RE: Debt And The Economy
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Debt is strange. If you are a mortgage holder, a bank will not negotiate with you if you are having trouble making payments. You have a contract, and they want their money, like in the deal.
Yet, banks are willing to sell a nonperforming note at a discount to get it off their books. You could buy a note that's a few months behind for a good discount. Often, note buyers can renegotiate with the borrower and get a good yield. There is an industry for nonperforming notes.
There are debt collectors who buy bad debts and are able to harass enough people to make a decent return.
Debt can be traded. Dollars are simply notes that are always at full maturity. Bonds are notes that are discounted. Both represent debt, not actual assets as we are no longer on the gold standard.
The point is, debt isn't something that is hard coded into fiat. There is room for negotiation and for packaging debts and selling them at a discount, if governments are willing to get creative. Much of it relies on the ability to discount a debt for fast cash. The US could say, 'Kerplakistan owes us $300 billion. We'll sell you the note for $150 billion in cash." This gives the buyer some wiggle room to lower the debt by say 20% and still make a decent return on the refinance.
Of course, unlike mortgages that have underlying collateral. Government debt doesn't get you anything other than more printed fiat. It's not like one can go take away some acreage or foreclose on a government property.
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That is true. However, a good case could be made that currencies are backed by the productivity of their economies (i.e. populations).
Of course, debt is exploding yet economic growth rates are going down so that highlights the problem of the current situation. The productivity backing these currencies, overall, is waning.
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