Yeah it took a convoluted path but that's roughly where we are. The employment level isn't really back to where it was, but in some ways the labor market has become more flexible, with more people working remotely and others taking advantage of the unemployment benefits or flexible work arrangements in order to learn new skills and switch careers. A lot of the shortage also had to do with the somewhat unpredictable shift in demand, rather than a simple supply-side issue. Things aren't amazing by any means, but all of this speaks to the resilience of the economy.

If that was true , how come The entire world is around 350% indebted over total gdp ?
I don’t see why you think someone necessarily as a surplus when someone is in debt .
It’s the reason why 2008 crash happens .
We are in a debt monetary system .
No one needs to be in the positive when the whole world are just printing money .


The article was a respond about your thought of corporations having strong balance sheet .
Which seem to me they do not have .
There is already around 15-20% of zombies companies in the US .
Household , governments and private sector are at record high in debts . .
Obv some are in the positive but as a whole , debts is dominating everywhere .

That's gross, not net. The net amount of debt in the world is, of course, zero. I mean, what do you think is going on, we owe money to some extraterrestrial entities? All debts are owed to someone else that's part of the economic system, there's no escaping this.

How is this so hard to understand? Every dollar owed is owned by someone. Every time cash moves from one entity to another, one entity has a positive cash flow, the other entity has a negative cash flow in the exact same amount.

Money and debt are essentially equivalent when it comes to calculating indebtedness. Money is just non-interest bearing debt issued by central banks. Printing money doesn't change the fact everything nets out to zero.

This makes no sense. Also 2 trillion dollars isn't a lot of debt when you're aggregating across the entire corporate america. S&P 500 has a market cap of 40T.

Maybe we misunderstood each other .
I just felt you interpreted cash flows as the same as debts .

Like take a bank lending for a house to someone .
That money is owe to the bank but obv that bank do not have all that money .
So yeah on paper it fits but IMO on net it doesn’t .
No amount of money in the world exist to cover all the debts in real life .
If for you on net means paper money , I guess yes .

But my whole point was that a strong balance sheet is not strong if it it based in the form of promised debts being paid down in full .
350% debts to gdp world wide .
It’s a long way to “achieve” it’s present real value .

I just don’t see debts value as being a strong indicator of value .
To me it represents weakness .

Isn’t exactly what happens with the banking system in 2008 with strong balance sheet based on debts ?

What are you babbling about? If a bank lends money to someone to buy a house, the money goes to the seller of the house. Again, nets out to zero.

If my wife and I lend each other quadrillion dollars, this doesn't mean suddenly the world is running out of money to cover all the debts in the world. It means we now have offsetting loans and the gross amount of debt is an entirely misleading way to look at the financial situation.

Again, this is symmetrical - if some debt doesn't get paid, the creditor faces a loss, but the debtor gains by an equal amount.

This is complete gibberish. The present real value of all debts, if you count both sides, is zero and has always been zero.

There's no real need to consider the total amount of debt at all if you're trying to make a holistic assessment of the global economy.

You're literally having a hard time understanding that when money exchanges hands, the net cash flow for all parties involved is zero. I'm afraid you don't have the requisite background knowledge to understand what happened in 2008.

The reason to care about things like leverage is you're worried about a specific imbalance - for example, it's possible that a specific sector is highly-levered in a dangerous way while others aren't. For example, it's pretty clear that in 2008, the corporate sector, led by financials, was too highly leveraged, which is another way of saying that the government didn't borrow/print enough money. But it's completely incoherent to talk about there being too much debt in the whole world.

Why should any one care? This is how the market works - do you expect every company to remain profitable forever? 2 trillion dollars of zombie debt is simply not enough to have any sort of systemic impact.

No, you and whoever wrote the below are both confused:

The amount of debt owed by zombie firms increased by 1 trillion dollars because:

Not because:

Obviously the total amount of money owed by zombie companies is higher now that existing companies that were always highly indebted have recently become zombie companies. This doesn't preclude the possibility that zombie companies have added to their debt burden by borrowing more, but "they’ve added almost $1 trillion of debt to their balance sheets in the span" is certainly straight-up fiction.

Montrealcorp, also, you do understand that this is year 2021, the article is from 2020 and they used the most recent quarterly earnings data as of then to determine whether a given company was "a zombie company", which would've been highly misleading due to the temporary impact of lockdowns?

Meanwhile, in the real world:

https://www.spglobal.com/marketintel...slump-65370020

Let’s say the bank give all the money to the seller of the house .
Right after , all the depositors of the bank on that day present themselves at the door and they want to cash out all their deposits ?
What would happen ?
Still net zero ?

Does math stop working because you can conceive of a bank run?

Maybe we do not understand each other .
It’s ok .

Assuming a 100% mortgage, the debt will exceed the sum given to the seller of the house by a significant margin.

If someone wants to borrow 100K over 20 years to buy a house, they will have debts significantly more than 100K.

Sure but the point is that all cashflows have two sides and all debts are assets. If you're counting all future cashflows from debt - and sure that can exceed the principal amount - but there's someone on the other hand receiving all these cashflows. Every one of these transactions has net zero cashflow if you look at the economic system as a whole. It's a trivial observation, but one that we need to keep reminding ourselves of - money and debt are purely social constructs.

For example, a lot of people are worried about the demographic shift being problematic for pension systems (whether national systems like social security, other governmental programs or private) and talk about unfunded liabilities as though the problem is that the world as a whole isn't saving enough. Well, sure, for individual actors and programs, they can save to increase their chances of solvency going forward, but at the level of a global economy, saving via paper asset accumulation is a meaningless concept. Savings are just someone else's debts and how the paper claims on real assets are divided amongst ourselves doesn't magically lead to surplus or shortfalls in productivity down the road. The real problem is the potential shortfall in productive labor relative to the population it needs to support - if every pension program runs a massive surplus today to account for future shortfalls, that doesn't solve any real problem other than draining other sectors of liquidity and just moving these unfunded liabilities to elsewhere in the economic system - likely national governments (this is sort of what's been happening in Japan). Accounting doesn't magically allow us to save up today's labor and use it 30 years later.

In theory, what the global economy as a whole can do to save comes largely down to increased investments in infrastructure, capital assets and productivity growth, but I suspect that most people that are fretting about demographic shifts and unfunded liabilities aren't thinking that spending on infrastructure, basic R&D and education is how you can incrementally contribute to solving that issue. Which brings us back to my point that most people don't really understand the implications of a relatively trivial observation that money and debt are just social constructs and essentially add up to nothing at the global level.

Defaults happen.

Stores of value decreasing in value happens.

2008 says hi.

The debt asset is a nominal one, (till fully realised) from which lots of other instruments derive their value also.

This doesn't change anything with regard to cashflows. If you don't get your money back, then whoever is supposed to pay you back also doesn't incur an associated negative cashflow.

This is again irrelevant when we're talking about the system as a whole - the present value of all cashflows as it relates to any specific debt instrument is always zero.

The lesson of 2008 is that when governments don't borrow enough to meet the saving needs of the private sector (demand for low-risk, fixed income assets), it highly incentivizes the private sector to meet this demand, which increases systemic risks. And it was solved when governments took on enough debt, which in turn improved the private sector balance sheet. Again, the point is that the total amount of indebtedness is zero, so the question is about what is the right balance between the various sectors - adding up the private sector debt and the public sector debt and talking about how it's so bad that we're all so indebted makes as much sense as claiming that it's amazing that the world is so fabulously wealthy because we own all these paper assets. They net out - we owe money to ourselves. For specific entities, they can be assets or liabilities, but if you look at the global economy, the problem isn't that we have to pay all these back or that we have all this free future income.

Ultimately, money/savings/debts all net out to zero - there are only real assets in the real world. The increase in gross debt is merely a consequence of the fact that many entities need to save in ways that aren't necessarily entirely satisfied by owning real assets, which are riskier and/or incur the burden of active management. It's easy to see if the increase in debt is driven by the demand for funds or the supply of funds - long-term interest rates. The decline in long-term interest rates clearly indicate that the increase in debt is due to a glut in savings. Now, it makes sense to wonder why we appear to have such a glut in savings, it could be a consequence of the looming demographic issues in the developed world, growing inequality, freer movements of capital across most of the world or just the world running out of infrastructure projects now that much of the world has been industrialized.

Sure but all of those instruments net out to zero.

X lends to A, 100K flows to A, who defaults entirely, No cash flows back to X.

A invested his 100K in an speculative value bearing entity, sentiment change destroyed all the value of the entity before A could exit his position.

A has effectively destroyed his 100K and X now has a liability not an asset.

.

The cash flow doesn't go anywhere. A still either has the cash or someone else has it. Even if A literally took the money and burned it, the government/CB's effective liability then goes down as a result (money is essentially just debt for the government, though its nature is somewhat obfuscated by the practices of modern central banks).

Whatever convoluted scenario you're trying to conjure up doesn't change a very simple fact that all monetary transactions net out to zero.

That's not what the word liability means. They may have a worthless asset, but they don't incur any liability as a result of their asset becoming worthless.

You added this after I already replied but again, this doesn't change anything - someone else has the original 100K in that case.

Edit: also, in terms of the balance sheet, previously A owed 100K and X was owed 100K, which nets out to zero. After all this, now neither A, nor X is owed or owes anything. Again, nets out to zero.

A non performing loan is a liability for a Bank.

O.A.F.K.1.1, the key thing here is that any actual loss at the global level has to happen in the real world, not simply in monetary accounting. For example, if A borrowed 100K and lost it all because they used that money to 100K worth of apples, and apples predictably went bad, sure, the global economic system lost 100K worth of stuff. But there's no need to look at the debt or consider the role of money - the loss is identical regardless of how A funded the purchase of apples or even if A didn't even buy the apples and just picked them in their own apple farm, which is run via an elaborte system of barter.

This doesn't mean financial imbalances cannot themselves cause real losses in the real world, but when they do, it's by causing actual wealth destruction, not by causing some monetary losses. Any actual problem with debt accumulation, again, when you're considering implications at the global level, has to do sectoral imbalances and how they may incentivize problematic economic behavior. This vague sense people seem to have when they see "Debt is X% of GDP, OMG" type of headline that all this debt means the society at large is borrowing too much, well that simply has no bearing on reality. Debt is just someone else's savings.

I'm not sure if you're randomly mixing up accounting concepts with colloquial meanings of the words or trying to win on a technicality. At least in accounting, sure it's possible to treat future possible losses on a loan portfolio as liabilities, instead of simple taking write-downs, but in that case, the loan itself remains an asset, it's the expected future losses that count as a liability, not that loan itself. In neither case is it accurate to consider the loan itself a liability.

The reality you suppose does not arise from debt = money.

As my example above shows, the bank has the liability of a bad loan, Person A is bankrupt and has a terribly shitty credit rating and assuming no right off still owes 100K+ interest.

This is ok for you because person Y (who sold the asset to A) who exists outside of this arrangement has savings of 100K.

When you add in that debt itself is a speculative vehicle, bought and sold using debt, then the issue of who owes what to who become specifically important rather than disappearing into the hand wave of all it all nets to zero.

Nope.

You must be naïve of standard terminology, when discussing the balance sheet of a bank, an under performing loan is referred to as a liability as standard.

This is not remotely close to being debatable, claiming other wise is simply calling black white.

I know you think debt is meaningless, but being able to actually calculate the exposure of a bank is actually important.

Debt and assets are very real, despite the fact they balance out across sheets. Why? Because attached to those debts are risk that is paid back in the form of interest. When someone defaults on a debt, they got your money which has a higher present than future value and you got nothing for taking on the risk. In aggregate, this can lead to liquidity crises which shuts down the ability to do anything including what businesses are in business to do: create wealth along their value chains. This almost always leads to real economic loss: lost productivity, lost time value, lost risk premiums. For a good case example of the destruction of wealth see the financial crisis of 2008. Had the government not printed money to bail out overleveraged lenders (who can, apparently, just write off their balances because they're social constructs) we would have been in the biggest depression in history and the economy of the world would have been set back by at least 50 years. That's 50 years of economic stagnation, lost productivity, lost lives, lost economic value. Calculate that in GDP.

What happens when the government prints money? Inflation. This is obvious. Each dollar can really be seen as a share in the overall economy. If you have $1 and the economy as a whole is worth $100, you own %1 right to the economy itself, which is composed of real assets. When the government steps in and prints another $100, but economic growth hasn't moved, now your dollar has 0.5% right to the economy. Again, a real economic loss via inflation. Candybar would at this point say "but it doesnt matter, the economy is still the same size as it was before, there's just more money in it." Yet it does matter, a lot, because the overall trust in the system breaks down a little bit when 99% of the people that make up the system lose 50% of their purchasing power overnight. You want to talk systemic threats and economic loss? Look around. People are opting out of the economy altogether now, because they're fed up. Another real loss.

A simple analogy would be lending my very real $1000 to a friend who promises to pay me back $1100 at the end of the year. When he gambles it away, I've lost the $1000 and someone else has gained it, sure, but had my friend worked 100 extra hours to pay me back, a company would have been ahead $500 including their profit margin for the goods he produced and I would have been up $100 in interest. Now that $600 in extra value is gone forever. Not to mention the broken trust, future unwillingness to lend, broadening of the wealth gap (the casino now has my $1000 and I don't have it), and other economic and social side effects of reneging on promises, which are never solely in monetary terms.

In monetary terms the $1000 you lent to your friend is now the casino's money. Instead of you investing the $1100 a year from now, the casino gets to invest it now.

I don't think anyone is arguing that because all monetary transactions are "net zero" that defaulting on loans is overall a good thing.