How Much Money in the World

I have commented on this previously but here is a link that gives it some metrics.

Starting with the US Dollar:

Begin copy from the link;

The first way to look at it might be, "How much cash is there in U.S. currency?" If you took all the bills and coins floating around today and added them all up, how much money would you have? All of that hard and easily liquidated currency is known as the M0 money supply. This includes the bills and coins in people's pockets and mattresses, the money on hand in bank vaults and all of the deposits those banks have at reserve banks [source: Hamilton]. According to the Federal Reserve, there was $908.6 billion in the M0 supply stream as of July 2009 [source: Federal Reserve]. That sounds like an incredible amount, but think about it this way: According to the CIA, there were 307,212,123 Americans alive that month [source: CIA]. If you took all the cash and divided it up equally, each person should have about $3,000 in cash on them (or stuffed under the mattress). Obviously, there's some money missing, but there's an easy explanation for that: The Federal Reserve says that at any given time, between one-half and two-thirds of the M0 money stock of U.S. dollars is held overseas [source: Federal Reserve].

The rest of the money is held in bank accounts of various types, and the Federal Reserve tracks these funds in three different values known as the M1, M2 and M3 money supplies:
M1 represents all of the currency in the M0 money supply, plus all of the money held in checking accounts and other checkable accounts, as well as all of the money in travelers' checks. In July 2009, the M1 money supply for U.S. dollars equaled about $1,655.6 billion [source: Federal Reserve].

M2 is the M1 supply, plus all of the money held in money market funds, savings accounts and small CDs. In July 2009, the M2 money supply was about $8,326.8 billion [source: Federal Reserve].

M3 is M2 plus all of the large CDs. As of March 2006, the Fed no longer tracks the M3 money stock as an economic indicator. That month, M3 totaled around $10.3 trillion [source: St. Louis Fed].
All told, anyone looking for all of the U.S. dollars in the world in July 2009 could expect to find around $8.3 trillion in existence.
Even though the Fed can't say precisely where all the U.S. dollars are in the world, it does try to keep track of how much exists. Not every nation in the world has a well-established central bank, though. Find out why it's so difficult to track exactly how much money exists in the world on the next page.

End copy from the link.

This is the total cash in US currency as of July 2009.  About $8.3 trillion dollars.  While the Fed no longer tracks M3, consisting of all large CD's as an increment to M2, they continue to be considered part of the money supply.  They simply are not tracked.  That does not mean they are not part of what we call all US Dollars.

MO and M1 are the workhorses of the medium of exchange.  The money that passes from hand to hand in daily transactions.  The most liquid of US cash dollars.  M2 and M3 are less liquid and have to go through a change process to transfer to a spendable form as MO or M1 depending on what form of money you want to use to do your spending.  Dollar bills or money in a checking account (on a debit card) that you spend.

Credit spends the same as cash.   That is a factual statement.  An obvious statement.  Of course it does.  Google that statement in quotes and it returns exactly one hit which is a reply comment buried down in this threaded link: http://www.arizonasportsfans.com/vb/f66/global-plans-to-replace-the-dollar-159897-2.html


It seems to me that this statement would be more commonly expressed and get more than one hit on a google search.  Credit is cash, it expands the money supply as it increases debt in a debt money system.  Credit however is not counted in the total of US currency dollars?

Dr. Econ at the San Francisco Federal Reserve says here that credit is not part of the money supply.  Credit is not money.  He explains that money is an asset.  A credit card transaction creates a liability.

"Why is it important to distinguish between financial assets (like money) and liabilities (like credit card debt)? First, from an economic standpoint, the Fed measures the amount of money in the hands of the public because of its potential use as an indicator of monetary policy; the money supply measures reflect the different degrees of liquidity that different types of money have. See Ask Dr. Econ (January 2003) for some historical perspective on the use of the monetary aggregates."

Hey, Dr. Econ:  Money in the hands of a user that can spend it is an asset to the user.  However all money is fundamentally debt money created by a loan. Credit is a loan to an end user to spend.  All loans are money to an end user to spend.  That loan, that debt creates money.  Credit is an expansion of the money supply.

Dr. Econ adds:

"From a personal finance perspective
Finally, the difference between money and credit also is important from a personal finance perspective. You shouldn’t view a $1,000 credit card limit the same way you would view $1,000 in cash. Spending today using a credit card loan means that at some point in the future you will have to reduce your spending in order to pay back that credit card balance and any accumulated interest!"

OK wise guy.  How about this:  You shouldn't view buying anything on credit the same as buying with cash.  You have to reduce you future spending in order to pay it back.  Like a mortgage.  Home loans create an expansion of cash in the money supply!

Credit creates an expansion of cash in the money supply!

This also says that credit card purchases is  not an increase in the money supply:

"The question is imprecise. So in order to answer it I must make an assumption. I assume that what it really means is "Should credit card lines of credit be counted in the money supply". The simple answer is no.
Money is defined as the commonly accepted medium of exchange. The accepted medium of exchange in the US are cash dollars and checking account dollars. No-one accepts a line of credit as a medium of exchange in transactions.
If, however, someone makes a payment using his credit card then actual money is credited to the sellers checking account. The money supply increases after the payment has been made. The bank issuing the credit card essentially makes a loan to the person using the credit card and actual money is credited to the seller's account.
But even then, it is not the credit card balance in itself that adds to the money supply, but the money appearing on the seller's checking account.
Only in that sense can one make a connection between the existence of credit cards and the money supply.
More details on how to define the money supply can be found here: http://nimamahdjour.blogspot.com/2008/03/money-supply-watch.html

Read more: http://wiki.answers.com/Q/Should_credit_cards_be_counted_in_the_money_supply#ixzz22am07zd7"


So, the money paid the seller is what adds to the money supply, not the credit extended as a loan to the buyer.  OK, wise guy.  The amount of purchase paid on a credit card equals the amount received and immediately added to sellers bank account.  That increases the money supply until such time as the credit loan is repaid taking an equal amount of money out of the money supply as the time the loan is repaid.  During the amount of time the credit loan was outstanding it increased the money supply.  It was debt created money.  All money is debt money. 


The contribution of credit to the total money supply is equal to the total amount of national revolving credit card credit!!!!


This link gets it right

"When someone uses a credit card in a purchase, he automatically expands the money supply.  The seller receives a new deposit in his account, which increases the total of demand deposits in the banking system -- until the buyer pays off the loan.  The result is that consumers who roll over their credit card loans rather than paying them off have increased the money supply on their own initiative by hundreds of billions of dollars.  In effect, the money supply is substantially larger and less measurable than the Fed's definition."

eHow says credit it is not part of the money supply.  Like money was a real asset but credit is not, it is a loan.  Dumb enough for the common person to understand.  Don't want to tell them that all money is debt!

Off-Shore Banking - World Money

Off-Shore Banking.   The EU.  The World Bank.  All  the places in the world where money exists.  Different kinds of money, different places.  Money convertible from one place and currency expression to another, at a fee, in market exchanges.

The Super Class of Money in an object oriented analysis to which all things called Money in the world belongs is defined by its Super Class set of attributes, methods and relationships to other Super Class objects.  These relationships are identified by the messages that can be passed between Super Class objects that have relationship with the Super Class Money Object to implement its methods.

The SuperClass:Money is the collective term for all money.  An instance of the SuperClass:Money is a uniquely singular object of the SuperClass inheriting all its SuperClass attributes, methods and the messages from other SuperClass objects that invoke the methods that it can perform.

In order to discover the SuperClass of any object the only question necessary is to select any object and ask the question:  What type of an object is this.  Like selecting any specific or animal or its arbitrary category in a taxonomy and asking what type of a higher level real object conceptual class is it?  Above the level of a real object's physical existence all object categories that it belongs to are abstract conceptual constructions of the human mind that we create to understand our world and then interact with it.

If all money in the world belongs to the SuperClass:Money then it would be appropriately defined as SuperClass:WorldMoney.

My focus is on what money is.  Defining what it is now as an object and designing  what it should be to accomplish its reason for creation.  Not in service to its functional purpose but as function of its inherent attributes, methods and associations with other objects implement by its interactions with other object invoked by messages for which it has private methods for response.

An SuperClass object of WorldMoney is ultimately the top level object in the money system relating to other top SuperClass objects in the system.  General abstract conceptual organizations of things points to the efficiency of an object structure with a minimum number of SuperClass Objects at the top.  One to not more than 12.  A greater number than 3...maybe 6...indicates that some objects identified as top level object are actually child objects of a combined SuperClass.

At the very least, a SuperClass:WorldMoney conceptual abstract view of the money system is necessary.  In my view that is not only conceptual for the purpose of conceptual representation of the money system but also its implementation. 

WorldMoney is a collective SuperClass.  Every collective noun object has a singular noun object that is a unique member of the collective class.  The human race is a collective of all singular human beings having a unique identity separate from all other beings.  A unique instance of the class.  Likewise,  WorldMoney must have a unique singular object instance of the collective class:  A unique unit of money having a characteristic that uniquely identifies it as an object:  A uniquely serialized digital world dollar existing on a cloud computer system.

All the concepts previously described in this blog for what the US dollar should be in a real money system apply to the collective and singular object identity and description of all money in the world.

In such a system there is no need for, nor concept of Off-Shore Banking which is only a device to circumvent object relationships of money to evade taxes by creating spurious object classes.

There is nowhere to hide WorldMoney.  It is all the same.  It is all visible.  There is no geographic partitioning at a high ObjectClass level but perhaps at some lower level to serve some object relationship purpose and object method such as tax.  Maybe Tax is a SuperClass object?

Pirate Banking

I like the Real News Network with Paul Jay.  It presents the insights of knowledgeable people about stuff that is real news.  Real news?  What is that?  News is something new, something of value (for what its is worth) that was not known before by anybody.  History is news to a student to whom it is taught in school.  To everyone else it is history therefore it is not news.  If there was something new to be known about history, new to everyone then it would be news.  Much of what is in the news is not news.  Bankers are crooks that have bought off politicians who are also crooks.  That is not news.

Paul Jay's interview with  "James Henry of the Tax Justice Network covers his newly released report “The Price of Offshore Revisited” in which he estimates the size of the “offshore” market as somewhere between $21 and $32 trillion as of December 2010. Note that this total includes only financial assets, and thus omits real assets (real estate, gold, artwork, yachts) that are held via trusts or corporate entities in tax havens.

Read more at http://www.nakedcapitalism.com/2012/08/pirate-banking-21-to-32-trillion-in-estimated-tax-haven-money-managed-by-big-global-banks.html#LpspDx0JdETc0o8q.99"

That is a big boat load of money!  What is this money?  What kind of money is this?  It looks like money in the bank since it is in off-shore bank accounts.  I get just one point for that no brainer!  Money.  What kind of money?  Money money in the currency of the geographic location of the specific bank that accounts for it?  Can a bank or bank office in a certain geographic nation location be only an accounting location for the existence of money in a different nation?  Since money and information management is an exercise is separating the conceptual logic management  from the physical management of the associated thing why not account for it in one place but have it be used in another place?  

20 to 30 trillion dollars in Pirate Bank off-shore accounts.  The big issue is that it is hidden from taxing by a country that otherwise has some right but no ability to tax it.  The concept of a sovereign country is something that the information age has not yet managed to separate the physical management from the logical management.  Countries physical and logical identities and management. are tightly bound.  They all have a flag, a national song and can have an olympic team if they are a country.  There is a finite number of countries in the world and they all have a unique name.

People are associated with a country.  Call it citizenship.  The country in which they claim citizenship normally claims rights to tax them.  Their wealth or income, whatever might be the basis of choice for the tax.  If the citizens money is in an offshore bank the right of the country claiming the citizen or claimed by the citizen gets muddled.  The country in which the money resides in an off shore bank has an interest in taxing the money held in their country, if it is taxed at all, or, more likely the economic benefit, whatever that may be and to whomever that might be in the country where the money resides that is the asset of a citizen of a different country.

Maybe it is like having kids that live in a different house with a different family.  Wait...wait....there was an idea here that at first seemed to present a strangely confusing example of a direct natural parental relationship to something that has a physical relationship to a non-biological parental relationship in another household.  Not a good example, not so unusual.  On the other hand maybe it is a good example????

Back to the interview:  That is a lot of money.  Money like we think of money in a bank account.  One that we can write a check on when we want to spend it.  If I have money in the Cayman Islands and buy a billion dollar yacht do I just write a check for it in Cayman dollars and then let the bank take care of converting Cayman dollars to the national currency of choice of the payee?  Or do I pay in bonds or other non-hard money national currency that are held in my bank account as an investment instrument.  There seems to be little separation between bank saving and investing functions in the USA and probably true of all banks.  Just saying I have money in the bank does not necessarily mean savings anymore, it could be investments.  Like saying I have money in the stock market.  I really, have no actual money in the stock market I only have a stock in my stock account that I payed money for and is a liquid asset that I could convert back into money.  The way be use the term money has  certain ambiguity.  There is real money and then there are liquid assets.  How liquid they may be on any given day is variable. 

Trillions of dollars in off-shore accounts.  Some of it is the money of national governments, some is private money.  Corporations or individuals.  If it is real money then it is debt money since all money is debt money created by some national central bank or the World Bank.  

The World Bank:  Now there is a whole new can of worms in the money business that could be the focus of thought for a long time regarding what money is.  Maybe it would be more of a focus of what money does after determining what money is?  Deferred thought on that one for now. 

If all this off-shore money is debt money then it is "parked savings".  Savings that while in the bank of nationality where it resides (or is accounted for) is loaned or is the basis for fractional reserve banking financing loans.

My head is spinning and I am getting dizzy thinking about all this complexity related to off-shore accounts.  It is difficult enough to simply get a handle on money in the USA.  The USA is an off-shore account to someone not having citizenship and residency in the USA.  The USA offers a tax haven to off-shore entities and the USA may or may not report off- shore holdings to the country with rights to tax a citizen of that country having the off-shore account in the USA.

A broad conclusion so I can wrap this up and get on with the day is that this is a complex situation.  The only way to deal with complexity is to reduce it to simplicity.  The approach to that reduction is to organize the things, the conceptual objects in the problem domain as the ultimate goal.  Then present the object oriented conceptual model relationships.  Understanding the functions manifested by these object relationships serves to discover the relationships.  That is the only way to understand the complexity.  Any attempt to understand it with the focus on creating a purely functional model of how things work rather that what the things are is unproductive.  It is also the method of choice  (functional top down deconstruction or bottom up functional assembly) that anyone wishing to hide the object relationships or obscure uses to protect any complex system from being understood and consequently change.  Changed by changing what the system is (the objects it is built on) rather than changing what the system does (the functions of the object relationships.

Enough.

Securitzation is Illegal

Almost everything I write on this blog addresses the question of what the conceptual thing called money is not what money does and once what money is has a definition then what should money be doing. 

What money is currently not only permits but facilitates the problem caused by application of money to do things.  There are only two fundamentals about money:  What it is and what it does.  If the application of what money is today gives undesirable results, (I let the results stand for themselves) and accepting the proposition that a conceptual thing does what the thing is designed to be (just like a natural physical thing) then what is necessary is to change the conceptual nature of money to produce a beneficial result (lessen or eliminate the adverse result) as a function of what the new concept of money is.

So:  I will write something about the negative aspect of what money does currently as a function of what is.  This is based on an entry in Karl Denninger's blog "Market Ticker" titled "Securitization is Illegal" authored by Michael Nwogugu.  It is  complex explanation, but evidently well supported by references and displaying the detailed structure of what securitization is and does.

This is the Wikipedia definition of "Securitization"

While the nature of the concept of what money is remains my focus, Securitization is a thing that does some thing that is a step removed from money as a conceptual thing that has some aspects of an object oriented child relationsip to the Parent Class "Money" in that it inherits some of the attributes and methods of the parent class.  On the other hand it may stand on its own sharing attributes and methods of Money which obviously concludes that Money and Securities are both children of a Parent class called XXX Super class????

Money is a medium of value exchange where the object thing exchanged has a dollar value related to it.  The thing exchanged can be any thing.  A conceptual thing as well as a physical thing.  A conceptual thing like a right, an obligation, etc.  It appears that although Securitization is a small step removed from money itself and may be functionally used as money is used, I will treat it as just another thing that is exchanged for money, is not money but shares some attributes and methods of money at a higher level that is perhaps up at the primitive level of object barter that does not involve the intermediate role of money as a medium of exchange but the barter transaction has associated money features in that it it value exists in that whatever is securitized to the extent "makes money" as a result of a barter that exchanges two things of equal value??? I will have to think about this one!  What are the two things involved other than money?

Barter seems to fit as a Parent Superclass of both Money and Securitization.  For that matter Finance, which also  has shared  attributes and methods aspects might also be viewed as a child of Barter Superclass.  I like the idea because before there was money there was barter.  Trade in the absence of money.

That is a long intro to expressing some thoughts on the referenced link to "Securitization is Illegal"!!!!

Now that I have at least established for myself where the concept of Securitization might fall in relationship to Money, its illegal aspects and how my concept of debt free real digital money might resolve illegal aspects of Securitization  I will do a follow on blog entry expressing some thoughts about it.

Money Creation

Today I found a link to a Wikipedia explanation of Money Creation.  This is interesting since what money is, my primary question, relates essentially to what it is created to be.

This Wikipedia entry deserves some thought.

The creation process is the genesis of a thing.  beginning, birth, commencement, creation, dawn, engendering, formation, generation, inception, origin, outset, propagation, root, source, start.


A great place to start!  At the beginning!





 

Trillion Dollar Patinum Coin

The minting of a trillion, or multi trillion dollar platinum coin to resolve the national debt is discussed here.

This is an idea of Joe Firestone, website Corrente.  He is an original outside of the box thinker.  I have looked at his ideas before and like them for their original thinking.

A fascinating idea that takes advantage of Treasury ability to mint coins to any face value and receive the difference between whatever the face value is and the actual cost to mint the coin.  It would solve the national debt problem withing the context of the existing debt money system.  It is one way to skin the cat. 

This is not a new money system replace the debt money system we have now except to dramatically focus on the basic fact that government finance does not run a the same model as household finance.  The government can create money out of nothing for which there is no corresponding debt.  It can do this to reduce existing debt.

It is an interesting academic exercise that teaches something about how the current system works and how to resolve the National Debt problem by working within the framework of the current system.

The system I propose really is a new system not simply an exercise in making the current system work better by eliminating the restrictions and impediments to government creation of money through seigniorage.  An unfortunate name that really conveys nothing in itself and few could readily define what it is.  It looks like a word that could win, or lose a spelling bee contest.  Even my spell checker tells me it is not a real word.  It is making a coin out of some metal then giving that coin any arbitrary value.  The difference between the cost of the metal to make it.  (it could as well be lead as platinum since the coin itself is never put into circulation but held in a Treasury vault).  Platinum sounds better.  Maybe make it out of Unobtainium.

Unlike one coin for a trillion or multi trillion dollars the new money system concept that I have dreamed up produces trillions of serialized digital dollars on a computer all with a value of one dollar and puts those dollars into circulation by a combination of government spending and retiring all existing debt as the existing debt is paid off.  For each dollar of existing debt paid off a new digital dollar enters the money system and the bank reserve ratio for lending is increased by one dollar.

I would have to think about it but it appears that a trillion dollar platinum coin itself as well as the digital money value it introduces into the system would exist forever.  Never to be retired by paying of any debt.  There is no debt to pay off!  In this case it is exactly like all coins produced today.  They (for all intents and purposes are real 100 % money with no corresponding debt relationship money) exist forever.

 This is the part I have to think about:  The trillion dollar coin system could or would ultimately lead to a 100% real money system.  Could is more likely than would depending on how the system was designed or intended to be controlled.  Eventually, if all government spending was derived from seigniorage there would have to be some control on the total money supply growth probably done by increasing the bank reserve ratio for fractional reserve lending.  Increasing it to 100% if necessary, certainly a desirable goal.

China Prepares Vast Stimulus

The Headline reads:  China Prepares Vast Stimulus as Slump Threatens Asia

Read about at the link.

"The city of Changsha has seized the moment, unveiling plans to spend $130bn (£82bn) on roads, satellite towns, and an industrial park – almost 150pc of its GDP. 

Guizhou trumped this today, touting an eye-watering investment package of $470bn on transport, energy, infrastructure and eco-tourism over 10 years. It is a staggering sum for a sleepy province with just 35m people.

The Chinese railways have chipped in with plans to crank up spending by 40pc in the second half of the year.
It is unclear how such projects can be financed. Fitch Ratings said China has already reached the point of diminishing returns from debt-fuelled growth. The economic return on each extra yuan of credit has collapsed from 0.75pc to under 0.4pc over the last five years.
Prof Eichengreen said China’s authorities have abandoned efforts to wean the country off mega-projects, with tell-tale “ghost towns” and “bullet trains running off rails”. “The restructuring agenda is now on hold,” he said."


While the world is headed for austerity, China is spending. 

I still do not understand money.  How can I figure out what China is doing - going in the opposite direction regarding government spending when everyone else is reducing it.

What is going on??????  There must be a reason for China doing this.  What is it?

"Full-throttle stimulus may keep uber-growth alive for a while but only at the cost of an ever-more deformed economy, ever more reliant on exports. China’s leaders know the risks. The last credit spree in 2008-10 pushed investment to 49pc of GDP – unprecedented in world history – and is now deemed a policy error by Beijing. "


WTF?????!!!  


Is there a plan here???

In a comment on the link" purepressed" said this:

"All the "Stimulus" China needs is to break the self imposed Dollar peg.
The RMB rises in value against the Dollar and China's material imports cost less. The Global purchasing power of the Chinese consumer rises... Yes for sure they will lose out when it comes to exporting to poundland and wal-mart but the domestic purchasing power has increased at a rate of knots.. China's otherwise surplus production can be /will be diverted into it's domestic consumption. This will be incredibly bad for the UK and the US as we have become so used to cheap Chinese imports and borrowing Chinese money to pay for them that WE will no doubt suffer withdrawal or the prospect of paying higher prices for pretty much everything... A price of our QE programme more than an appreciation of the RMB. The United States as the worlds biggest debt junkie of course will be even more screwed.  The only people who are in for a hard landing are the people who behave like debt fuled junkies.... oh hang on a second.. "I guess that means us then"."

Everyone else in the comment thread that China is putting a gun tot their head, headed for disaster.

What do I know about all this, what can explain it?

China reserve ratio is 20%.  A fact, for what it is worth.

People's Bank of China (a government bank) is the central bank of China, like the Federal Reserve (a private bank) is our central bank.   Hmmm.....  Government Bank --- Private Bank.   There is a difference!   Another fact.

The People's Bank of China is a wholly owned government bank.  Not a bank that the government chose to do business with, like we did after we created the Fed as a private bank then our government chose to do business with it because it was the only bank in town.  Just like we individually  choose to do business with a bank of choice.


Seems like there might just be more control of the central bank by the people because it is owned by the government.  Seems like there is less control of the Fed because it owns the government.  People's Bank of China.  An excellent name for a Bank.  Truth in naming?  "People's" being the possessive form of the the word "people"  Gosh maybe it really says what it IS!  Novel!  What if we were to change the name of our central bank called the Federal Reserve to reflect who owned it?  What would be an appropriate name?  Maybe the Fed should have a name reflecting all the owners like a law firm of private partners called Dewey, Cheatem and Howe? 


PBofC loans all this money to government agencies to build stuff.  We laugh at them for the cities they build with nobody in them and trains that run off the rails.  It was all built with government money.  Big debt creation.  China suffering from massive debt spells doom.  At least by our standards and ways of doing business in our debt money system.

What does China do with all their debt?  Wipe it off the books.  Forgive it.  Almost like a Jubilee?

Poor China!  They are so happy spending all this money loaned by the government bank employing people, building things.  Don't they understand the concept of debt associated with a loan.  Somebody better teach them Economics!  They should look it up on Wikipedia and learn that loans have to be repaid.  Countries have National Debt.  Money it owes somebody because somebody loaned the government money to spend and want repayment of principal and interest!

Poor Europe and USA. We are so happy spending all the money loaned by the European Central Bank and the Federal Reserve.  Dumb Chinese do not even know how to handle money!  They are really going to pay for their stupidity and get what it coming to them.  They will have to work for nothing just to pay off all their debt!

Idiots!  Wait,  wait, don't tell me........Who are the idiots?

Holy Crow!  Could China have a devious plan?

All our money is debt money.  What little money we have is called reserves on which the debt money is based in a fractional reserve banking system.  Our reserve is X%?????  China's  reserve is 20% .  What happens when massive amounts of loaned money is not repaid?  In the debt money system loaned money that is repaid to satisfy the loan extinguishes money.  It goes back to the great nothing to be brought out of the great nothing again to be reloaned by a banker if there is enough held in reserve to allow this.

What if all that money loaned out by the PBofC is never paid back.  Where does the money that was loaned go to?  How does it go out of the system if loans are not repaid to extinguish the money created to make them?   It is all on a computer somewhere and when will it ever cease to exist.?  Or maybe it some amount of paper money that wears out and has to be replaced with an equal amount of new paper money.   Through a 1 to 1 replacement program for paper money it still never ceases to exist.  Good question. 

Where does the money go that does not have to be repaid for government loans in China if loans by the central government bank to local governments for spending on cities with no people go.  Where does it go  when the local government debt is forgiven?  Happy days!  It goes to the people who got paid to build government projects.  Those people do not have to replace what was loaned with their taxes?  Don't have to pay interest on what was loaned either.  Double Happy!  There is a character in Chinese for Double Good Luck.  There must also be one for Double Happy. 

Money given to the People in return for work!  People have money to spend.  They did not used to have much of that to spend so how could they buy much in the past?  There is a direct  relationship, you know, did you know that?  Unless however you borrow on credit to spend money you did not earn.  Money you did not work for but will---forever if the debt is big enough and that is where we are headed.  What country does that sound like.  One where you have to pay back the debt.  One that says we have to pay the national debt, just like private debt.

What is the savings rate in China?

In this paper, we define "The Chinese Saving Puzzle" as the persistently high national saving rate at 34-53 percent of gross domestic product (GDP) in the past three decades and a surge in the saving rate by 11 percentage points from 2000-2008. Using data from the Flow of Funds Accounts (FFA) and Urban Household Surveys (UHS) supplemented by the findings from existing studies, we analyze the sources and causes of China's high and rising saving rates in the government, corporate, and household sectors. Although the causes of China's high saving are complex, we suggest that the evolving economic, demographic, and policy trends in the internal and external environments of the Chinese economy will likely lead to a decline in national saving in the foreseeable future.

Savings will decline in the future as the Chinese buy stuff!  Sounds like a domestic market.  Wow!  The Chinese producers will be making money hand over fist when they sell to both a huge domestic market spending all that saved money as well as the foreign market spending all the money in China for stuff they are buying on credit cards with continuing growth in gross credit (debt) position!

Can the Chinese producers really handle all that productive joy.  What happens when they decide that the domestic market is just as good as the foreign market?  The foreigners raise the prices on all the raw material that China needs to produce all the stuff.

Economic war?

Is China making a stealth move toward 100% real money.  Is that the answer to where all that money loaned that is not repaid actually going?

Re-entered from the quote above:

"The last credit spree in 2008-10 pushed investment to 49pc of GDP – unprecedented in world history – and is now deemed a policy error by Beijing. "


Oh, so sorry.  We Chinese so wrong to make big mistake and go on spending spree unprecedented in world history.  We know so little about history.  We must learn from west......Europe and America so rich.  1% rich.  In China we try to make 99% rich.