It's a lotta figures. It's mindboogling. It's scary. It's
incomprehensible. But i will try to make it simpler to help more
understand.
Imagine a world without money. Kuwait has a barrel of oil to
sell to US. US digs up 3 nuggets of gold. Both agreed to the VALUE
and transacts.
This is what trade at its basic level is all about - goods
exchanged for an agreed upon value.
Earth has much resources and each time it is harvested or
extracted, it has a value accepted by a majority of humans since
civilisation begun. The standard in past centuries had been trust
in gold.
In time, gold proved cumbersome and dangerous to carry around,
so promissory notes - money, was used, in ancient civlisations such
as China and India.
As civilisation progressed, money could be printed and broken
down to smaller denominations, but each paper or coin is back by
gold. The more gold extracted or robbed, as during colonnialism,
the richer the country became.
Those countries without gold, accepted promissory notes issued
by reputable banks for their goods and in turn, the more promissory
notes they hold, the richer their country became when they either
exchange it for gold or use it to trade for other stuff. Singapore,
an non-resource rich country, is an example.
The value of the promissory note, which is now the US dollar
which is commonly used in international trade, does not stay the
same forever, simply because earth resources are continually being
extracted and harvested.
For example, yesterday US extracted 1 nugget of gold = value $1,
so $1 is printed. TOday, another nugget is extracted, total 2
nugget of gold in the treasury. By right the value of US$1 is now
today US$2, but instead, it print one more US$1 dollar note for
circulation.
No devaluation here or causing major confusion in the
international market on the valuation of the dollar. ( This is
simply explained, but in actual fact, there are many international
mechanism and treaty to be honoured before even 1 note can be
printed.)
Therefore, over time, as more Earth's resources get dug up or
harvested, ever since civilisataion began, there will be more
promissory notes printed. A century ago, a billion dollars is
mindboogling, but today, a trillion is nothing. We had
progress.
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It looks crazy - quadrillion dollars! But in truth, it is not
surprising.
Even though our global economic output is only $60trillion, it
is only for 1 year. How many years had passed since civilisation
began?
Not to forget, those assets sitting in banks are properties,
with 'mark to market' valuation meaning today's prices. Calculate
the amount of properties and land holdings in the world and
quadrillion dollars is not as scary as before.
Just like Singapore, our assets is not just US$300 billion in
the Tresuary. Every single infrastructure have to be counted in -
homes, road, pipes, etc, to get a valuation, which will takes
months if not years to fully assess based on mark to market values.
It would run into trillions, even for just a small little island
like Singapore.
The only scary thing is when VALUE is worth nothing. No one
trades, no one buys. This we must avoid AT ALL COSTS, otherwise
what generations had build up would be lost. Fortunately, humans
have needs and will have to spend, one way or another.