More on Money & Debt

In today’s Irish Times I learn the following:

1. there is about 10 trillion euro in circulation in the world today

2. in addition there is about 125 trillion euro of classic debt.

Both of these are highly regulated and meticulously recorded and thus neither¬† is capable of bringing down the world’s economy.

When we factor in a third element of wealth in circulation we get a fact that is staggering. There is anywhere from 450 trillion to 750 trillion euros in circulation as derivatives and ‘other loans’. Many are in the form of bearer bonds, so they are linked to nobody but the holder. It is ‘new’ debt created by the selling on of loans in ever more complex instruments so that it is almost impossible to link the loan to the lender.

One financial guru describes them as uncannily like the untitled homes in shanty towns around the cities in the developing world – difficult to value and useless as collateral.

Ireland’s problem is less to do with these forms of toxic assets than it is with the collective madness that seized consumers and developers when land prices were inflated. Values have now dropped as liquidity is squeezed and these assets have collapsed – but they still have some value. These other toxic assets are utterly worthless.

Madness and greed.

Leave a Reply