[simonh]

Those are absolutely excellent arguments for why debt itself, as a mechanism, can be beneficial and useful. That isn't the questions. The question is how much debt is too much, and why, and what happens when the debt level becomes unsustainable.

Greece is an extreme example. They borrowed far more than they could ever pay back and wasted it. When borrowing is spent on things that don't pay back a return higher than the cost of the borrowing, and when that's done on a large scale with no other credible source of income to pay back the debt, both the borrower and the lender get burned. The problem is that you don't always know the return you're going to get on the investment, and you don't always know the full cost of the borrowing to fund it because interest rates can go up.

[belorn]

A central concept in the book Debt: The First 5000 Years is that peasants' revolts occurred when dept level becomes unsustainable. The reason why is that as debt goes up the security of the loans go down, which forces the lender to impose harsher punishment to defaulters. In turn this resulted in usury laws regulating loaning, or in other places making loaning a monopoly right of the state, the church or completely illegal.

Now days it seems that the risk of uprisings are low, and that when either whole countries or people en mass start to default, the governments simply steps in and shuffle tax money or print more in order to stabilize the economy. I don't think we actually know how far that strategy can work.

[hnick]

I enjoyed that book. I think another key point is it wasn't just uprisings, back in the day people literally fled to the hills out of the city to avoid their debts.

Not only did this lead to bands of outlaws roaming the countryside (and eventually posing a risk to the cities), it meant that cities lost a sizable part of their labour force and were unable to function as well.

Hence jubilees to let off steam and forgive all debt, welcoming people back into the cities every 7 years or so.

[chadcmulligan]

The real problem with countries and debt is the people who take out the debt aren't the people who have to pay it off. This is a real flaw in the system.

[panarky]

> when the debt level becomes unsustainable

I'm arguing that you can't determine what the unsustainable level of debt is for the world in total.

Yes, debt can be unsustainable for a family, or a company, or a nation.

But if I, as a creditor, decide to risk my capital by lending to my neighbor, or to the United States, that increases total world debt, but it's not necessarily bad or dangerous.

In the case of Greece's debt crisis, the important question is why creditors lent too much to a nation that couldn't pay it back.

There are many answers from ignorance to failed governance to corruption, but none of the answers have anything to do with the general level of debt in the world as a whole.