What’s the world worth? Net worth is assets minus liabilities. If the bank account is bigger than the mortgage, net worth is probably positive unless some big surprises lurk. The economic crisis revolves around discussions of debt. The Occupy Movement revolves around discussions of wealth. Those two components entered a conversation the other night and inspired me to ponder whether there is enough wealth to pay off the debts. That’s a simple enough question that never seems to come up in the news.

I’m a fan of history. On the scale of the universe, our history is short. We haven’t been practicing at this civilization thing for very long. We have a tendency to repeat mistakes, repeat solutions, and spiral back through the process one slight step higher than before. Within science there is a progression through increasing complexity that reaches unreasonable levels that is then resolved by a simpler, more comprehensive view of the world. The stars revolved in perfect spheres around the planet but that didn’t explain retrograde orbits. Putting the sun at the center cleared up a lot, but the timing was off. Put circles within those circles (epicycles) and predictions are better but harder. Use ellipses instead of circles and predictions are simpler for hundreds of years. Start getting picky though and realize that relativistic effects are significant. There is a cycling through complexity to simplicity to complexity to simplicity that continues. Quantum mechanics, multi-verses, dark energy, and dark matter make a complicated mix. I’m waiting for an ingenious simplification.

Our current economic situation sounds incredibly convoluted and complex. American debt ceilings, entitlements, deregulations, European Union bond defaults, Euro dissolution, the rise of sovereign wealth, China’s possibly unsustainable growth, and the impact of population on a limited planet creates a picture so intertwined that most purposely lose sight of everything except for one issue that they can understand. So, why not take a step back and look at the really big picture. What’s the world’s net worth? I asked four financial friends. Their answers were simple. Pardon me if I manage to misinterpret your responses guys. (Their names are withheld because I don’t know if their professional regulations would preclude them from being quoted publicly. Guys, feel free to add your names by commenting.)

On a purely bookkeeping level, the global net worth is zero. Balance sheets are called that because they balance. Every asset is balanced by a liability. There’s a implicit philosophical statement you can play with. Assets and liabilities are where money sits or where it’s supposed to be shoveled into. The other issue is where the money flows: income and expenses. As one friend and expert pointed out, the issue of the debt becomes a non-issue as long as the debt payments can be made. It’s like the mortgage company having no issue as long as the check gets there every month and on time. (Mine should squeak in under the wire. Cross some fingers, eh?) I suspect that global income equals the total expenses. One person’s income is another person’s expense.

Zero is certainly a simple answer, but it may not be a very useful one, except for the philosophers.

One characteristic of frugal folk is that they tend to be very aware of their assets, liabilities, income, and expenses. They can be wealthy, comfortable, sustainable, or struggling, but they are aware of their situation and aware of what they can and can’t control. It is an uncommon characteristic within the general populace, partly because financial literacy isn’t taught (something that the New Road Map Foundation attempts to remedy) which also explains why advertising is so successful at selling luxuries while necessities are overlooked.

The skills frugal folk learn can be applied to understanding the slightly more complicated financial condition of corporations. That is one reason I am willing to invest in stocks. I have at least some ability (currently under intense internal review) to analyze companies and see if they manage their finances better than I do. If so, then maybe I should invest in them instead of myself. (My post, Irrational Markets, talks about why I don’t beat myself up about my current performance, even while I gripe about it.) If they don’t handle their finances better than I handle mine, then I won’t buy their stock. The same logic can be applied to countries, though I am less likely to switch citizenship purely based on finance. Currently, while I don’t like the US debt and expenses, the US does have significant assets and income that are within our control. The solution probably involves bits of hurt all around: reduced entitlements, increased taxes, and cutting programs that are based more ideology than pragmatism.

As soon as I asked myself about the Earth’s net worth I knew the over-arching answer was that the value is significant and positive. I hemmed this discussion within the bounds of our monetary system and our bookkeeping system that are arbitrary and part of a young and learning civilization; but, before we invented money the world had a value. Cared for properly it sustains us and allows us to grow and develop. That’s a net worth that exists regardless of ideology. Given the choice between the Earth without an economic model versus an economic model without the Earth, I’d skip the economic model. Monetarily the global net worth may be zero. In reality, the globe’s net worth is priceless.