Approximately no one, in all of history, has ever believed that all debt on the globe would be repaid, so “still” is inappropriate. This is why we have interest, debt jubilees, bankruptcy laws, legal provisions for discharge of certain debt separate from bankruptcy, negotiated debt modifications (and laws which facilitate them), security for debt (and in some cases limitations on collections beyond the security) and numerous other current and historical features of society.
> Does anyone even believe that the amount of debt will go down, rather than up, over the course of any length of time?
Why should it? The number of people is increasing, as is their average economic output, as is (globally, and in long-term trend) lifespan. So real (much less nominal) aggregate debt can increase over time with no meaningful change to what the average person owes (and is owed) as a proportion of their expected future output.
I don't understand why you would ask this question. On the individual level its obvious that some debts won't be. It happens all the time for a lot of reasons. So I assume you aren't talking about the individual level.
But on the macro level zero debt is a very bad idea and unless civilization collapses there will always be debt. Debt itself is a very good thing. Too much, and too little, of a good thing is bad.
So in either case all debts being paid off will almost certainly never happen.
> Does anyone even believe that the amount of debt will go down
In absolute terms due to inflation it always goes up.
> (that allows people to have negative amounts of currency)
You say this like its a bad thing. Debt isn't a bad thing. Debt allows people to own homes and cars and pay for education and invest in business. Debt means you are optimistic about the future.
How about having homes and cars and education without debt?
It's not like you need to be in debt to another and to steal from your feature to have nice things...
The only way a young person could be given a house without owing any debt would be if someone else bought it for them or if the government paid workers to build houses for everyone. However, if the government paid people to build houses without any payments in return the government would be collected the debt which it would then hold. This doesnt reduce any debt globally it just transfers it.
Maybe you could argue it is better for the debt to be on government than individuals but that doesnt address how no debt is good. No debt would just mean zero houses.
Our generation gets 25-year mortgages, and very little help from inflation.
As someone born in the 1980s in the USA, I don't think this is true. I believe that the 30 year mortgage has been the standard here since sometime in the mid 20th century.
Another thing to keep in mind is that there far fewer homes and people made a lot less money.
You don't need a new house for every young person.
You can reuse houses across generations. 100, 200 and even 500 year old houses are not uncommon in Europe for example, if you build them properly (and not the el-cheapo wood US construction). They're not any kind of ruin either, but highly coveted city and rural real estate.
Plus, there's an existing pool of a hundred million houses or close, so you wouldn't have to worry about getting them a house either.
Lastly, debt means money owed. A government can also money it actually has (e.g. form taxation, dropping military expenses and so on). Presumably there's still that.
Not to mention that the government could still ask for payments for the houses, but for a much smaller interest, and without expecting a profit, allowing people to repay them much earlier.
This is not some communism plot, places from England to Singapore, most of EU and beyond have done public housing in different degrees. England's public housing plan, for example, implemented for the most part of the 20th century, turned it from a country of extreme poverty slums (think L.A.'s seedier districts but in Dicken's London and Manchester and elsewhere) into an acceptable middle class (they'd call it "working class") existence.
If you only see these things as "nice", your should reevaluate what you value.
Housing and cars - I’d agree. But for me the problem with debt is it seems like a ploy to squeeze more and more out of people who don’t realize the deal, or who because of encroaching levels of debt don’t have a choice in society.
If debt were purely opt in and people could simply not get into it while still having a first world life then I wouldn’t disagree with you at all. But as it stands debt is a requirement that permanently endentures far too many of our citizens.
All of the above things have stopped worked for the majority of middle class and most working class people for the past 30+ years in the US (and lots of EU).
"a better education now" doesn't "means you can probably make more money over time", but leaves you straddled with a large debt, as just another person with a degree in a huge pool of people who might not even make as much as their parents did.
And the huge debt crisis shows that people and countries alike increasingly can't "out grow the costs of that borrowing".
https://www.forbes.com/sites/patrickwwatson/2018/03/08/the-m...
https://www.brookings.edu/blog/social-mobility-memos/2018/06...
http://www.pewresearch.org/fact-tank/2018/08/07/for-most-us-...
So, sure, if a few people don't want to have any debt, that's great. But if everyone stopped borrowing we'd be in a lot of trouble.
There are other ideas about how we could grow the money supply of course. Perhaps the Federal Reserve could mail everyone some cash every month.
Why would we be in trouble. Explain it to me like I know nothing about economics?
There's a place for credit, but right now I think it does more harm than good.
Some people have to live with family for a while or build in stages. It’s a challenge, but it’s doable.
Yeah, sorry, the life you want might not be sustainable and could be detrimental to society.
At the same time I have the impression., independent what the environment-protection-movements want to achieve or actually did, the state of the planet did not improve.
However education for which you need to get into debt is something that I really don't think is a progress. It is still better than no education or education for which you have to join a political party or a religion, but it is actually a step back from free education.
If I do work for you, and you can't pay, and you give me an "IOU", that is debt, and if I agree to make that IOU transferable that that is money.
The Federal Reserve system is simply one specific kind of money that is only special because the US government accepts it for tax payments and certain other kinds of money at illegal.
For a lot of America's history we used horses and sailing ships to get around. Are you suggesting we should return to that too? Otherwise this argument is empty.
I don't see debt as all that much different than insurance. Sure, society can get by without it, and you may never need it, but society in general benefits. If I run a business any large expenses would be amortized over the lifetime of that thing. I could pay for it upfront, but that might never happen and if I could it wouldn't be the best use of my resources. Ideally, I'd "pay rent" in order to borrow money upfront, now that I have that machine it's easier to pay back since that fixed cost will benefit me for the next 20 years. That's the scenario where all debt is never paid back.
Financial tools, like anything else can be good or bad depending on the circumstances and motivations at play. Payday loans (generally seen as bad) aren't all that different from micro-loans lauded in third-world countries. Let's say there's an older woman who walks out of town to buy goods and carries them back to town every day to sell (arbitrage). If she gets a small loan to buy more goods up front, invest in a wheelbarrow, or a booth at the market she can do more business and more easily pay off that loan benefiting; her, the person offering the loan, the sellers and the buyers--society in general. If she cannot pay back the loan she can get into a debit spiral. There are situations where that is beneficial to the person giving her the loan at the expense of her and the rest of society.
Either that, or cheap college tuition.
I have more assets than debt and I could pay off my mortgage but it's simply not the best way for me to spend my capital.
Additionally, I suspect this article is using a median value for "average income" but a mean value for "average debt." This paints a misleading picture.
Second, while it is useful to think of debts in terms of things like mortgages and auto loans, most of this global debt is government debt. Think locally - your local town may need 50 million dollars to build a new school. They aren't increasing taxes for one year to build the school they instead take on 50 million dollars of debt in the form of bonds. So even if you have no personal debt you still have tens or hundreds of thousands of dollars in debt which the government has taken out which can reasonably be repaid overtime.
The anecdote about secured mortgage debt might apply equally well to government debt. Most debt is serviceable.
In other words, $350k home = $300k mortgage + $50k in equity. You still have debt. Its just that the debt was exchanged for something. Its the same equation for credit card debt.
No one takes on debt without receiving something in return.
Or you buy a car. It quickly loses value, but you still have the debt based on the original purchase.
The formula still holds, but the "equity" part is negative, which leads many people to conclude that bankruptcy is a better option than paying for something they no longer have or is no longer worth what they owe.
Aside from perhaps the first year of owning a financed car, it is worth more than remaining principal on the loan for the majority of the loan's duration.
If those people then liquidate their scarce asset in order to acquire more fiat currency after a devaluation then the market glut will devalue that scarce asset too to some extent.
As for the currency idea, that is already how dollars are created. A bank loans out money it owes other people and creates new money.
The interest rate (and hence service payments) on such debt tends to rise. The lenders just price the possibility of distant default and demand fatter checks upfront.
> Or does it eventually go kabloie?
I am not sure all scenarios are as drastic as you describe. A bunch of countries have a privilege to issue debt in the currencies they themselves control and can inflate their way out of it.
People who have paid up a portion of their mortgage can get interested in a HELOC, provided that the interest rates are attractive, or even buy a second house / rental property once the credit situation allows them. Their growing debt is not necessarily an indication of a bad balance sheet - they have tons of collateral and just choose to use the debt mechanisms when it makes sense for them.
Also, debt is money. When you give me something of value, and I say I will pay you later for it, we have created money. A big part of the problem in down cycles is that lending drastically decreases, and there is therefore less money (broadly defined) in the system.
https://economics.stackexchange.com/questions/10007/will-maj...
Assets also increase monotonically. One cannot talk about debt without talking about assets. You should look at the whole balance sheet.
> debt has just become a standin for currency
debt IS money. If all the debt in the world is repaid there will be no money.
This kind of rhetoric involves essentially a misunderstanding of our present capitalist system.
Individual, organizations and government in the course of their existence, need to sometimes get access to more resources than they currently have. Borrowing for capital expenditures is the means to do this - issuing bonds, taking out mortgages and etc is the basic way this happens. This applies to houses, to bridges and to many other things.
Since new, large expenditures happen even as other others are paid-off, of course all the debt is never paid. There's no reason for all the debt to be repaid, paying it all would be counter-productive.
We could talk about the particular ways that debt and expenditures are done in this society (and boy there's a lot to talk about there). One big, problematic is imposing more debt on the personal level when it belongs on the state level (see student loans, "health care savings accounts" and other problems). But to begin the conversation, one has to understand how the broad economy works at all, how it's not equivalent personal values of honesty and thrift, etc.
I believe that all debts will be repaid. They will either be repaid by the borrow or by the lender, when the borrow can't pay and the lender has to bail them out.
Most of the debt is usually just rolled over. Think credit cards, treasury bills, commercial bonds etc.
What other ones do you think will be hardest to solve?
I look forward to our subterranean future. I think the combination of vehicle automation and tunneling technology will allow us to build massive underground systems. If things get too rough on land, we can go below the surface.
Why go to Mars to encounter an atmosphere hostile to life when we can all collectively experience right here at home?
Storms washed out your fiber optic cables? Starlink. No place to hide from the hostile surface? Boring Co. Need to remediate the atmosphere? Solar panels / Powersats -- I believe he's being reserved about Powersats. Need to move things around without easy access to transport? Electric vehicles. Need energy storage through the night time because the baseload power stations have all fallen into disrepair? Grid storage. Building your Gigafactory in a desert? Future-proofing.
The most effective answer is distance. While unlucky mobs can walk to your solar panels in the desert after civilization breaks down, how are they going to get to Mars? Get a good trampoline to jump on?
On some Mars colony with the foreseeable level of technology for the next 100-200 years you're even more prone to death and to worse climate than whatever might happen here on earth.
Beyond 200 years, Elon Musk could not care less about...
I believe that he wants to go down in history. And he wants there to be a history for him to go down in. True, he won't be there for that. But the thought of what it might be is a positive motivation for him.
Second, we don't have to worry about protecting acres of land-based solar panels from damage if we're beaming microwaves from orbit. The receiving arrays would be smaller, more defensible, and cheaper to maintain. The powersat could be weaponized to defend its own receiving array.
Third, regarding distance, it's really hard to dig more than a few meters underground without heavy equipment.
Fourth, in a total collapse scenario -- no food, air becomes unbreathable due to methane pollution from melting permafrost --, the people remaining on the surface will die off rapidly. The death squads may last longer, but aren't going to be able to present a significant risk to a deep underground military base protected by the members of the former government with a powersat on overwatch.
After the chaos of the collapse, these locations could quickly begin the effort to repair the atmosphere using all of those terraforming approaches that we would not tolerate being deploying today: ocean iron seeding, orbital shades, bioengineering.
Then the hardened survivors could return to a generally functioning planet, and then maybe go to Mars with their newfound skills.
EDIT: This might seem preposterous, but it's far more viable than shipping one million people to Mars and building up a manufacturing base under time pressure capable of keeping everyone alive and fed while also reproducing a supply chain capable of developing integrated circuits on a world with a different gravitational constant.
Also most collapses to worry about are not "the Earth just became immediately uninhabitable" but instead "there is a complete collapse in civil order". Think the power grid goes down like it did in 2003, but on a wider scale and doesn't come back up. As we go from inconvenience to mass starvation, what happens?
If you hide away, the survivors aren't just going to conveniently die off. They are going to remain, and WILL have a grudge.
If we had room to speculate on the wide variety of disasters that may befall the Earth within the next, say, 200 years, then perhaps hiding underground isn't the optimal best solution.
Aside: I'm sure you'll agree that it'll be easier for Elon to keep his family alive if he's adequately defended. Regardless, he might not have a choice. The third amendment was not always a thing.
As an example of the difference, consider "widespread crop failures followed by food riots causing a general breakdown of transportation networks". The social order is destroyed. But the air is still breathable. And where you live the local crops might even have been fine until pillaged by hungry people.
On a side note, the 3rd amendment has only come up in one legal case, and it was decided in that one that the violation of the 3rd amendment happened, but the government had a qualified immunity because a reasonable person would not have known of the rule. See https://en.wikipedia.org/wiki/Engblom_v._Carey for the bizarre case.
We also use other limited resources in unsustainable ways even if it won't deplete in the next 50 years it is obviously inevitable. I hear about usable sand for construction being depleted at a rate faster than it is replenished.
Good news is that it's not "real." It's numbers in a database. The stuff, knowledge, and experience that we have is real.
At least thats how I see debt...
Think of it. A few centuries ago, there simply wasn't $80000 dollar in the whole world. You'd be quite wealthy for having a single dollar.