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Wiping the world slate clean

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 mypyrex 13 May 2020

Beyond managing my own bank account i have little knowledge of financial complexities. I find it very mind blowing to hear about the economic impact of Covid 19 with suggestions of economic collapse being the worst for hundreds of years.

What I can't understand(and I know it's a more complex situation than my brain can deal with) is, if ALL countries are in the same boat why can we not wipe the slate clean and start afresh when we're through the crisis

I know this is an over simplifi ation but I keep thinking of the following analogy:

Three people, A B and C. A owes B £10, B owes C £10 and C owes A £10. Thus, without, moving any money anywhere each respective "debt" can be written off.

I know there will be variations in the amounys owed but is my analogy logical.

No doubt some financial whizz kid will be along soon to enlighten me.

3
 Graeme G 13 May 2020
In reply to mypyrex:

I’m not a financial wizz but my take is that post C-19 whoever can leverage the most influence via debt management will dominate world politics.

Why would you want to risk being governed by.....(fill in the blank)

 Lurking Dave 13 May 2020
In reply to mypyrex:

Person A has made no preparations to deal with a pandemic. Person B has dicked around with policy settings and only realised lately that this is serious. Person C had plans in place, acted quickly and is well placed for recovery.

What motivation does person C have for returning to status quo?

OP mypyrex 13 May 2020
In reply to Lurking Dave:

> Person A has made no preparations to deal with a pandemic. Person B has dicked around with policy settings and only realised lately that this is serious. Person C had plans in place, acted quickly and is well placed for recovery.

> What motivation does person C have for returning to status quo?


I see your point. That's the problem, everyone for themselves

1
 Richard Horn 13 May 2020
In reply to Lurking Dave:

> What motivation does person C have for returning to status quo?

There is uncertainty in all scenarios - most are assuming the countries will continue to try and eradicate the disease. Many suspect this is fruitless especially if attempts of a vaccine fail in the next few months. Lets suppose in 1-2 years, CV is endemic in most of the world, most populations are heading towards herd immunity (either deliberately or by mis-management), and open/closed borders start to become completely inconsequential. The A and B countries start trading unrestricted. What does an C country that has cut itself off (for example like NZ) do then, knowing the consequences of opening its borders? 

I am not suggesting the above *will* happen, but its the sort of uncertainty that means countries will continue to push for their own interest.

 dread-i 13 May 2020
In reply to Graeme G:

>whoever can leverage the most influence via debt management will dominate world politics.

That would be China. They are a big buyer of US Treasury bonds (government debt.) Because the US gov always pays their debts, they're seen a a stable investment, that pays interest. They can be used for all sorts of technical things like balancing exchange rates. They can also be used as a weapon.

If China were to dump the bonds, then US would be in trouble. It would cost China lots as well, but war is expensive. Probably many, many times more expensive than crushing your enemy financially. Russia also had lots of US Treasury bonds as well, but they sold them down in small tranches.

I think a  better solution that's been proposed is Debt for Nature. Write off debt in developing nations in return for them spending that money on environmental projects. But that supposes that countries have enough money to spare and the vision to think longer term.

https://www.investopedia.com/articles/investing/040115/reasons-why-china-bu...

OP: Can you lend me £100, but only give me £50? Then I'd owe you £50, and you'd owe me £50. So we'd be even, right?

 Billhook 13 May 2020
In reply to mypyrex:

Its quite simple.  Even if you wiped the slate clean, then you'd still have companies that had gone bankrupt and are no longer there.  

There are many individuals who are now on benefits or reduced pay.  They won't be able to afford goods that keep the  manufacturing world going round - and employing people.  People won't have excess money to invest in new companies or bail out companies who are close to bankruptcy.

It will take a long time (how long's a bit of string), for everything to settle down to where it was before.

Supply chains will take some time to get re-sorted - until then they won't be so effecient so you and I will be paying that bit extra for goods...   and so on.

 Gone 13 May 2020
In reply to mypyrex:

Economics isn’t about a fixed pot of money being shuffled around, but about creating wealth and value. If you employ someone, both benefit, they directly from the money, but the company will overall be benefitting financially by more than that on average. Same if someone has a widget that they sell to someone else. So if these transactions don’t go ahead, everyone is worse off.

consider shares: you are a part owner of a widget manufacturer. Your share is worth less if people believe widgets aren’t being sold or aren’t getting a good price. This causes you to plan to buy fewer thingamyjigs. The thingamyjig manufacturer shares go down. Everyone gets poorer. The ones who were planning to sell their shares to buy footleblits can now buy fewer. So even pure sentiment and changes in confidence can cause wealth to disappear. 

 jkarran 13 May 2020
In reply to mypyrex:

> I see your point. That's the problem, everyone for themselves

Was it a problem when you were winning?

Jk

 Basemetal 13 May 2020
In reply to mypyrex:

Even if you could wipe the World slate clean today, it wouldn't take long for winners and losers to reappear. Differences in abilities, resources and attitudes as well as in location, climate, population density would very rapidly establish something like the status quo under free market capitalism.

Human nature is a relatively fixed quantity, sadly. We look out for ourselves, our families, our tribe (however defined) and most often do so in competition rather than cooperation with others. Witness our every day fondness for rankings and league tables as a low key example of this.

Even 'consumer choice' breeds waste - why use resources to compete with another brand for sales ( creating winners and losers, but needlessly manufacturing similar cars, helmets or phones, say)? And waste ultimately leads to resource shortage and competition.

Something like WW2 utility production standards would have to be adopted globally until everyone has all the necessities - and even then there would be black markets in luxury items. Capitalism can't operate without wasteful speculative production that creates losers as a by-product, and human nature won't tolerate a benign communism ( it's beyond us). So token based economics reflects this. Re-deal the tokens mid-game and watch them redistribute back to how they are now.

The main lesson from history is that we don't learn lessons from history.

 HansStuttgart 13 May 2020
In reply to mypyrex:

> I see your point. That's the problem, everyone for themselves

Of course, who in the western world is willing to give away most of the value in their bank accounts to Africa, India, etc?

 mullermn 13 May 2020
In reply to mypyrex:

> I see your point. That's the problem, everyone for themselves

Why is it unfair that the entities that prepare for a problem suffer less when said problem occurs than those that couldn’t be arsed?

Roadrunner6 13 May 2020
In reply to Lurking Dave:

Many will make many millions of this too.

 Harry Jarvis 13 May 2020
In reply to mullermn:

> Why is it unfair that the entities that prepare for a problem suffer less when said problem occurs than those that couldn’t be arsed?

What about those who, through no fault of their own, are unable to prepare for a problem? 


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