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Perhaps Krugman would like to redefine debt, because his definition does not seem to match Merriam Webster [0]: "an amount of money that you owe to a person, b

Perhaps Krugman would like to redefine debt, because his definition does not seem to match Merriam Webster [0]: "an amount of money that you owe to a person, bank, company, etc. the state of owing money to someone or something" Debt is a wonderful thing. It means you can buy an expensive good like a house or a car now and pay for it later. As opposed to saving for years and then getting the car. However, either way you pay. I fail to see how national debt is any different. Governments want money now, so they go into debt often by selling bonds. If the debt was acquired during my generation, but the bill comes due during the next generation, then that seems to be pretty close to stealing from the next generation. Today's debt is tomorrow's taxation. [0] http://www.merriam-webster.com/dictionary/debt http://www.merriam-webster.com/dictionary/debt

binarytrees 12y ago
If a country uses that debt to let's say, invest in DARPANET, or build new transit infrastructure for commerce. I'd say that is a good use of debt. I think comparing what a government can use debt for vs buying a car or a house is short sighted.
twblalock 12y ago
National debt is different from household debt for many reasons, including the fact that the government operates a central bank, prints its own currency, does not have to apply for credit, passes the laws that specify the terms of the debt it owes, etc. Plus, in the case of the United States, the national debt is in the form of one of the safest and most widely held investment vehicles in the world : US treasury debt. To argue that government debt is the not any different from household debt is to ignore all of those things.
- crazy1van 12y ago
  The mechanics are different but the fundamental idea is the same. Taking on debt today is a promise to pay back the money in the future. Governments have more ways of violating or manipulating that promise, but the core idea is the same. Taking your points one at a time: > the government operates a central bank, prints its own currency This is one method governments use to skirt paying the full value of what they owe. They can borrow a fixed number of dollars today, then print money and use the printed money to pay what they owe. By doing so they are paying back the dollars they owe, but because each dollar is worth less, they are never paying back the value they owe. And they will pay the price with a higher interest rate next time. > does not have to apply for credit Applying for credit for normal people is a way of offering evidence that you're likely to pay back what people loan you. The more trustworthy you seem, the less risk for the lender, and therefore the less demanded interest. Governments are the same way. The more the perceived chance that a government will not make good on its debts, the greater the interest it must pay to borrow money. > passes the laws that specify the terms of the debt it owes This is another method of skirting paying back what they government has borrowed. Drastic changes or changes which modify the rules on existing debt will have an effect on the government to borrow more money in the future. > in the case of the United States, the national debt is in the form of one of the safest and most widely held investment vehicles in the world Yes, but I think that is true because the US usually doesn't play the games that are in the earlier points. Traditionally, the US has not drastically increased its money supply and has not changed the law on existing debt. If they started doing these tricks more, I think we'll see the high regard fade for US treasuries. One last point: these are methods governments use to avoid repaying debt, but individuals in most countries have their own methods. They can default on a loan or declare bankruptcy entirely. But just like governments, that will make it harder to borrow in the future. The mechanics are different but the core ideas are the same.
hnnewguy 12y ago
>It means you can buy an expensive good like a house or a car now and pay for it later. As opposed to saving for years and then getting the car. What about debt to build businesses or infrastructure that creates real wealth?
- crazy1van 12y ago
  Debt is a fantastic tool for all kinds of good things from buying cars to seed money for businesses. But in both cases, the person/entity who loaned out the money is expecting to get paid back eventually.

binarytrees 12y ago

If a country uses that debt to let's say, invest in DARPANET, or build new transit infrastructure for commerce. I'd say that is a good use of debt. I think comparing what a government can use debt for vs buying a car or a house is short sighted.

twblalock 12y ago

National debt is different from household debt for many reasons, including the fact that the government operates a central bank, prints its own currency, does not have to apply for credit, passes the laws that specify the terms of the debt it owes, etc. Plus, in the case of the United States, the national debt is in the form of one of the safest and most widely held investment vehicles in the world : US treasury debt. To argue that government debt is the not any different from household debt is to ignore all of those things.

crazy1van 12y ago
The mechanics are different but the fundamental idea is the same. Taking on debt today is a promise to pay back the money in the future. Governments have more ways of violating or manipulating that promise, but the core idea is the same. Taking your points one at a time: > the government operates a central bank, prints its own currency This is one method governments use to skirt paying the full value of what they owe. They can borrow a fixed number of dollars today, then print money and use the printed money to pay what they owe. By doing so they are paying back the dollars they owe, but because each dollar is worth less, they are never paying back the value they owe. And they will pay the price with a higher interest rate next time. > does not have to apply for credit Applying for credit for normal people is a way of offering evidence that you're likely to pay back what people loan you. The more trustworthy you seem, the less risk for the lender, and therefore the less demanded interest. Governments are the same way. The more the perceived chance that a government will not make good on its debts, the greater the interest it must pay to borrow money. > passes the laws that specify the terms of the debt it owes This is another method of skirting paying back what they government has borrowed. Drastic changes or changes which modify the rules on existing debt will have an effect on the government to borrow more money in the future. > in the case of the United States, the national debt is in the form of one of the safest and most widely held investment vehicles in the world Yes, but I think that is true because the US usually doesn't play the games that are in the earlier points. Traditionally, the US has not drastically increased its money supply and has not changed the law on existing debt. If they started doing these tricks more, I think we'll see the high regard fade for US treasuries. One last point: these are methods governments use to avoid repaying debt, but individuals in most countries have their own methods. They can default on a loan or declare bankruptcy entirely. But just like governments, that will make it harder to borrow in the future. The mechanics are different but the core ideas are the same.

hnnewguy 12y ago

>It means you can buy an expensive good like a house or a car now and pay for it later. As opposed to saving for years and then getting the car. What about debt to build businesses or infrastructure that creates real wealth?

crazy1van 12y ago
Debt is a fantastic tool for all kinds of good things from buying cars to seed money for businesses. But in both cases, the person/entity who loaned out the money is expecting to get paid back eventually.