Friday, 23 September 2011

Not All Debt is Real Debt

While discussing China saving the world today I came across what I think is the crux of the difference between the Post Keynesian view of the world and the 'Sound Money' crowd.
Debt is a promise of repayment with future work and energies.
That is only the case if the debt in question is denominated in a liability you do not have monopoly control over.

When you go to the Bank of England with your £20 note and ask them to fulfil the promise on the front of it, you will get another £20 note. That is not future work and energies. That is an accounting journal.

Some debt is real debt. The rest is just an accounting liability.