US National Debt

Started Dec 29, 2012 | Discussions thread
Bill Randall
Forum ProPosts: 17,333Gear list
Re: US National Debt
In reply to Morris Sullivan, Jan 5, 2013

Morris Sullivan wrote:

Bill Randall wrote:

Morris Sullivan wrote:

Bill Randall wrote:

Morris Sullivan wrote:

Bill Randall wrote:

ljfinger wrote:

Bill Randall wrote:

ljfinger wrote:

CFynn wrote:

"The debt the government owes to itself" sounds to me a bit like an accounting trick.

It kind of is. That's why the CBO reports the debt held by the public, which is what my plot shows.

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Lee Jay
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Debt the government owes to itself cannot just be written off. It is debt. It is a politicians tool for handling finances with an emphasis on making the numbers look good as opposed to making the financial situation clear. The value of this tool may be seen in the state and national debt that we have.

If the debt counts then so do the assets. Either way they cancel out.

Again, you present government accounting which is not accounting at all.

In the real world, assets are assets and liabilities are liabilities. The two are separate for a very good reason. What if the assets for some reason become worthless? It is a government TRICK to hide debt. No self respecting accountant in the private sector would condone such underhanded and misguiding techniques.

I have worked with people using government accounting techniques, and I can tell you that in some cases they did not match the real world. Even these people would laugh at their own techniques because in some cases they are laughable. Just like the one being discussed above.

Lets say I owe my wife one million dollars. Would it be appropriate to include that in our household debt. The fact that she might not be able to collect would mean she couldn't include it as assets. So we are negative one million, but not really right?

Yes it would. Note also your wording is wrong. If your wife loans you one million dollars, and you cannot pay her back SHE is out one million dollars. The loan was from your wife to you. It was NOT from "we" to "we". You owe her one million dollars until it is either payed back or she tells you to forget it. The bottom line is that she has lost one million dollars.

You gained from the loan and she lost. The condition of the loan was that you would pay it back. If you did not have to pay it back then it was not a loan, but a gift.

In the private sector, who gains and who loses is very important. In government, not so much.

Did you miss the part where I said "Household Debt", If my wife had one million dollars to give we are +1,000,000 when she loaned it to me we are still +$1,000,000 but I owe her $1,000,000. That's not household debt. Our household debt is zero. Even if I spend it I still owe her $1,000,000 but as a household we are not $1,000,000 in debt. Our household debt is still zero. So money owed to my wife will never be household debt. Just as money owed from the government to the government is not government debt.

BTW, can I borrow $100? But please only give me $50 of it.

You still do not understand. If you borrow $1 million from your wife, and you do so with the understanding that you must pay it back, then this will affect your household budget and expenses. After you spend the $ 1M, you will have less money to spend on other things since you now have a liability. Your household has less money to spend on other things because of this liability/debt. Yes, "WE" have less money to spend because you have to pay back the debt.

If you did not make the debt part of the household budget, and you continue to spend as you did before the loan, you will probably never pay the dept back. Please realize, if you have a household budget in black and white, even if you do not enter a line item for the debt, you still must make changes in your budget to pay back the loan. Gee, I can't afford more than 1 six pack this week because I must save $ 1M to repay the loan. So whether you make a line item in your budget or not, it affects your household budget.

But as I'm paying back the loan it's going to my wife who is then recording extra income thus adding to the household budget so she can buy the beer and our household budget is not effected at all.

If she is concerned with building up her savings again that is her choice, but a lack of savings is not debt. Spending money is not creating debt unless you don't have that money to spend.

As for your comment elsewhere about the government printing money, that is a completely different line item. It needs to be accounted for but not as a debt unless the intention is to collect and then destroy the money when re-payed.

In regards to the $100 loan you want from me. If you ask me for $100 and I agree to give it to you, I will record it as a liability. This is money I cannot spend because I have promised it to you. If you only take $50 but do not indicate you do not want the other $50, I will record $50 as a liability and $ 50 as an asset (money you owe me).

So clearly based on your accounting:

You have a $50 liability(Money you owe me), and a $50 asset (Money I owe you), we are obviously even. Thanks.

Are you serious? You really think we are even?

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