You know why I think some kinds of statistical information and slick Infographics economists keep feeding us all with are so self-congratulatory for them but so self-deluding for us?
Take a look at this chart below :
The world’s wealth today tops $ 100 trillion !! Wowww! It makes one want to believe in it, stay awestruck over it and cheer for all humanity on the planet, of course, on account of it.
But then pause for a second and think about this: Compare how we regard global GDP and how we reckon Individual or Corporate Net-Worth….
If a father were to tell his son or daughter “I’m going to bequeath to you all my assets and wealth to you … a $10 million !” and does not reveal that the same assets are saddled in fact by a 20-year mortgage loan outstanding amount of $35 million on the books…. what then ? Should the son or daughter congratulate themselves on their future inheritance of wealth or the accompanying inheritance of debt? Does Gross value of wealth or assets signify delusion or reality ?
Real Wealth … global, corporate or individual … ought to be always expressed as Total Wealth minus Total Debt? The term Gross Wealth or Gross Domestic Product (GDP) is self-delusional without reckoning Debt. If you ask me, I would say therefore that very term “GDP” should be banished from the economist’s lexicon forever and that’s the only way to erase it from public consciousness. And that’s the only way to rid the world of this conceptual toxin called GDP … a toxin that today we know only makes the global GDP of $100 trillion seem real nothing but is nothing but chimera when you see this chart below :
Global Wealth or GDP is thus $100 trillion minus Global Debt of $352 trillion!
In other words generations of your children and grandchildren on this planet will be paying a $252 trillion as the price of inheriting from you $ 100 trillion!
Who is fooling who here? The answer is thanks to our economists who help keep us all stay infected with this toxin called “GDP growth” which we are led to believe is true measure of humanity’s prosperity, it’s we fooling ourselves!
And that’s called self-delusion.
Sudarshan Madabushi
Sir, you are drawing attention to a very important issue. The rise of global debt since the Reagan-Thatcher years has been indeed startling.
Imagining a global „balance sheet“ indicating the global debt of $352 trillion, I became curious, what is supposed to be found on its assets side.
It is estimated that in 2020, the total value of global assets, which include financial and non-financial assets such as land, buildings, natural resources, and financial assets, was around $360 trillion. Such estimate can be found, for example, at https://www.visualcapitalist.com/all-of-the-worlds-wealth-in-one-visualization/ (It’s important to note that the value of global assets fluctuates and changes depending on various factors such as economic conditions, interest rates, and market trends.)
Total match!
What can we figure out from this?
There would be a „net worth“ on this imaginary global balance sheet. It’s immediately obvious that it‘s equal to about ZERO in our times. The meaning of this is tremendous to realize.
But let’s go further. From the same source (please see the link above) we learn that in 2019, total world wealth (net assets) grew by $9.1 trillion to $360.6 trillion, which amounts to a 2.6% increase over the previous year.
Is this $9.1 trillion annual increment outlines an upper limit for an annual debt increase? And what’s in reality? These are interesting topics to ponder.
Furthermore, the source of the $9.1 trillion increment, apart from fluctuations of asset valuation, must be what’s left of the annual GDP after consumption, depreciation and waste. That’s an analog of „retained earnings“.
So, the big picture emerges: the humankind labors hard (or not so hard) to leave a mark on this planet. Every year witnesses further build up of global wealth at a rate of a few percent. Overwhelmingly, GDP gets consumed or wasted. At the same time strange thing is happening, for each unit of the newly created wealth there emerges a new unit of debt. What does it mean? I don’t know yet, but it would be very interesting to find out.
Well argued! 👍👏