3 ms·

> If the U.S. were a family, it would be deep into the financial danger zone. But the US government is not a family. Neither is the Japanese government. This a

> If the U.S. were a family, it would be deep into the financial danger zone. But the US government is not a family. Neither is the Japanese government. This analogy is disingenuous and one that should be eradicated from all economic thinking. When in debt, the rational thing for a family to do is always cut expenses to the greatest extent practicable (or to declare bankruptcy, I suppose.) This is decidedly not the most rational thing for the government to do in every situation, because it can crash the economy and actually worsen the relative debt load of the country. The US is not in danger. Interest rates are very low, sometimes still trending into negative territory. [1] The US is a sovereign nation that issues its own currency. The US can inflate its debt away, just as it did with an almost equally large debt in the late 40s and 50s. Granted, the economy needs to be growing more than it does now; in part because of anemic growth, the Fed is struggling to meet target inflation rates of 2%. http://www.treasury.gov/resource-center/data-chart-center/interest-rates/Pages/TextView.aspx?data=realyield http://www.treasury.gov/resource-center/data-chart-center/in...

chii 11y ago
> trending into negative territory i dont get how interest can be negative - i get paid money for borrowing?!
- Amezarak 11y ago
  > i dont get how interest can be negative - i get paid money for borrowing?! Yes, that is how negative interest works. I should have qualified that, though, with "real interest rates", meaning that inflation is accounted for. Rates in the US at least are nominally not negative. But the net effect is the same: a borrower with a negative real interest rate is being paid to hold your money. This implies that investors are looking for very safe places to keep their money, so much so that knowing you're going to lose a little bit is OK.
  - jcranmer 11y ago
    At times during the Great Recession, nominal interest rates on US (and German) bonds did actually go negative for brief periods of time.
realityking 11y ago
> The US is a sovereign nation that issues its own currency. Note that only major economies with a history of having a stable currency are able to finance all their debt in their own currency.
taejo 11y ago
Even in a family, if the breadwinner loses their job, they should not sell their car if that's the only way they'll get another job.

chii 11y ago

> trending into negative territory i dont get how interest can be negative - i get paid money for borrowing?!

Amezarak 11y ago
> i dont get how interest can be negative - i get paid money for borrowing?! Yes, that is how negative interest works. I should have qualified that, though, with "real interest rates", meaning that inflation is accounted for. Rates in the US at least are nominally not negative. But the net effect is the same: a borrower with a negative real interest rate is being paid to hold your money. This implies that investors are looking for very safe places to keep their money, so much so that knowing you're going to lose a little bit is OK.
- jcranmer 11y ago
  At times during the Great Recession, nominal interest rates on US (and German) bonds did actually go negative for brief periods of time.

realityking 11y ago

> The US is a sovereign nation that issues its own currency. Note that only major economies with a history of having a stable currency are able to finance all their debt in their own currency.

taejo 11y ago

Even in a family, if the breadwinner loses their job, they should not sell their car if that's the only way they'll get another job.