You and I and everybody we know, we all think we own a bit of money. It must be true, because we worked hard for it, we put it into the bank, and there it is. It says so on the bank statement. Some have a bit more money, some less, but there’s something. If something bad was to happen, we have a buffer. If we fancy something, we can afford it. When it’s time to retire, we’ll do alright. Life is good.

There’s just one problem: it’s not true any more. The money is gone and will not be there when we want it back. We are all much poorer than we think.

This blog is called upon2020 because being a technologist, I set it up to talk about the future of technology. But I got stopped in my tracks rather soon when I started paying more attention to economics. You may have noticed that I have not posted much about future technologies in recent months. What I found sounded ominous, but perhaps I didn’t understand it well enough. So instead of blogging about the future of technology, I spent more time on the future of money, wealth, economics and all of that. Our money, our wealth. Unfortunately, I’ve come to the conclusion that the future will be worse than I had feared, and it’s starting to knock on our doorstep.

So today, on this nice Easter Sunday, it is time to blog about doom.

Don’t believe me? Here are my first two exhibits:

• “My bank account’s got robbed by the European Commission.” Instead of €850k, this software company now only has €129k.
• “I went to bed Friday as a rich man. I woke up a poor man.” From €1 million saved for retirement to 10% of that over a single night.

Both these are of course stories about Cyprus from last week. It’s easy to dismiss Cyprus. But we shouldn’t: there’s nothing particularly Cypriotic about why these guys’ money disappeared; this is coming to you, too, almost regardless of where you live. The financial fringe has predicted that for a long time. Now that we have the first hard datapoint – Cyprus – prediction is becoming reality. It’s time to pay attention.

Let’s take your bank balance. Everybody knows that the bank doesn’t actually keep your money in a big vault, but lends it out to, say, somebody wanting to borrow money for a car or a house. The trouble in a nutshell is that many, many of the borrowers that have (indirectly) borrowed our savings will never pay it back. This is true world-wide. So far, lots of accounting tricks and elbowing have papered over the problem, but it’s coming unglued in front of our eyes.

Because the borrowers won’t pay back the loans, the bank does not get the loaned-out money back. Because of that, your bank statement may say what it wants, it does not matter because what the bank doesn’t have, it cannot give you when you ask for it. This is exactly what happened in Cyprus: the banks there made loans (many to Greece, as it turns out, which defaulted), which did not get paid back, and now the bank is unable to return the money that people like you and me had deposited there. They, too, thought they owned money and they had the bank statements to prove it. But when they looked again, all they have is a claim to a bankrupt entity. Good luck with that.

It would sound like it’s just a matter of finding a more solid bank. You might find such a bank. But unfortunately, there is far too much bad debt around; there are simply not enough musical chairs around for everybody to sit down safely: Some people will get hurt bad. On average, we’ll all get hurt. Probably a lot.

World-wide, there are literally trillions of dollars of liabilities on balance sheets that have no chance of ever getting paid back. And it’s getting worse all the time. “Liability” here means: the bank took your money that you saved, loaned it out to somebody, that somebody spent it on something, they failed to recoup their investment, and now that somebody cannot pay it back. So your wealth is gone, say that bank statement what it may.

The important part is that the wealth that you earned was spent on something, and it is gone.

Here are some things that your savings might have been spent on:

• student tuition, room and board, and generally college expenses. There is $1,000,000,000,000 in student loans outstanding in the US. Between 15% and 35% of those loans are 90+ days delinquent, growing rapidly. (Many sources, here’s one.) Expecting your money back?
• Real estate. Many mansions were built that are now empty and rotting.
• US government expenses. Its spends $1,000,000,000,000 of somebody’s savings (your’s?) every year more than it earns.
• Outside of the US, the numbers aren’t all that different. Worst offender: the Japanese government has borrowed 230% of GDP (think: more than twice your annual salary) from its citizens, and they keep borrowing more as a percentage of revenue as time progresses. And as demographics turn negative. Do you really believe you can get your money back?

The only question is how we’ll all notice that our wealth is gone. In Cyprus, it was that the bank declared (well, had to declare): sorry, we can’t give you your money, neither today, nor ever as it is likely.

The same scenario may happen in many other countries, and soon. In the US, it is much more likely that the Federal Reserve simply prints so much money, and gives it to the banks, that the banks will always be able to return the amount of money to you that you deposited. This year, they are planning to print One Trillion Dollars. Should be enough, right?

Of course printing money does not cause wealth. Otherwise all we need is printers, no jobs or anything like that. Printing money only makes your money worth less: the number of iPads or potatoes or rental homes remains the same, but they will cost more.

Take our pick of poison: have the banks keep your money, or have them return it after it buys a lot less. There are no other choices when you have too many loans that will never be paid back.

(Of course, keeping interest rates at 0% means lots of other bad investments will be made that will spend your savings on things that won’t produce a return, i.e. you will get even less of your money back. The side effect of the “monetary easing” medicine may just kill the patient in some other way.)

The astute reader will notice that I use the term “bank” loosely. It’s true about many other institutions. Your retirement taxes and expected pensions for example.

For the past 10 or 20 years, this was all something that may happen some time in the distant future. So we didn’t worry about it. But the distant future has arrived already in Cyprus, and so far that future is just a bit unevenly distributed. Soon this “product” is going to be available – unavoidable – world-wide.

Individually, prepared, we might be able to find a musical chair. Collectively, we cannot hide. The money is gone.

Happy Easter!