On a serious note. Are there any countries without any national debt? Because if not then clearly capitalism is broken right?
Well, that’s a misleading title. All the countries in their list have some debt, just less than most.
All countries carry some debt, because they need to show a history of reliably making payments on that debt in case they need to borrow money in the future for whatever reason. Not all countries, however, run massive deficits every year.
I’m not the biggest fan of capitalism myself but the existence of debt does not mean it is broken. Debt is a mechanism to allow for solid investments, e.g. building infrastructure or schools that will create a net positive in the (far) future.
Germany for example has enacted a Schuldenbremse (debt-break) in 2009 and forbids our states to take on new debt and limits the debt taken on the federal level to a minisule percentage of the GDP. Our infrastructure is currently slowly but noticeably crumbling away, bridges are getting closed for heavy traffic and experts say many of them have become irreparable due to missing maintenance and need to be fully rebuild in a few years. The local military barracks are in such a desolate condition that the soldiers need to drive two towns over to shower. We might not take on financial debt, but an infrastructure debt that will demand an even bigger toll on us.If 90% of the countries in the world are in debt and corporations have more money than god, then clearly the system isn’t ideal.
$34T is insane for one single country.
As for infrastructure, proper taxation of corporations would raise more revenue to fix such things. If Amazon is contributing to the breakdown of roads due to all the couriers then they should be paying more tax.
Look at the water companies in the UK. Paid out their shareholders for decades and did nothing to improve the infrastructure which is now likely to end up with them being nationalised after they’ve looted what they could.
I think you entirely missed the point haha
I’m as much of a leftist as you are, and I’m sorry if I sound a bit pretentious here but the analysis you’re doing of debt is wrong.
States generally create their own currency, and generally get indebted (i.e. issue state bonds) in their own currency. You can see how a state that creates its own money doesn’t really need debt to be able to pay for stuff, debt is just a political decision, sometimes misguided by people who don’t really understand it properly, sometimes properly guided by experts.
A state doesn’t need taxes to fund itself either. If it needs to build roads, it can literally create the currency to hire the workers to extract the resources, plan the roads, and build them. Taxes have many purposes such as removing money from the private sector to prevent or reduce inflation, disincentivizing certain behaviours (for example tobacco taxes), lowering inequality (for example progressive income taxes), or even making people use your currency instead of another (people in the private sector will end up using your currency if they are forced to pay taxes in that currency).
Taxing companies and rich people is useful because you place the burden of reducing money for inflation purposes on them instead of on the lower income people, and therefore you reduce inequality, so I obviously support at the very least heavy taxation of income and wealth of private individuals and companies, but the state really doesn’t need taxes to fund itself since it creates its own currency and pays in that currency.
So I preface by saying finance isn’t my forte, but I would like to raise a few thoughts I had whilst reading this.
The first is that the state can just create more currency to pay for things, which to my understanding is not always the case, if you saturate the market with your currency it becomes less valuable and we end up with runaway inflation.
The other point is on the no need for taxes and that we tax the richest and the corporations to remove some of the money supply, clearly this isn’t something that happens as taxes for both of these is rarely raised at the same rate it is for regular people.
Finally, we have most people, in the western world at least, living literal pay check to pay check whilst the likes of Microsoft have gone from less than $2B to over $3B in a few years. The same can be said for Nvidia and many many more.
Edit: I guess my point is, just because this is how things work doesn’t mean things shouldn’t change. Clearly something is broken.
if you saturate the market with your currency it becomes less valuable and we end up with runaway inflation.
Notice how I didn’t say that the state should create infinite currency, I’m just saying that the limit isn’t based on taxation. And funnily enough, if you look at basically all inflationary episodes in developed countries over the past century, they’ve happened as a consequence of problems with the supply of goods, not as a consequence of excess currency creation. 2022 inflation? Energy prices and supply chain bottlenecks as a consequence of Ukraine invasion and post-covid effects on production. 1970s inflation? Fuel prices… Really, I encourage you to look up a graph of inflation for, say, the USA, over the past century, to look at the inflation peaks, and to make a Google search “crisis of 19XX”. You’ll find that the inflation was in basically all instances prefaced by a big external event, and not by money creation. Moreover, many of these inflation events happen simultaneously in countries such as the US, UK, Japan and Germany, all of which have different central banks, different currencies, and different rates of currency creation.
Also, there’s countless examples of vast increases in money supply without inflation. In the decade of 2010-2020, the EU has created VAST amounts of euros with basically no meaningful inflation. You can look up the Euro monetary mass M2 or M3 over the past decade, you’ll find a huge boom, without any effect on inflation. Again, all of this isn’t to say there isn’t a practical limit to how much you should create before destabilizing the economy, just that the limit is absolutely not imposed by how much you’re collecting in taxes, and it depends a lot, for example, on which part of the capitalist boom-bust cycle you are. Another argument for this, is that money creation doesn’t have to be just that, it can imply an increase in the amount of available goods and services. As a stupid example, the US government could open a state-funded iron mine and a refinery, hiring all the employees with newly minted currency, and that would effectively increase the total amount of goods and services in circulation, which can balance out the supposed inflationary effect of the currency creation.
About taxes not being currently used practically to reduce inequality, I agree, but that’s not a point against the nature of taxation, that’s a point against the current decision of who we’re taxing, what for, and how much. I absolutely agree with ramping up the taxes of huge multinational companies and their directives. It’s just, if we see taxes not as a necessity to fund the state’s activity, but as a necessary tool to reallocate money in the economy from rich people to poor people and to create a welfare state and a great infrastructure, it’s much easier to explain why Amazon should pay 90% taxes and your average low-paid worker only 10%.
As for your last point with inequality between companies’ income and that of people, I couldn’t agree more, I’m a hardcore leftist and I want to reduce wealth inequality extremely, again, I’m not arguing for lowering taxes “since they’re not necessary”, I’m arguing for reallocating the taxes in a much more progressive way to disincentivize certain behaviors such as speculation, and to reduce inequality between the richest and the poorest.
Thanks for the civilized discussion, it’s good to be able to actually discuss this stuff.
You missed the biggest flaw in the “money creation = inflation” argument. That would be Japan. They’ve been printing money full tilt for the last couple decades, and are just barely staving off deflation
Interesting, I’ll look up the monetary mass of Japan over time, thanks!
No. Thank you for giving me some food for thought and areas to research to further my understanding, rather than talking down to me due to my lack of knowledge on the macro economics of the world.
I really do appreciate you taking the time.
To be fair, it’s not you lacking knowledge, it’s a fundamental problem in the field of economics, which because of political reasons, has been dominated for the past decades by neoliberalism. The problem is that neoliberalism reaches conclusions that have been falsified by experimental data in several occasions, but since it serves the ideology of the elites, it’s peddled constantly in media by prominent “economist” propagandists. If you’re interested into the topic and this modern, more empirical vision of the economy, the field is called “Modern Monetary Theory” or MMT. There’s a documentary released recently about the basics of it, applied to the US, called “Finding The Money”, and I can also recommend the YouTube channel called “Unlearning Economics”, which isn’t MMT per se but it’s very keen on treating economics through empyrism.
That sort of thing can happen in extreme situations. Zimbabwe and Weimar Germany are the most prominent examples. Both examples involved not having enough stuff. When there aren’t enough necessary goods to buy and people have plenty of money you’re going to get inflation. Using the right combo of subsidies, government run production, purchase quantity limits, reserves, vouchers, and price fixing you can ensure the supply is stable and eliminate inflation even if there’s lots of money.
That’s true. That happens because people are stuck in the narrative of the government needing a balanced budget, just like a household. It also happens because the owners and the corpos use all their money and power to ensure workers pay taxes and thus decrease worker money and power.
Yeah, if the population was educated on MMT the ability to bring corpos to heel would be significantly increased. People arguing for it are fundamentally arguing for a change in how we think about money.
No, if anything it shows capitalism is working. When you can increase or tighten money supply (ie when you can print and shred money) debt isn’t what you think it is. A state with money issuance powers is not a household.
I can thoroughly recommend “The Deficit Myth” book by Stephanie Kelton, if you wish to understand modern monetary policy better.
https://youtu.be/1JpZZcD8C4M?si=efc3KJCUSP9k5kP4
And to answer your specific question, there are countries with very low debt, but that’s usually due to either not being able to “borrow” money (again, borrowing doesn’t always mean what we would think as borrowing when you can issue your own money), being locked to another currency (Denmark is a great example - amazing economy and locked to the euro) or having a large generation of wealth (typically oil). Larger countries can issue debt more easily.
Here is an alternative Piped link(s):
https://piped.video/1JpZZcD8C4M?si=efc3KJCUSP9k5kP4
Piped is a privacy-respecting open-source alternative frontend to YouTube.
I’m open-source; check me out at GitHub.
The debt we’re talking about here (as opposed to deficits) is practically all bond sales, isn’t it?
Yes more or less, that is indeed how the central bank creates money most of the time; the government creates a piece of paper that says “IOU 100k and I’ll pay you 5% interest on it for 20 years and then I’ll buy it back from you in 20 years” (that’s a bond), which they sell on the open market, at auction (where the variable element is the interest rate someone is willing to accept). When the central bank wishes to increase the money supply they buy government bonds on the open market (ie from other holders, rarely from the government directly) by materialising money out of thin air.
When they wish to shrink the money supply they sell their government bonds and destroys the money that they receive from the sale.
Yeah. It’s another form of creation of money. It’s a useful tool for some things, like the central bank being able to control interest rates in the economy, as shown during the recent inflationary episode.
What do you mean by Denmark being locked to the euro? It has it’s own currency
Denmark has not introduced the euro, following a rejection by referendum in 2000, but the Danish krone is pegged closely to the euro (with the rate 7.46038±2.25%) in ERM II, the EU’s exchange rate mechanism.
So if euro gets stronger, so does the krone. If euro drops, so does the krone.
Okay, makes sense
<giggle.gif>
Not really. They’ve got a version of the euro, called kroners, which allows Danes to believe they have their own currency. They are locked into an exchange rate band (extremely tight) which means the Danish central bank has to follow every decision the ECB takes within minutes). And this makes complete sense, in that it’s a compromise that’s edible by voters (maintaining the illusion that Denmark didn’t adopt the euro) and edible by business (allowing businesses in Denmark to participate fully in the common market).
And that’s one of the reasons Denmark has such small national debt - they can’t really invent new money because it would break the bond with the euro. So the Danish budget is sort of a “household budget” in that in contrast to, say, Sweden, they cannot create money (meaningfully) and the books have to balance (which they do; lots of oil, Novo Nordisk, Maersk, Vestas and a few other big international plays who still pay a majority of their tax in Denmark obviously helps a lot).
I heard that the us still has good credit because although it owes trillions, it is worth quadrillions (all lands and assets), so not really a concern
Worth pointing out that credit scores are completely detached from the government. They are entirely private industry, that is collecting and selling your financial info without your consent or opt in. If you were born before 2004, then they have also accidentally leaked literally all your personal info to the dark web, with literally 0 consequences.
Nah uh! We forced them to pay an hour’s worth of profits to their own charity!
Whats really neat is that modern credit score systems are only 40-50 years old
And what’s sad are the number of people that act like credit scores are a force of nature we just have to accept
Well, since the billionaire class doesn’t pay it’s fair share of the tax burden, that money has to come from somewhere.
This is a popular thought, but even if we take 100% from the billionaires it pays for almost one year for the US.
Now imagine if we had taken 30-40% from billionaires every single year… hmm…
We could have a couple year of almost not having a deficit.
While I understand what assumption you’re running under no one said for only billionaires to pay. The idea is progressive tax brackets the less you make the less you pay percentage wise. We also need less loopholes for the people that can buy lawyers and manipulate their funds to get out of paying what they should. There is no reason companies and the extremely wealthy should be paying an effectively less tax percentage than the diminishing lower middle class.
It’s not about only billionaires paying, it’s about them not being a magical money source. A higher rate might feel better, but it’s not solving government revenue problems.
Tell me you don’t understand how credit score works without telling me you don’t understand how credit score works
Credit scores are just some fake shit that boomers made up. It’s so dumb.
Only people who are bad credit risks ever come up with this take, lmao.
The sole function of credit scores is to benefit people who are reliably ‘good for it’ when they borrow money. Without them, everyone is treated as just as high a risk as the worst borrowers who are least likely to pay back their debts, and you gain no benefit from reliably paying back your debts. But with them, your good borrowing is kept track of, and good reputation means lenders trust you more to pay your debts back, so they’re willing to lend more, and they are willing to charge less interest.
Removing credit scores changes nothing for bad borrowers, and hurts good borrowers.
The thing is you’re forgetting who are good borrowers and who are bad borrowers. A person with a low income with a precarious job will be a very bad borrower, and imposing a higher interest rate on them on top of that is just the final nail in the coffin. We generally believe universal healthcare is good, and we don’t want to discriminate “good health” and “bad health” people and make unhealthy people pay more, do we?
imposing a higher interest rate on them on top of that is just the final nail in the coffin.
That’s the only way to justify loaning to people like that at all, given how much more often they default (and the lender never gets repaid at all). If lenders were forced to give the same interest rate to everyone, that would cause them not to lend to “A person with a low income with a precarious job” at all.
If the lenders operate with the purpose of maximizing profit, then yeah, it makes sense not to loan money to people in precarious situations except at high interest rates, that’s my whole point: that’s evil, the profit motive leads to evil decisions. Let’s have public banks instead, where interest rates for loans are equalised, in the same way that every taxpayer gets identical access to healthcare regardless of how much they contribute through their income.
You’re discounting the people who have always lived within their means and so never took on debt. They also don’t have good credit. They’ve never missed a payment. They’re good for the money. But they don’t have a history showing that because they’ve never needed that.
You’re discounting the people who have always lived within their means and so never took on debt.
No I’m not. Those people are unknown quantities, and so also suffer if credit scores go away, because bad borrowers are worse than first-time borrowers, so without credit scores, first-timers will be treated worse.
I’m saying people who don’t play this credit game but otherwise are good financially also think it’s dumb. Not just bad risks.
…except that it used to be that your ability to secure a loan was based on where you went to school, how firm your handshake was, and if you happened to have the right skin color and sex organs.
The current system certainly isn’t perfect; and if you’re denied a loan you have a legal right (in the US) to know the reason.
There are systemic issues, to be sure. But the nominal goal is absolutely better than what we used to have.
We can’t ignore that there are other ways of doing it besides credit scores or overt racism. Some countries have no credit scores at all and just base loan eligibility on your salary and employment history.
And how exactly is guessing your credit worthiness based on those factors a better system than literally keeping track of what happened each previous time money was lent to you, when it comes to making a decision on lending money to you?
This is like arguing it’s a better idea to select NBA players by their height, than by their performance in high school and college basketball games.
Sorry, I’m not sure how to answer “how is measuring your credit worthiness based on your income a good way to determine how much to lend you.” I would think it’s pretty obvious that your capacity to repay a loan is dependent on your current income, not how many loans and credit cards you’ve had active in the past.
1 in 4 households earning over $100,000 a year live paycheck to paycheck–not because they can’t make ends meet, but because their money management sucks. A high income has very little relationship with responsible borrowing, despite what many would assume.
If you stop paying your car or home loan it gets repossessed, people with bad money management still have incentives to pay those on time.
My mom should have amazing credit, but she doesn’t. She does literally everything right.
Meanwhile I have really good credit and have no idea why.
It’s just made up shit and we should find a better system.
and have no idea why
Just because you refuse to learn doesn’t mean it’s magic. It is very simple to understand why exactly you have the credit score you do. Maybe mommy isn’t being entirely truthful with you.
I’d definitely recommend getting a credit report (not from the websites that advertise with an insane jingle, but from the actual credit bureaus — you’re entitled to a free report). Mine had debt from a relative with a similar name; I was able to get that removed. They will also tell you in more detail what goes in to calculating it.
I agree that it’s not perfect, and often very opaque, but you should be able to get some understanding of why she doesn’t have good credit.
Does your mom have debt that she pays on time? Is her “doing everything right” visible to credit scoring agencies and aligned what statistic says about good borrowing customers?
Credit score doesn’t mean “runs a good personal economy” it means “likely to pay their loans on time, consistently, based on statistics that are observable”.
Most people who think they understand how credit scores work…don’t understand how credit scores work.
The biggest things are loan-to-limit, payment history, and average age of accounts.
Loan-to-limit is easily achieved by keeping balances below 50%, and ideally below 30%. It’s also helped tremendously by not carrying a revolving balance (paying the statement balance in full each month) and not closing idle cards.
Payment history is of course helped by making payments on time.
And AAoA is probably the easiest. Just don’t close cards. Call and “downgrade” a card if it isn’t worth the annual fee. If there’s no annual fee, there’s no reason to close a card.
Just make sure you use it every now and then and pay it off. I sock-drawered one of my oldest cards a long time ago and it just closed last month from being idle, and that took a hit to my score (high limit gone and it’s no longer incrementing time in my AAoA).
It’s also worth mentioning that credit scores don’t matter until you are looking for credit. Credit cards are probably the easiest way to build credit, as long as they are used properly. But they’ll give a basic card to any schmuck. Where it really matters is getting mortgages and larger loans like cars. That’s where having a good score matters. And also better cards that earn more points/miles/cashback and have other fringe benefits.
Crypto
Unstable, and mostly used for speculation or illegal activity. Ew.
for now
Forever until a powerful state starts to charge taxes in crypto.
Technically, at least where I live in Canada, you have to pay taxes on crypto income and capital gains. It’s possible for goverments to track crypto transactions.
That being said, if you think normal fiat currencies are without crimes and illegal activities, you’re kinda stupid.
I’m not talking about the current way, I’m talking about the possibility of a privacy-focused crypto, issued by the state, where transactions can be made private with the Blockchain. This crypto, as it would be used for normal transactions, wouldn’t have more variability or speculation than the variability and speculation in converting US Dollars to UK Pounds. The post talks in hypotheticals, I do too.
I don’t think fiat currency isn’t used for illegal activity, I think crypto is mostly not used for normal transactions.
-1000 social credit for questioning government
Ugh… Here we go again with the social credit… It’s been debunked so many times that it’s not even funny anymore. You can ask any Chinese person about it and they don’t even know what it is because it’s really not a thing. Financial credit scores on the other hand…
Hey, buddy
Ever heard of a joke?
Yeah, it might have been funny the first time 10 years ago, but repeating the same joke over and over again, often makes it annoying and unfunny, as is the case with your comment, especially when it’s not even accurate.
Well, 39 people disagreed
Try a buttplug. May help you stop being such a tightass
Plenty of idiots around to upvote your shit, no doubt.
Yawn
We ain’t China…. Yet
A social credit score would only harm the bad people
Who decides what’s bad and what’s ok?
The same system which makes laws
You mean the system that makes it illegal to have an abortion or to marry the person you love if they happen to be the same sex as you? Sign me up then cause, yeah, only bad people suffer in that system
Sounds like you don’t like laws and rules in general
Aww hell nahh if they ever do that I’m out of here going to another universe see ya
And it’s rising at $1 trillion per 100 days in interest.
Hey bud, guess what? The gov don’t hand out a credit score, the banks do.
This entire meme is just OP admitting they don’t know how finance works in the US.
It’s a meme not a dissertation on finance.
From one pedant to another, you’ve gone to far this time.
How much does the USA have in assets? I’m willing to bet more than $34,000,000,000,000.00.
They could sell Wyoming to Canada, that’d be alright with me.
Canada couldn’t afford it, their monopoly money is worth almost nothing.
The US has a fantastic credit score. Being the world’s reserve currency helps.
And collateral lol
I wonder how many debt collector calls the Whitehouse gets a day
International associations managing countries credit scores are all located in the usa. Therefore the incentive to valorize debt.
