Greece and China have reminded me that the global economy makes no sense

//Greece and China have reminded me that the global economy makes no sense

Greece and China have reminded me that the global economy makes no sense

It has been a long running cliche that the US owes China “all the money”. We have been taking out loans from them for ages and ages. It is often thought that China could basically take our country the moment they want. You would think then with this belief that we are constantly increasing their wealth that China would be rock solid financially. You’d be wrong. If you don’t like CNN you can find articles about China’s stock market all over the internet. Their shit is falling apart. Something like two decades of constant growth has been in a crazy death spiral for a while now.

The Chinese government is in a panic and it’s looking pretty dire. At this point businesses and the government are both pledging to put money into some kind of fund to help turn it all around. But here is China, lord of debt, who is now feeling their own crunch. The US owes China, and apparently China owes enough people to be in danger. Then on the other side of Asia (in a land known as Europe) you’ve got Greece. Greece owes a lot of people a lot of money. While that amount of money is trivial compared to how much banks owed not too long ago, it has raised a pretty nasty precedent apparent.

Greece is correct to point at austerity and say “That is a foolish plan.” But it is peculiar to me that nobody has gone to jail for this. Goldman Sachs basically created this crises and yet they seem to have walked away completely free. This is obscene to me. How any company could nearly destroy an entire currency is insane and really gets to why I don’t understand the economy.

As I explained it to my wife. Let’s say you have three people and one dollar. The first person lends the dollar to the second. The second now owes the first a dollar. We have 1 dollar and 1 dollar of debt. The second, for whatever reason, lends that dollar to the third person. Now we have one dollar and two dollars of debt. If the third then lends it to the first, for whatever reason, you now have 1 dollar and three dollars of debt.

Debt in this situation continued to increase while actual value remained stagnant. While I’m grossly oversimplifying this appears to be what is happening globally. Everyone is in debt to everyone and there is a dramatic disproportionate amount of wealth creation being had. The big money now is in lending other people money, not actually creating things or doing things. It’s crazy and confusing to me. Greece had to close their banks because everyone was withdrawing their cash in Euro (as opposed to a worthless new Greek currency that might be coming).

Whatever country you live in could collapse tomorrow if enough people withdrew their cash at the same time. It’s absolute insanity. The economy of a single nation makes very little sense to me, but globally? That makes absolutely no sense at all.

By | 2015-07-06T21:06:05+00:00 July 5th, 2015|Journal|Comments Off on Greece and China have reminded me that the global economy makes no sense