The Global debt is around &$260 Trillion which is more than three times the size of the global economy, according to an analysis by the institute of International Finance.
Now the question arises, who do we owe this ridiculous gigantic amount of money? We basically owe this to our future kids.
I found a good answer.
**You save money, let’s say one dollar, with a bank or invest money in a fund controlled by a bank.
The bank then loans out seven dollars for each dollar saved. They create six dollars out of thin air. This is called fractional banking.
Who do they loan it to? To businesses, governments and consumers. These parties pay interest of say one dollar a year.
For each dollar interest received, the bank loans out another seven dollars. And so on.
Businesses and consumers generally pay of their loans, unless they go broke. If that happens they default on loans and banks run into trouble. Banks then need to be rescued by the government. This is called a bail-out.
Governments generally do not pay off their loan, they refinance. The debt of some countries has risen to staggering hights.
Who has to pay for the national debts and the bail-outs? The tax-payer. Because debts rise, interest increases. Thus the governments needs more and more tax revenues.
How do they do that? Answer: they create inflation by printing money. Printing money solves the problem for the government in the short term by:
Paying off the loans with the printed money;
Additional tax revenue because inflation will cause wages to rise.
Who will be paying for the inflation? Savers are losers. But the worst losers are our unborn children. Because governments represent the people, any debt of the government is a debt of the people. A child who is born in the US today already owes other people somewhere in the world over $200,000 before the cord is cut.
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