3 ms·

Instead of a household budget, why not compare it to a company's balance sheet? A company perpetually spending more than it takes in will eventually go bankrupt

• enraged_camel 13y ago
  Because companies cannot print their own money, unlike a nation.
  • grinnbearit 13y ago
    Right but they can issue their own equity which is what a country's currency really is.
  • bsaul 13y ago
    the belief that the current debt situation can be solved by printing money endlessly is being debated among economists right now. germany is a great proponent of keeping your budget balanced, and it worked quite well for them so far. and btw, printing money on the current scale will eventualy cause devaluation, and so is in itself a kind of default.
• dllthomas 13y ago
  "A company perpetually spending more than it takes in will eventually go bankrupt." That is not a true statement. If a company's revenues are growing, the amount of debt they are holding can increase over time and they can be perfectly capable of servicing that debt in perpetuity as long as the cost of the debt isn't growing faster than the revenues. Revenues can grow both because of real growth (in the company's market or in the economy, depending on whether we are speaking within or without the analogy) and because of inflation (especially if the inflation rate is greater than the interest rate on the loans, which I believe is the case with some government debt).
  • grinnbearit 13y ago
    > as long as the cost of the debt isn't growing faster than the revenues But that can't hold true forever since the size of their debt is increasing, unless interest rates are 0, eventually the cost of holding onto debt will cross revenues.