I’ve often wondered that. Economics is something I just don’t get.
I picture six people in a room, and one borrows money from another, who then borrows money from the third guy, and so and so on. And when the borrowing stops, there is no money in the room.
Makes no sense to me. The money doesn’t go anywhere. It just changes hands. And yet we seem to live in a world in which every country on the planet is broke and in debt.
How?
One guy is the Fed and has a stash of cash over in the bedroom.
That’s a great question. I see how the legality of loans and treaties could make balancing transfers difficult between countries, but that’s usually a temporary thing. Explains depressions and why they eventually end.
There are only three kinds of true wealth and they are mined, grown and manufactured. Infrastructure is wealth also, buildings bridges etc. Everything else is service of that wealth and does not create wealth but are wealth enhancers. So if an economy slows or even stops completely the eventually then food gets eaten, manufactured goods get consumed and thrown away and oil/gas/ore is used up. Leaving a crumbling infrastructure as the only wealth left. So wealth can disappear.
...Makes no sense to me. The money doesn’t go anywhere. It just changes hands. ...
What is happening is that governments expand the money supply by issuing bonds, or just plain printing more money. The result is you actually expand the amount of money in circulation, while at the same time devaluing its worth. The expected results are that the economy will expand with the added liquidity and you will be able to retire the additional debt (bonds) with the added taxes from the expanded economy.
The problem that emerges is if you expand the money supply faster than the economy grows, you run into the problems of inflation, or if the economy, does not react to the added stimulous, is deflation, which is the big concern now.
Because the first guy to loan you money printed it and promised it was worth something. That is why the globullists are hell bent on a one world system, it will necessitate the destruction of old currencies and start the cycle of deception anew.
“Makes no sense to me. The money doesn’t go anywhere. It just changes hands. And yet we seem to live in a world in which every country on the planet is broke and in debt.”
Respectfully;
The people who took received the money are not broke and in debt. It’s the government entities that decided that spending money and printing it would be possible forever with no consequences who are obliged to repay it.
The money is in vehicles, homes, food markets, “investments” in solar collector companies, “saved” automotive companies, “infrastructure” projects that never took place, “free” phones, “free” food, “youth” programs, “free” school breakfasts, lunches and dinners, “free” tuitition, and every other excuse for government taxing, spending and borowing that results in debt that must be paid off.
The money has to be repaid but there’s noone left to repay such astronomical amounts of money that were thrown out with no hope of return, camouflaged as “investments”.
IMHO
Not with fractional reserves. The banks lend out much more money than what really exists. It is only appear wealth. True wealth is out right ownership of tangible assets.
Economics is a "science" (I use the quotes because it is a human science, not a traditional science of the physical world), while finance involves mechanisms of trade that relate to economics.
Possible answers
The Kleptocrats steal it — leaving their subjects in debt.
Aaaannnd. . . it’s gone.
. What if someone in the room buys some corn from one of the other people in the room. The guy growing the corn just created money from the ground. In essence, he created wealth. Now there is more money in the room because someone brought some corn into the system.
Because in the real world the room has 6 people and a bank. The bank has $100 and under the current reserve requirements is able to lend ~$95+ to each of the 6 guys. Voila, the “money supply” has just expanded by close to 6X...
Money is not a solid object anymore. It is ones and zeros in a computer memory, created by a bank, and supported more by psychology than anything else.
In other words, something is worth what people are willing to pay for it.
To some, a $300 silk tie from Nieman Marcus is worth it.
To others, the $300 would be better spent on heroin.
The U.S. dollar is also a commodity, exactly like that—based on perception—except that we have so far caused the oil powers to require it in return for their necessary commodity.
As an aside: The attack on oil is actually an attack on the American economy, which for the past few decades has been based upon the export of dollars . . . ultimately, for oil.
Because consumption also takes place. What is a hundred dollars we of groceries worth 2 weeks later?