Quote:
Originally Posted by Rob
One thing I don't get is that if everyone is owing everyone money, who actually has the money that has been loaned in the first place. Or is the reality that this money never existed and the economics that have fuelled the industrialised world economy always been on a false pretence that has now been exposed as one big lie? And assuming that is the case, are we very close to a real meltdown as nobody can pay their bills.
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I've been puzzling over that same issue for some months now. As far as I can tell the money doesn't actually and never actually existed. If you look at it from a personal level it seems to be easier to comprehend. Suppose you go to your bank for a loan and they grant it. They then credit your account. Now YOU have a debt and the bank shows that debt as a positive value on their accounts. However, no money has actually been moved around, the bank has created that credit out of thin air.
Apply the same logic to international finance. These numbers are apparently created in the same way to balance the books between countries. It all appears to be a 'trust' game with everyone involved agreeing to play the 'fiat' game by the rules. The big banks hold immense amounts of imaginary money in the form of these debts which apparently makes them quite wealthy.. However, it all depends on all the players continuing to honour this insane system.
Now suppose one country says "I'm not playing anymore and you can't have your monopoly money back". Oops, suddenly a load of wealthy banks are revealed as rather the opposite. And what happens if a major number of Eurozone countries say the same?