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Comment by graeme | Hacker News Reader

Doesn't debt have to sum to zero globally? A debt held by one person is an equal asset owed another.

Or perhaps this is a measure of the number of debts outstanding, divided per person, but not accounting for assets.

Not necessarily. The value of debt as an asset is often less than the amount owed, because there is a non-trivial risk that the debt will not be paid back in full. Furthermore, if you are a central bank, you can effectively borrow money from your future self.

Aren't all loans effectively borrowing money from your future self? :)

Not if you default or die. Technically, you're only borrowing from your future wealthier self.

That wouldn't affect the balances though. So if you simplify to liabilities (as you say, non-discounted) + assets = 0, that would be true.

Could also be more, when interest adds up to the debt.

I believe the statistic referenced in this headline is roughly total sum of debt in the world (184 trillion) / earth population (7.6 billion) is the total number of debt per person. I think what you are driving at is exactly why this article is misleading.

edit: I don't think debt is exactly zero sum. When a loan is made, the person who took the load has a debt of the present value of future loan payments(ie with interest accrued and adjusted for inflation). The lender has an asset that is the present value of the loan payments times the probability the loan will be payed off. I might be missing something here though.

Right, if you have US government bonds (or a bond fund) in your 401k, that's included in the total. Your savings is also loaned out to others, and counts toward this number.

Banks don't lend savings (1). They create the money that lend.

1 - http://archive.economonitor.com/lrwray/2013/08/15/banks-dont...

Bingo. It's meaningless to talk about debt without mentioning assets.

Not necessarily in all conversations. The quality of the collateral asset is subject to lots of things.

If you look at what happened during the Great Depression, assets were effectively worthless — demand vaporized and seemingly safe loans secured by valuable factories became junk.

I'm guessing it's the latter. I owe hundreds of thousands on my house, but my house is worth significantly more than my debt, so my net debt is zero.

I'm guessing this is just all debts added together, and then divided by the number of people. And it's probably including national debt, which is ~$58k/person in the US (which is surprisingly slightly below average for countries with debt).

>"I owe hundreds of thousands on my house [...] my net debt is zero."

>"my house is worth significantly more than my debt"

You realize the value of your house dropping by 50% in a year would not be very surprising? And that would be mild, it is all up to which group of people the federal reserve chooses to benefit.

At the end of the day it's still a house.

What does that have to do with owing a bank 300k and then your assets are worth ~150k?

I made the joke (about what is considered a depreciating asset or not) on an S&P e-mini forum a couple of days ago that went something this:

Most people don't buy houses, they buy mortgages worth $x00,000 on an "asset" that goes to being valued at $x00,000 / 2 when interests rates double…

> value of your house dropping by 50% in a year would not be very surprising?

That's crazy, does that happen often in the U.S.?

Not often. Actually there is an interesting distinction here between frequency and probability... but anyway there has recently been a ZIRP induced bubble (~2008-2016), which leads to high prices of various assets in a trickle down way: https://fred.stlouisfed.org/series/FEDFUNDS

Correct. The sum of all assets and liabilities in the world in some unit of account (like the USD) is 0.

So if we say that the average liabilities per person in the world is X, it turns out that the average assets per person in the world is also X.

Interests.

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