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> A country isn't a household, its balance sheet can have debt permanently, etc. etc. Is that really different than a household? The problem with a debt isn't

> A country isn't a household, its balance sheet can have debt permanently, etc. etc. Is that really different than a household? The problem with a debt isn't that you have to pay it off. Actually, your creditors were prefer that you didn't and instead pay them interest until the day you die after which they'll collect the debt from your estate. The problem with debt is that you have to pay interest all of the time. Countries with debt are necessarily purchasing less goods and services for their citizens then if they didn't have to spend some portion of their income paying the interest. So, the fundamental reason why it's better (all else being equal) to avoid being in debt is the same in either case. Its not about the future day when you'll have to pay the debt, it is interest you are paying now.

nostrademons 8y ago
The difference is that a country isn't a person with its own wants that it's presumably satisfying with its purchase. When a country pays interest, it is effectively transferring money from its taxpayers to its bondholders. Very often, the bondholders are other parts of the government (28% of US government debt), private citizens (32%), or the Federal Reserve (11.2%). If the U.S. government has less money with which to purchase goods and services, it just means the private sector has more money with which to purchase goods and services, which in many cases is what you want. There was some concern about China being a large holder of U.S. treasuries a decade or so ago, but that concern has abated as China has unpegged their currency and unwound some of their treasury holdings, and because the debt is denominated in U.S. dollars and so the U.S. government could always inflate it away to nothing if China tried anything funky. The "bad consequences" of the U.S. <=> China current-account deficit have largely already come home to roost - that's what's fueling the rise in real estate prices bought by Chinese investors which is making homes unaffordable for Americans in west coast states. The household analogy would be an adult child who pays rent to live in their parents' basement, which the parent may either spend on the child or plans to return to them via inheritance when the parent dies. Sure, you're spending money, and sure, it means that you have less money for spending on other things. However, it just means that other people closely associated with you spend that money instead, and if they don't, it comes back to you anyway.
- winstonewert 8y ago
  You analogy makes no sense to me. I presume that the parent is the government and the adult child is the citizen. That would suggest that the rent is taxes. But that would leave there being no debt in the analogy which would rather defeat the point of it. So I have no clue how this is supposed to work.

nostrademons 8y ago

The difference is that a country isn't a person with its own wants that it's presumably satisfying with its purchase. When a country pays interest, it is effectively transferring money from its taxpayers to its bondholders. Very often, the bondholders are other parts of the government (28% of US government debt), private citizens (32%), or the Federal Reserve (11.2%). If the U.S. government has less money with which to purchase goods and services, it just means the private sector has more money with which to purchase goods and services, which in many cases is what you want. There was some concern about China being a large holder of U.S. treasuries a decade or so ago, but that concern has abated as China has unpegged their currency and unwound some of their treasury holdings, and because the debt is denominated in U.S. dollars and so the U.S. government could always inflate it away to nothing if China tried anything funky. The "bad consequences" of the U.S. <=> China current-account deficit have largely already come home to roost - that's what's fueling the rise in real estate prices bought by Chinese investors which is making homes unaffordable for Americans in west coast states. The household analogy would be an adult child who pays rent to live in their parents' basement, which the parent may either spend on the child or plans to return to them via inheritance when the parent dies. Sure, you're spending money, and sure, it means that you have less money for spending on other things. However, it just means that other people closely associated with you spend that money instead, and if they don't, it comes back to you anyway.

winstonewert 8y ago
You analogy makes no sense to me. I presume that the parent is the government and the adult child is the citizen. That would suggest that the rent is taxes. But that would leave there being no debt in the analogy which would rather defeat the point of it. So I have no clue how this is supposed to work.