Capitalism’s Obituary: “Trillions in claims to debt known as wealth were wiped out.”

Claims to debt were thought to be claims to actual wealth rather than claims to debtors’ future incomes.  When debtors could no longer pay, the claims became worthless.

The Federal Reserve Bank of Chicago in 1963 explained the complete identity between claims to wealth and debt as the two faces of debt.

“While debt is a claim on the assets and earnings of those in debt, it is simultaneously a part of the wealth, or assets, of their creditors. Just as for every buyer there must be a seller, so for every debt incurred by any person or institution, someone acquires a financial asset of equal amount” (The Two Faces of Debt, Federal Reserve Bank of Chicago, 1963, p. 6).

When debtors could no longer pay, the claims became worthless.