There is no national debt
October 18, 2016 § 33 Comments
Everything you think you understand about government finance is wrong. (You aren’t alone: everything that everyone thinks they understand about government finance is wrong. There is literally no way to accurately understand government finance: the accounting framework to do so does not even exist conceptually).
The ‘national debt’ isn’t debt. Debt is when an institution owes some property (actual property or third party securities) to a creditor. (Institutional ‘owing’ isn’t like personal debt: it is an impairment of the balance sheet of the institution).
USG owing dollars to China is like a company owing shares of its own stock to China. T-bills are more like stock options than notes payable: they represent a claim for the future issuance of USG securities, not a claim against actual property or third party securities.
Dollars are securities which impair the balance sheet of USG. But nobody knows what the balance sheet of USG ought to look like, not even in theory as a conceptual matter, let alone what it actually does look like as populated with sound real world data.
That doesn’t mean ‘everything is fine, go back to sleep’. What it means is that neither the folks who say that everything is fine nor the folks who think we are on the brink of apocalypse can possibly know what they are talking about.
They are just expressing their feelings.