There’s a myth in the USA that just won’t go away. It’s this idea that a household balance sheet is somehow comparable to that of the federal government’s. Few myths are more destructive and lead to greater confusion and/or misguided government policy. In recent months this has become a particularly public subject as the debt ceiling debates have raged and the European debt crisis continues. The problem is, the analogy between a sovereign government’s balance sheet and a household’s balance sheet is never accurate. The reason this analogy always fails is due to the difference between being a currency issuer and a currency user.
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Nuanced or not borrowing has its limits, most certainly in the family budget and yes in the Government budget as well. Read Greece. I get it, good can be done with some leverage.
ReplyDeleteWe are on a path to self destruction built on the false promises of leverage. Mortgage debacle? Nope, your arguement is appropriate but not as this stage...
Duh
ReplyDeleteAs the author explained, the difference between us and Greece is the ability to print money. The only way the federal budget can be compared to a home budget, or Greece for that matter, is if every home had a money printing machine in the closet.
I don't buy the argument other than the fact that being a currency issuer you can buy yourself sometime. In the end the money you print is only worth the value people using it assign it. Just look at Weimar Germany. They were a currency issuer. In the end, the market calls the currency issuer's bluff. First the bond market and then the user market. When people lose faith in a currency's value and spend it as soon as it is gained for fear it will lose purchasing power. velocity of money spins out of control, even beyond the control of the issuer. Granted there are differences between government and households, but in the end they meet the same fate. As Voltaire once said, "paper money eventually returns to its intrinsic value -- zero."
ReplyDeleteBy that logic, the value of the debt is only worth the value people using it assign and will also return to its intrinsic value -- zero.
ReplyDeleteif there were no effects from printing, we'd simply print much much more then we have already huh. why not print 70 trillion(an est. amount of all liabilities), after all, we alone use our money, no foreign and market interested parties, and printing never decreases value, printing simply has no ill effects and nobody is interested or balks at the idea.
ReplyDeleteGet back to me at QE 17. The thing to worry about is not the printing of money. There will be another Bretton Woods or there will be war. Once the banksters realize that all the wars will be internal (civil wars), and there are no safe harbors, A Bretton Woods scenario is all but certain. The days of the talented 10th insulating the 1 percent are over. The new wages are 51 percent or nothing.
ReplyDeleteThe author's problem is he assumes that everybody thinks that the national debt is money that has to be paid back. There are some people that think this way but the educated types don't. It will be paid back but not in the form of currency. When I walk in the grocery store and see a 8 ounce jar of peanuts for $5 or a bag of fish sticks (which actually has very little fish in it)that also cost $5 that debt is being paid back. The price of too much debt is monetary value deflation. Most people see it as price inflation. The value of the items we buy is not going up, the value of our dollars is going down. We are paying that debt back.
ReplyDeleteAt some point the bankers force the price to high with inflation. At that point the peooples choice staple will be.........banksters. Their appetite will be ravenous.
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