I have been wondering about the global debt situation for a long while, and although I know very little about economics, I have never understood the bottom-line about the 'global debt crisis'. I would truly like some help in understanding this issue. This diary was prompted by the article in the Washington Post today entitled "Debt is ballooning into a global crisis". The subheading reads "Developed nations may have to raise taxes and cut programs".
It seems to me that debt is a basic human arrangement on a personal level; if I ask you today for $10 to buy my lunch, then I am ethically required to repay you the $10. This somehow seems very different to me than financiers creating ever-more-fanciful debt instruments to trade amongst themselves, with no obvious ties to actual goods and services, and then when all these debts "balloon" the people and their governments are somehow responsible for repaying these debts. I know that our currency is based on a shared agreement that the dollar has a certain meaning in terms of its purchasing power, and actual tangible debts must be repaid. And we all must operate in this "as if" environment. So if we are all operating based on this collectively agreed upon fiction, if you will, why can't we collectively (through our world leaders, Breton Woods style) get together and decide that this artificially created debt be cleared or reduced? The wealthy financiers would temporarily be "harmed", but I'm sure that class of people will always bounce back and do very well for themselves.
Please forgive me for my naive understanding of this issue and clumsy articulation of my ideas. I really do want to understand why this world debt is so "real" and why the world can't collectively agree to modify the terms.