What is Debt?

[Blessed2]

9 hours ago, Phil said:

Debt goes both ways btw. 

 

Whatchu mean?

[Phil]

@Blessed2

Companies, banks & governments loan and also borrow money by issuing bonds etc. Even the Federal reserve (central bank) has debt in the form of US Treasury securities. The Fed’s debt is unique because it also oversee’s monitory policy. The Fed creates money and buys US Treasuries in the market increasing money supply which changes interest rates. The Fed also sells the securities reducing the money supply, again changing interest rates. Interest rates and bond pricing & rates have an inverse relationship, like being at opposite ends of a teeter totter.

 

It’s the same individually speaking. Someone buys a house or apartment incurring debt (the mortgage) which was created from nothing, and then receives rent and the net / profit is created from nothing. The income that pays the rent might come from a company’s operating expenses or a surplus but could just as well be coming from a loan or the sale of corporate bonds. 

 

Micro & macro the systems mirror that duality is apparent, with three cups but never a peanut. A peanut would require actual separation. 

[Joseph Maynor]

The debt comes from what you have to do to get the money.  It's a hungry world.

Edited February 17 by Joseph Maynor