to private creditors. edit: If you want to know who is buying up bonds - look around at all those people approaching retirement.

But don't make the mistake in assuming that no public debt is a good thing. Too much public debt is, to be sure, a bad thing - but the effects of too little public debt are just as bad (a reduction of public debt goes hand-in-hand with a reduction of the money supply).

[–]jamesss6 1 point2 points ago

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If you want to know who is buying up bonds...

The FED buys the majority of the US Treasury debt. Money is debt, that's how we can all be in it.

[–]bloosteak 2 points3 points ago

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Why are you.down voted? That's a factual statement.

[–]tyrryt 1 point2 points ago

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It's called a "scam". They will keep it going as long as possible, i.e., as long as they can keep borrowing more to pay off old debt/interest, and as long as populations of the various countries accept what is happening.

At some point, it will collapse, as any system based on continual acceleration of debt levels must. There is no political will to stop it, or even slow it down. The only question is when. When economics fail people turn to violence and military force, as they always have.

[–]Cr4ke 0 points1 point ago

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I imagine it's a lot like /r/circlejerk :P

[–]silverionmox 0 points1 point ago

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States can be in debt to private persons or organisations, and vice versa.

[–]troller10 1 point2 points ago

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Because all money is backed by debit. If all the debit in the world was paid, we would have no money.

[–]codebolt 7 points8 points ago

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But because of interest, that's also a mathematical impossibility. There's more debt than money in the world.

[–]troller10 4 points5 points ago

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True. That is why a debit based economy is ultimately unsustainable.

[–]Point321 0 points1 point ago*

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country number 1 with the biggest debts per capita here.. I can't believe that these debts are not as a big thing in the news as it should be, besides we are one of the most wealthiest country..

edit: wikipedia says that "^ The exact external debt of Luxembourg is disputed."

[–]memsisthefuture 0 points1 point ago

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Really odd list. I don't understand why Norway seems to have so much debt. I've always been told we have no debt at all, and our Foreign Pension Fund is about 600 billion USD.

[–]tripleg 0 points1 point ago

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The list doesn't take into consideration what the countries own. For example here in Oz, if we need to open an iron ore mine, it's likey that we need 10 billion for infrastructure and equipment.. i.e ports, rails, trains, etc... so we borrow it. However that mine, once in production, will return 1 billion a year in profits so it kind of balances out. Not all debt is bad.

[–]hahahhau 0 points1 point ago

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invent something everybody wants.

prevent chinese from copying it.

win.

[–]notJebBush 0 points1 point ago

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The central banks for each country lends debt to financial institutions/lenders who essentially own the debt. There's no real organization or community or such.

This is what every country does. Not just the U.S.

[–]xoctor 0 points1 point ago

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Countries don't have to borrow from other countries. They can borrow from individuals and companies. Even better, they can "borrow" from their own Reserve Bank.

That said, China has loaned the USA trillions. Don't believe the rubbish about their problems you hear on the US media. That is just pandering to the wounded pride of Americans. Not that China is without problems, but government debt is not one of them.

Saying this is possibly the greatest taboo in Western society, but this problem is caused by a fundamental flaw in democracy.

Naturally enough, voters tend to support candidates who raise services and lower taxes. The only way to do that is to borrow. Many voters will react against blatant la-la-land policies, but it is easy to disguise economic irresponsibility, especially because not all deficit spending is irresponsible.

There is a huge incentive for politicians to make promises now that future governments will have to pay for. In fact, if they don't do that they have little chance of being elected.

[–]LuckyBdx4 0 points1 point ago

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We Can't...

[–]BlackSands[S] -1 points0 points ago

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Right, so that's what I'm asking. If no one can pay their debt, how does any of this work?

[–]LuckyBdx4 1 point2 points ago

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Expect a much lower standard of living in the next 20 years...

[–]BlackSands[S] 0 points1 point ago

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But I'm sort of wondering if that's even necessary. If we're all in debt, can't we all just agree to ignore it? Reset it? Obviously that sets a really bad precedent, but that's sort of what I fail to understand. If we're all in debt, why does it matter? What does debt really signify/represent?

[–]tyrryt 2 points3 points ago

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It matters because that debt represents the stored value of work and sacrifices of people. As a simplistic example, Americans "borrowed" shitload of money, and used that money to buy appliances from China; Chinese people wasted their lives slaving away in factories to build those appliances, and now have IOUs from America to show for it.

Simply cancelling out those IOUs represents, in essence, a theft of the work that built the appliances. Eventually, if done on a large enough scale, people get pissed off enough to go to war over things like this.

Not to say that it will or will not happen, but that is why it matters.

[–]AbjectDogma 1 point2 points ago

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It means nothing because we operate on fiat currency, it is all just a shell game and the taxpayers always get the empty shell.

[–]refcon 0 points1 point ago

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The governments of these countries are in debt. The countries themselves are fine.

[–]generalu -3 points-2 points ago

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I remember having these conversations. It's all funny money. Watch/Google Zeitgeist.

[–]doctordal -2 points-1 points ago

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Never mention this movie again.

[–]firstsnowfall 1 point2 points ago

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Actually the newest one (Moving Forward) is quite good and takes a departure from the previous movies which focused on conspiracy theories and religion bashing.

[–]generalu 0 points1 point ago

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Okay. How about The Secret of Oz?

[–]doctordal 0 points1 point ago*

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Honestly dude I've learned to avoid political documentaries because there's a 90% chance that they're full of shit to the point of absurdity. I'll check it out though. Because I love you