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You can easily find many articles explaining why the national debt is very different from how we think about personal debt (e.g. http://money.com/money/4293910/

You can easily find many articles explaining why the national debt is very different from how we think about personal debt (e.g. http://money.com/money/4293910/national-debt-investors/ http://money.com/money/4293910/national-debt-investors/). And then even in the personal finance space, "debt is not a good thing" is just an incorrect statement, because it always makes perfect sense to borrow money at a lower interest rate than you can make via investments.

mehrdadn 7y ago
> You can easily find many articles explaining why the national debt is very different from how we think about personal debt (e.g. http://money.com/money/4293910/national-debt-investors/ http://money.com/money/4293910/national-debt-investors/). Article: "Things aren’t at a boiling point — yet." Well I am now definitely comforted...
- ianai 7y ago
  Chris Hayes did a podcast that helps explain the difference. Basically, the government is the sole source of money. If it were to balance its books it would mean the entire economy was zero sum. The government being in debt means its leaving value out in the economy. There’s a surplus of money on the not-government balance sheet. Source: https://www.nbcnews.com/think/opinion/debunking-deficit-hysteria-stephanie-kelton-podcast-transcript-ncna1003301 https://www.nbcnews.com/think/opinion/debunking-deficit-hyst...
  - mehrdadn 7y ago
    Glancing through it I can't find any mention of what's supposed to happen when the country ends up with so much debt that most of the government's income ends up going toward interest... leaving little/no funds for all its other expenses. Or for the rest of the interest it'll accumulate the following year. Is the idea that you just print money and the problem goes away ("what could possibly go wrong?")?
    - User23 7y ago
      The most likely outcome is that interest rates will asymptotically approach zero as debt increases and the theoretical claim that the natural rate of interest is zero will be proven. And obviously a zero interest treasury security is essentially the exact same thing as a normal currency note. Keep in mind that a 0% federal funds rate doesn't mean commercial banks won't charge interest. Which, by the way, leads to another important point. Something like 90% of the money in use isn't even created by the government, rather it's created from thin air by licensed banks. This is why a banking license is a huge deal. It is, subject to some restrictions, an actual license to create new money.
      - mehrdadn 7y ago
        Sorry, I don't follow. Zero interest? Are we talking about the same interest? We're paying hundreds of billions of dollars to China in interest. In what world is China going to let the US keep its money and lower the interest it receives in return to zero?
        atq2119 7y ago
        In the world where China wants to keep its own currency at a low value in order to continue the export-driven economic policy. Look, obviously China can sell its US treasuries in exchange for "cash" (electronic balances in a current account). If it did that, the US would only benefit. If China then exchanged this USD "cash" into another currency, the worst that would happen is for the USD to reduce in value in the foreign exchange markets, which would boost US exports and therefore boost the US economy. Yeah, US consumers would have somewhat less purchasing power for some time, but that only balances out the fact that US consumers currently have somewhat more purchasing power than they would "naturally" have.
        ianai 7y ago
        That’s the most straightforward explanation ive seen yet!
        deleted 7y ago
  - User23 7y ago
    Another good treatment with graphs that make it virtually crystal clear: https://americanaffairsjournal.org/2019/02/does-america-need-global-savings-to-finance-its-fiscal-and-trade-deficits/ https://americanaffairsjournal.org/2019/02/does-america-need...
maxxxxx 7y ago
"it always makes perfect sense to borrow money at a lower interest rate than you can make via investments." Only if you actually invest and the returns are guaranteed.
- jmchuster 7y ago
  Right, I think that's where the idea of "debt is bad" comes from, only thinking about money as "i can only use money to pay for expenses" as opposed to "i can use this to make more money", and then of course you always have to consider inflation as well.
User23 7y ago
Sovereign currency issuers don't have debt the way non-sovereign entities do (or sovereign entities that use a currency they don't issue). The federal government can always coin money to pay its debts if it needs to. So the likely outcome of the democratic House trying to force a default is Trump ordering Mnuchin to mint a $1 trillion platinum coin with Trump's profile on the obverse and depositing it at the Fed. Which will then be enjoined by a 9th circuit district judge because Trump did it, even though back in the Obama years the exact same thing was acknowledged as entirely legal. Remember the funds are already legally appropriated! So minting a coin isn't the executive violating separation of powers. It's just an accounting gimmick. The resulting funds can still only be spent as authorized by congress. Another factor is that the Fed might just let Treasury overdraw it's account. Even normal commercial banks can allow demand account holders to spend into the negative as a courtesy. I imagine extremely wealthy private individuals with a private banking relationship can overdraw into the millions. The Treasury is obviously an extremely wealthy "person," not just because it can create money (by coining, I'm not sure if Treasury can still print US Notes, but I do know it doesn't), but also because of its taxing power, vast real estate holdings, and other assets.

mehrdadn 7y ago

> You can easily find many articles explaining why the national debt is very different from how we think about personal debt (e.g. http://money.com/money/4293910/national-debt-investors/ http://money.com/money/4293910/national-debt-investors/). Article: "Things aren’t at a boiling point — yet." Well I am now definitely comforted...

ianai 7y ago
Chris Hayes did a podcast that helps explain the difference. Basically, the government is the sole source of money. If it were to balance its books it would mean the entire economy was zero sum. The government being in debt means its leaving value out in the economy. There’s a surplus of money on the not-government balance sheet. Source: https://www.nbcnews.com/think/opinion/debunking-deficit-hysteria-stephanie-kelton-podcast-transcript-ncna1003301 https://www.nbcnews.com/think/opinion/debunking-deficit-hyst...
- mehrdadn 7y ago
  Glancing through it I can't find any mention of what's supposed to happen when the country ends up with so much debt that most of the government's income ends up going toward interest... leaving little/no funds for all its other expenses. Or for the rest of the interest it'll accumulate the following year. Is the idea that you just print money and the problem goes away ("what could possibly go wrong?")?
  - User23 7y ago
    The most likely outcome is that interest rates will asymptotically approach zero as debt increases and the theoretical claim that the natural rate of interest is zero will be proven. And obviously a zero interest treasury security is essentially the exact same thing as a normal currency note. Keep in mind that a 0% federal funds rate doesn't mean commercial banks won't charge interest. Which, by the way, leads to another important point. Something like 90% of the money in use isn't even created by the government, rather it's created from thin air by licensed banks. This is why a banking license is a huge deal. It is, subject to some restrictions, an actual license to create new money.
    - mehrdadn 7y ago
      Sorry, I don't follow. Zero interest? Are we talking about the same interest? We're paying hundreds of billions of dollars to China in interest. In what world is China going to let the US keep its money and lower the interest it receives in return to zero?
      - atq2119 7y ago
        In the world where China wants to keep its own currency at a low value in order to continue the export-driven economic policy. Look, obviously China can sell its US treasuries in exchange for "cash" (electronic balances in a current account). If it did that, the US would only benefit. If China then exchanged this USD "cash" into another currency, the worst that would happen is for the USD to reduce in value in the foreign exchange markets, which would boost US exports and therefore boost the US economy. Yeah, US consumers would have somewhat less purchasing power for some time, but that only balances out the fact that US consumers currently have somewhat more purchasing power than they would "naturally" have.
        ianai 7y ago
        That’s the most straightforward explanation ive seen yet!
        deleted 7y ago
- User23 7y ago
  Another good treatment with graphs that make it virtually crystal clear: https://americanaffairsjournal.org/2019/02/does-america-need-global-savings-to-finance-its-fiscal-and-trade-deficits/ https://americanaffairsjournal.org/2019/02/does-america-need...

maxxxxx 7y ago

"it always makes perfect sense to borrow money at a lower interest rate than you can make via investments." Only if you actually invest and the returns are guaranteed.

jmchuster 7y ago
Right, I think that's where the idea of "debt is bad" comes from, only thinking about money as "i can only use money to pay for expenses" as opposed to "i can use this to make more money", and then of course you always have to consider inflation as well.

User23 7y ago

Sovereign currency issuers don't have debt the way non-sovereign entities do (or sovereign entities that use a currency they don't issue). The federal government can always coin money to pay its debts if it needs to. So the likely outcome of the democratic House trying to force a default is Trump ordering Mnuchin to mint a $1 trillion platinum coin with Trump's profile on the obverse and depositing it at the Fed. Which will then be enjoined by a 9th circuit district judge because Trump did it, even though back in the Obama years the exact same thing was acknowledged as entirely legal. Remember the funds are already legally appropriated! So minting a coin isn't the executive violating separation of powers. It's just an accounting gimmick. The resulting funds can still only be spent as authorized by congress. Another factor is that the Fed might just let Treasury overdraw it's account. Even normal commercial banks can allow demand account holders to spend into the negative as a courtesy. I imagine extremely wealthy private individuals with a private banking relationship can overdraw into the millions. The Treasury is obviously an extremely wealthy "person," not just because it can create money (by coining, I'm not sure if Treasury can still print US Notes, but I do know it doesn't), but also because of its taxing power, vast real estate holdings, and other assets.