There’s a myth in the USA that just won’t go away. It’s this idea that a household balance sheet is somehow comparable to that of the federal government’s. Few myths are more destructive and lead to greater confusion and/or misguided government policy. In recent months this has become a particularly public subject as the debt ceiling debates have raged and the European debt crisis continues. The problem is, the analogy between a sovereign government’s balance sheet and a household’s balance sheet is never accurate. The reason this analogy always fails is due to the difference between being a currency issuer and a currency user.
In the following video I explain briefly why this is such a destructive myth and why this country desperately needs to learn that the burden we leave our children is not a debt burden, but a certain living standard. It’s true that spending money at the government level could reduce this living standard and we could certainly leave our children with a standard of living that is below our own, but what we won’t leave them with is a bill that they need to pay off in the form of some debt burden.
See the following video for more and read the following links if you’re still confused:
Understanding the burden we leave our grandchildren: http://pragcap.com/the-burden-we-leave-our-grandchildren
Why government debt matters: http://pragcap.com/debt-matters
Understanding the modern monetary system:http://pragcap.com/resources/understanding-modern-monetary-system
Did you have a comment or question about this post, finance, economics or your love life? Feel free to use the discussion forum here to continue the discussion.*
*We take no responsibility for bad relationship advice.