Borrowing from future or the problem of debt

I learned recently that the world is 324trillion dollars in debt. The total wealth that it has generated is around 915trillion . It triggered me to write this article. As I can see there is a problem. A time bomb as someone would call it. Let's talk about why.

The future

The problem of debt.

Imagine you do a startup. You find out that your business has a potential, yet you do not have capital to explore these options currently. So you borrow, as debt. If the business flourished as you expected fine. You get profit, while lenders earn their interest and capital sometime in the future, so they will lend it again. But as you can see there is a problem. The problem of what will happen if you were not able to pay back. Definitely the lenders will try and extract every penny out of your pocket. You will get bankrupt. And there would be a negative mark in front of your wealth number. But what exactly is debt? Why would anyone give you money when they know your wealth doesn't promise gurentee in return but with a risk.

Borrowing from future

Essentially in debt what you as a collector is trading your future. Your future expected earnings, and part of these goes to lenders as interest and installment. Depending on the guarantee you provide lenders may agree to this trading. Yet nobody would be willing to pay you more than your current total wealth, as if you go bankrupt there would be a loss for the lender. Now think about it for a moment. Let's say you own 1 mil dollars and you borrow 0.5 mil more for business. If everything goes fine that's good. Even if you go bankrupt on this new endeavour if you do not borrow more you can come out atleast 0.5mil after paying for the debt from your own pocket. But imagine you get loans from three different people to a total of 1.5 mil. And now if you go bankrupt, either all 3 or one of the lenders will not get total capital. Forget about the interest, they cannot recover their capital. This is the problem of debt.

Generating wealth

World as a 200 people group.

Now consider the world as a group of 200 countries. They all have debts, have borrowed from each other. Governments, companies, public and private. Everyone is in debt to everyone. They use debt to pay debt. Trading their own future. As long as lenders would lend, things can go on. But consider what it means. It really means we are putting pressure on our future generations to earn more returns from the money we borrowed! Ah ha! Of course we are not going to do it as we are happy doing some travelling and writing blogs. But suddenly in 100 more years our children's of children will find out they are billions of dollars in debt. Each one of them and they cannot generate that wealth. And on the other side they will find they cannot recover their lendings. This scenario is inevitable. It will take 100 or 500 years in the future. Faster if a global catastrophe struck as all the wealth generating machines called factories would stop. I wonder what humanity would do in that scenario. Let's look at the positives and possible solutions.

I see no point in thinking about this as one of my problem. I am fine doing my 8-5 shift being a part of wealth generating global machine. It is running smoothly today. But I want to prepare our kids fir the future. I would print a million copies of this message and distribute free to the world while papers are still abundant. While Internet is still flourishing and smartphones are everywhere. Hoping one of those copies would survive into the future post apocalypse.

Waves in front of me

Message for future generation.

Forgive us for borrowing from your future to quench our thirst of greed. There are not thousands but few hundreds of us still think about you. But there is hope. The values we traded as your future is not the real value. It is all a mental game where we give a number to the future. Human consciousness have survived through hardships as it is the nature of it. So you as a child of future who lended your ancestors still have capacity to give a value to your observations of life. Just like me standing in front of this lagoon watching the waves giving it a more value than my bank account. Just use the gift of nature as if there is anything valueble to humans its generated there in your own mind. But you have a better chance of understanding valuelessness of experience, as we here are blinded by numbers.