Here is a website on this website they are talking about debt in China the largest communist country still in existence. While reading the article I was struck by a weird and quite terrible thought. If the state runs the banks, and the state lends itself money, why can’t they just wipe out the “debt” and start over. It is like saying that you owe yourself a quarter and then saying “aw that’s okay, you don’t have to pay me.” I know that would send ripples throughout the world economic circles, but isn’t that the true bottom line of the situation.
Most debt in the world is all on paper. There really isn’t any hard product between most of the debt. It is all in the minds of the lender and the debtor. The Debtor feels and obligation to pay for something even thought there is nothing there to pay for.
In a way that is how our financial system works. There is some perceived value of something because we say it is valuable. Take gold for instance. If the world were really to collapse why do people think gold would be valuable. I can’t build something out of it. I can’t eat it. The only thing I can really do with it; is to make jewelry with it. It only has value because we think it does. If the world were to collapse I would much rather have ammunition and guns; food and water; shelter and safety than gold. All money is like that. It has value because we think it does. We have confidence that other people will give us things in exchange for a little piece of paper. The more little pieces of paper you have the better off you are. Only because other people believe that.