5 ms·

Maybe we just haven’t gone long enough. That debt could crash everything and then you would have been much better off with that hunk of metal or bitcoin indeed

Maybe we just haven’t gone long enough. That debt could crash everything and then you would have been much better off with that hunk of metal or bitcoin indeed. How do we know Buffett just hasn’t lived long enough yet? His statement could be as silly as someone in October 1929 crowing about how everything is just fine and bragging about their paper gains. How is having that much debt a good thing?

rubyn00bie 8y ago
America's debt is way different than the debt of a person in all honesty. One of what I believe to be the quintessential reasons: the US Dollar is secure, and necessary for the world currently. Meaning the US government has not halted or suspended trading of the dollar-p ever. The US has, by all reasonable measures, paid back its debt on-time. If an entity has multiple billions, or even hundreds of billions, perhaps trillions of dollars to protect: where do you put your money that is equally safe? No where. It's a good thing because it's secure. Because it pushes the world forward. /shrug
deepGem 8y ago
How is having that much debt a good thing? Buffett answers this in a previous paragraph about BNSF. BNSF has debt but they also have cash generation even in times of recession. This is really important. If you are unable to generate cash during recession and you have a ton of debt, you are dead. A similar analogy applies to US. During recession, they can print money and generate cash. US will never default on their debt, or the probability of them defaulting is almost 0, hence the coveted AAA rating. Granted, the value of that printed money decreases right away, but eventually the value will stabilize w.r.t all other currencies and a stable store such as gold. Also note that the combined household wealth in US is nearing $100 trillion. That should count for something. It's ok to have debt, if you have significant cash flow to cover your debt eventually, even in times of recession. Apple follows a similar philosophy. They raise debt for their share buybacks and dividends, even though they are sitting on a cash pile.
- wbl 8y ago
  Waa almost zero and then the Republicans discovered they could play games with the debt limit. The US may default due to willful stupidity.
- shakethemonkey 8y ago
  > hence the coveted AAA rating The US Government seems to have begun a habit of launching investigations of credit agencies that downgrade its credit rating. It's happened to S&P and to Egan-Jones.
- zeusk 8y ago
  You'd be interested to know that the US federal govt. does infact NOT have a AAA credit rating (A couple states in US along with Microsoft and JnJ are the only ones with a AAA rating at the moment).
Retra 8y ago
In a rough sense, debt can protect you. My lender doesn't want me dead, injured, or unemployed because I have mortgage payments to make. Debt only becomes a problem for me if I am unable to make payments on it.
nabla9 8y ago
> How is having that much debt a good thing? The nominal value the deb does not matter. As the debt has been growing, so has the economy. Government debt should be measures in relation to GDP. Alternative name for government debt is delayed taxation. If private sector can use money more productively, government should delay the taxation and take more debt. I'm not advocating MMT here, just saying that reasonable government debt equals using the US economy as a leverage.
jellicle 8y ago
Every debt is someone else's asset. If you deposit money in the bank, is that a bad thing? You're creating a bank debt to you every time you do. If you deposit a million dollars you just put the bank massively in debt to you. Is that bad? People often use their small local understanding of debt ("my debts are bad, because the legbreakers will come if I don't pay") as an interpretation/understanding mechanism for the entire economy, and that misleads them.
OldFatCactus 8y ago
I don't think we should conflate bitcoin with gold
- JohnJamesRambo 8y ago
  That’s correct, it is hard to transact with gold.

rubyn00bie 8y ago

America's debt is way different than the debt of a person in all honesty. One of what I believe to be the quintessential reasons: the US Dollar is secure, and necessary for the world currently. Meaning the US government has not halted or suspended trading of the dollar-p ever. The US has, by all reasonable measures, paid back its debt on-time. If an entity has multiple billions, or even hundreds of billions, perhaps trillions of dollars to protect: where do you put your money that is equally safe? No where. It's a good thing because it's secure. Because it pushes the world forward. /shrug

deepGem 8y ago

How is having that much debt a good thing? Buffett answers this in a previous paragraph about BNSF. BNSF has debt but they also have cash generation even in times of recession. This is really important. If you are unable to generate cash during recession and you have a ton of debt, you are dead. A similar analogy applies to US. During recession, they can print money and generate cash. US will never default on their debt, or the probability of them defaulting is almost 0, hence the coveted AAA rating. Granted, the value of that printed money decreases right away, but eventually the value will stabilize w.r.t all other currencies and a stable store such as gold. Also note that the combined household wealth in US is nearing $100 trillion. That should count for something. It's ok to have debt, if you have significant cash flow to cover your debt eventually, even in times of recession. Apple follows a similar philosophy. They raise debt for their share buybacks and dividends, even though they are sitting on a cash pile.

wbl 8y ago
Waa almost zero and then the Republicans discovered they could play games with the debt limit. The US may default due to willful stupidity.
shakethemonkey 8y ago
> hence the coveted AAA rating The US Government seems to have begun a habit of launching investigations of credit agencies that downgrade its credit rating. It's happened to S&P and to Egan-Jones.
zeusk 8y ago
You'd be interested to know that the US federal govt. does infact NOT have a AAA credit rating (A couple states in US along with Microsoft and JnJ are the only ones with a AAA rating at the moment).

Retra 8y ago

In a rough sense, debt can protect you. My lender doesn't want me dead, injured, or unemployed because I have mortgage payments to make. Debt only becomes a problem for me if I am unable to make payments on it.

nabla9 8y ago

> How is having that much debt a good thing? The nominal value the deb does not matter. As the debt has been growing, so has the economy. Government debt should be measures in relation to GDP. Alternative name for government debt is delayed taxation. If private sector can use money more productively, government should delay the taxation and take more debt. I'm not advocating MMT here, just saying that reasonable government debt equals using the US economy as a leverage.

jellicle 8y ago

Every debt is someone else's asset. If you deposit money in the bank, is that a bad thing? You're creating a bank debt to you every time you do. If you deposit a million dollars you just put the bank massively in debt to you. Is that bad? People often use their small local understanding of debt ("my debts are bad, because the legbreakers will come if I don't pay") as an interpretation/understanding mechanism for the entire economy, and that misleads them.

OldFatCactus 8y ago

I don't think we should conflate bitcoin with gold

JohnJamesRambo 8y ago
That’s correct, it is hard to transact with gold.