We could easily change the World if we wanted to.

ChatGPT explains the basics

While I was sipping coffee in Harvard Square this morning (and looking at my phone because that’s what everyone around me was doing too) I stumbled on this post on X.

Just minutes before, I walked by a sign enticing customers to sign up as members to earn points for their purchases. I found it silly enough to take a pic:

10 points for every $1 spent! Woo-Hoo!

But what is a point? What is a point worth? Isn’t that of importance, or are we simply going to chase after points because they’re out there?

The question relates to the X post above. Where did these trillions of dollars come from? In many ways they are just like points. Today a thousand points will get you a free sandwich. Tomorrow just a cup of coffee. The value of a point is dictated by whoever is handing them out…

The collective debt owed by all world governments is difficult to estimate but $324,000,000,000,000 is definitely a stretch. However the post is worth considering for a moment. If we regard all the people on the planet as a single global society, how much do we owe and to whom do we owe this astronomical amount of money?

I asked ChatGPT:

“Globally, governments now carry roughly $100 trillion in outstanding public (sovereign) debt, with recent estimates clustering in the $90–102 trillion range—a level approaching 95–100 percent of global GDP.”

Much of the debt is owed to people and entities (including other governments) who have purchased debt through vehicles such as bonds, T-bills, etc., but how much is owed to central banks themselves, entities that can conjure money out of thin air if the government they control, Ahem, I mean, “serve”, expresses a need for help to deal with their latest calamity, like a pandemic or a critical shortage of battleships, aircraft carriers, smart bombs, missile systems, advanced aircraft, etc.?

Says ChatGPT:

“Roughly speaking, about 10 – 15 percent of global public debt is held by central banks. This implies 11 trillion / 102 trillion ≈ 10.8 percent of global public debt sits with OECD central banks.”

11 trillion. Where did they get the 11 trillion to loan us? Not from aliens. They, over the centuries, convinced us that we should be on a point system and that they should be in charge of handing out the points when we need them.

What are the numbers for the USG alone?

“Federal Reserve Banks held $4.556 trillion in publicly issued federal debt securities at the end of Q1 2025 Peterson Foundation. This reflects holdings of marketable Treasury securities other than intragovernmental obligations.”

So the people of this country carry about a third of the entire debt of the world and we owe our central bank, The Federal Reserve, about 40% of what all Central Banks around the world combined are owed by the people of the planet.

I wondered how the establishment’s economic experts would feel if we just decided to blow off the 4.5 trillion dollars we owe the banks for creating this staggering sum on our behalf.

What do you say Chat?

“If the U.S. government refused to pay the Federal Reserve (its share of interest or principal on Treasury securities), the consequences would go well beyond an internal accounting mismatch. Even in theory, such a refusal would constitute a sovereign default and debt repudiation—with dire legal, monetary, financial, and constitutional ramifications. Here's how it would likely play out:”

My Artificially Intelligent chat buddy went on for a while, citing the fact that it would be Unconstitutional, it would downgrade our country’s credit ratings and thus raising our borrowing costs making it even more costly for us down the road, market instability, loss of credibility (of those who create our monetary policy), global crises, US recession, institutional breakdown, etc. etc.

I couldn’t help sensing that Chat was warning me that contemplating this line of thought was a no-no. I was projecting, obviously.

Next I asked why Central Banks have openly admitted that they shoot for a low level of inflation (approximately 2%). It seems obvious that inflation spurs people to buy now with credit rather than wait and buy with savings. The need for credit leads to the creation of debt. The creation of debt leads to and expansion of the monetary supply. The expansion of the monetary supply leads to the devaluation of our currency, something our central banking overlords, Ahem, I mean “friends” call “inflation”.

In other words, central banks are gently fueling a fire that keeps the world in a state of overproduction because, roughly speaking, we have to work 2% harder year over year. But more importantly, it stabilizes the need for debt and thus an endless income stream through interest payments to banks themselves.

Why do we need inflation, Chat?

“Zero inflation may seem ideal, but downward price pressure can lead to deflation, wage cuts, and deep recessions. With inflation reliably above zero, nominal interest rates stay above zero too. That gives central banks more room to cut rates during economic downturns before hitting the effective lower bound.”

I can understand why zero inflation may lead to lower prices which would lead to wage cuts. But what’s the big deal? If things cost less, why would wage cuts be so terrible? It’s no different than saying, if prices don’t go up wages will remain fixed.

And if I understood the second point, having inflation necessitates positive interest rates. That’s obvious. But this is necessary so that the Fed can cut them if we run into an economic downturn?? So the 2% year over year devaluation of our money gives the Fed room to push the accelerator harder when we aren’t producing enough. Do you hear the crack of the whip? I do.

Moreover, if we have handed over the control of our economy to the Fed, why are there downturns which require more intervention on their part?

What is the proof that this 2% works so well, Chat?

“In short: there is no formal mathematical proof that 2% inflation is the one “true” number—but central banks rely on a coherent mix of economic modeling, empirical hiring grounds, and long-run experience.”

In other words, it’s all based on modeling, imperfect data and uncertainty.

Why don’t we just let the world do what it wants without dictating productivity through the control of the monetary supply? I asked:

In my estimation the stall in economic growth from zero inflation would be a temporary phenomenon. In order to survive and have the things people want they will have to work for them. In other words, productivity will eventually match demand for goods and services independent of a stable and predictable non-zero inflation rate. Would you agree?

“You’ve made a reasonable long-run point—and in an ideal world, where wages and prices adjust instantly and allowing deeply negative nominal interest rates was politically and economically feasible—your view would be largely correct: productivity growth could gradually align aggregate supply with demand even under zero inflation. Over time, living standards and output could rise steadily.

However, in the real world, that ideal doesn’t hold—and central banks overwhelmingly focus on managing shorter-run cyclical risks.”

The only evidence Chat offered that this “ideal" doesn’t hold was the economy of Japan in the 1990’s, which suffered a decade long stagnation because of a lack of adequate monetary reform. However, this prolonged downturn was directly due to deep interest rate cuts during the late 1980’s which led to property value bubbles which eventually popped. Japan’s GDP didn’t plummet, it actually continued to grow, albeit at lower rates than before.

“Stagnation”, an existential fear of the economists and Central Bankers, can not so unreasonably be considered a part of a correction toward a natural alignment between supply and demand based on productivity that isn’t being artificially stoked.

More importantly, economists (according to Chat) “overwhelmingly focus on managing shorter-run cyclical risks”. How do we know that these interventions don’t cause more shorter run economic phenomena which in turn dictate more interventions ad infinitum?

The real measure of the utility of Central Banks managing our monetary supply should be founded in how we as humans are doing. I asked Chat about how people are doing now compared to a century ago with regard to their access to clean water and calories.

People are doing much better, with the caveat that data from a 100 years ago is spotty. But why are we doing better? The answer is largely two fold:

Improved water distribution because of improvements made in the second half of the 19th century and a “green revolution” which has brought better fertilizer, high-yield crops, irrigation techniques and food distribution. These advances arrived over a century ago and could be attributed, in part, to our global prosperity from Central Bank interventions. But was it? It is impossible to know.

I next asked about the present prosperity of people on the planet, or more specifically the incidence of poverty as defined by the lack of food, water, medical care and leisure time. This should be the real test of how our global economy is doing under the stewardship of Central Banks and governments.

How many people on the planet have their basic needs met right now?

“If you define “enough” in all four categories strictly, only about a third of the global population has simultaneously met all of them.”

I’d say that our systems aren’t failing us. They are failing us catastrophically. It must be monumentally expensive to ensure that every human being on this planet doesn’t live with insecurity around the basic needs for survival, right?

“To significantly eliminate extreme poverty, ensure food security, achieve safe universal water & sanitation, and provide basic healthcare to everyone, we’re looking at an incremental global public-investment need of roughly $600–700 billion per year.”

How does this expense compare with our output as a planet?

“$700 billion is <1.5% of combined OECD Gross National Income (~$45 trillion), and smaller than annual discretionary budgets in single advanced economies.”

If this country alone decided to pay all our creditors except The Federal Reserve, a private institution created by an act of Congress in 1913, we could meet the basic needs of every person on this planet for almost seven years.

Imagine how this country would be regarded by the rest of the world if we did such a thing.

Imagine how many other countries would be encouraged to participate in this experiment if we started the ball rolling.

Imagine how conflicts between peoples and regions would start to vanish once people have their basic needs met.

Imagine how much the two-thirds of the people on Earth would eventually contribute to global prosperity if they had what they needed.

Just Imagine.