Arguably the WORST article and argument ever written about why debts don’t matter I’ve ever come across in my career.
And if you don’t get it, apparently you’re (Italian accent) “f*cking stoopid!!!”
Prepare for comments to be disabled on both the article and YouTube video.
Before I read the article, I am guessing it was written by the part-time drama teacher academic himself.
Where was this fellow when King Charles the First of England needed him?
“I can pay for my lifestyle with borrowed money and pay the interest with my taxes.”
What happens when interest payments exceed tax revenue? Current Ontario provinical annual interest is $11.2billion; revenue approx. $130billion.
In 1999, TheStreet’s market value was $1.7bn.
In 2014, the NASDAQ-listed company is worth less than $80m.
Somehow, these guys have a reputation for being money managers. It might not be a well deserved reputation.
if debt does not matter I think I will run up my credit cards, dump all the cash I have and go on a real tear.
It all makes sense … if you chose to ignore where the money comes from to pay that debt.
You won’t be noticed. Most everybody does that around Christmas time.
to the tune of Deck the Halls:
Let’s be jolly ’tis the Season,
Blow your dough for no good Reason,
Take your credit to the Limit…
Fah-La-La, Fah-La-La, La-La-Laaa…
This is a good definition. Since there is no debt, there is no need for taxes. Since treasuries are dollars, and people will keep buying them, there is no need for taxes; taxes shouldn’t exist. Let’s hope the Schutzstaffel Justice Warriors take up this definition. Since there is no debt, and no need for tax, then Trump’s tax returns have no meaning either. I like trple down on stupid. Let’s dial it all the way to eleven.
This is basically the argument of the Modern Monetary Theory. Using an accounting trick, they equate government debt with saving in the rest of the economy, and then declare that wealth is only created through government deficits. It’s insane.
There is a fair amount of truth to this gentleman’s post. Because the government can create money, when borrows, it is very different from when an individual borrows.
And with interest rates at nearly 0% debt is basically another form of currency.
When the cost of borrowing goes up, and when the money supply begins to impact inflation, all bets are off.
If you snort enough blow this makes sense
When is debt a good thing?
If I owe you a thousand dollars I am under your thumb. If I owe you a million, you are under my thumb. The US owes China $1.3 trillion!
So long as the US remains the reserve currency of the world, they can get away with their BS of endless, massive structural debt. Two years ago, it looked like the YUAN =might= become the new reserve currency, look what’s happened since then…….
If the US ever lost reserve status, our friend on youtube would be the ultimate STOOOOOPID one, as, the US would then resemble the financial mess that is Greece, Argentina, Brazil, Venezuela, etc.
I love his attitude, its the typical, tunnel vision type saying “It will NEVER happen to US!”
Tragic thing, when it DOES happen, we in Canuckistan will be severely affected too, unless we are flying the Chinada flag by then.
So I just fired off an eMail to VISA (with the link attached) and informed them that I actually have no debt with them. They didn’t buying it. Damn it!
The video provides an insider’s look at classic academia. Defending one’s thesis using scholarly assertions such as “f**kn’ stoopid” and the likes. He covered it all.
So THAT’S why Zimbabwe is the world’s leading economic power and why the Weimar Republic in Germany ensured the end of all wars in Europe are WWI!
Remember those who ignore history…should be buried with a backhoe.
I wonder if he is an advisor to Notley’s NDP.
Makes sense then to hire tens of thousands of public servants when revenues are plummeting due to a hurting economy.
On a smaller scale, imagine a family of four where the father loses his high paying job and the mother is reduced to part time. To these folks that is a perfect opportunity to borrow $10G for a Disneyworld vacation.
I kind of got lost at “There is no debt. The debt is dollars.”
Don’t worry. The budget will balance itself.
Cash flow is very different than debt.
The government has paid of $94 Trillion in Debt by REBORROWING 100 Trillion.
No sweat, just keep adding zeroes. We have lots of those.
Don’t forget that there was a mutual fund, or some such thing, that was created by a group of American university professors about 20 years ago. They based it on some fancy mathematical models.
It didn’t last long. It failed miserably and the investors lost their shirts.
That article is bizarre. It betrays a fundamental misunderstanding of how debt works or even what it is. Claiming that a debt security isn’t a liability or obligation is just….. bizarre. The fact he doesn’t seem to understand that refinanced debt is still debt is so mind boggling it’s hard to respond to. Charitably, he may be arguing in a hamfisted way that because no one ever expects to be paid back the principal that the debt should be considered more like equity but given that interest is paid on it and it has real maturity dates it seems a stretch.
He also doesn’t seem to understand how bank accounts work. He realizes that his deposit account is a liability of the bank, right? Right?
I wonder if Mike Norman will lend me money.
Using his illogic, if debt is held by China that means she holds American assets. The truth is she holds debt with a claim on assets/taxation power.
He seems confused about the macro vrs the micro, along with the significant amount of government debt that is held by foreigners.
He also didn’t bother with a discussion about fiscal cash flow. If a government borrows a billion from its citizens, it has to pay them back, not all the citizens. That results in a wealth transfer from poor to rich. Then again these pseudo SJW’s ditched the poor long ago.
Debt also affects government ability to deliver programs because of debt service costs, again ignored by the “economist.”
If government spends 10% more than it collects, it’s deferring tax increases. Now government has to cut 10% of its expenditures when, like Greece, nobody wants to lend them any more money. Instead they overspend, where debt service costs become, for argument’s sake, 10% of her revenues.
Now the government spends 10% more than it collects, plus a further 10% in debt servicing costs. So she is working with 80 cent dollars trying to deliver $1.10 in transfers & services; in fact is desirous of doubling down on spending. This is unsustainable.
Cabin boy Justin is driving up budget deficits in the face of already massive debt, all of which can be traced to the his father. Subsequent governments had to borrow more to reschedule maturing debt as well as debt service costs. It’s called circling the drain.
Einstein called it the insanity of doing the same thing over again and expecting different results.
Or maybe the Socialist Workers Party. He has about as much economics logic.
If I Were A Rich Man
I have a vague recollection of Paul Krugman writing a similar article a few years ago arguing similarly that it didn’t matter because we owed the money to ourselves.
Oz, I don’t plan on repaying any of it. Just like the government, only I will not even service the debt by paying interest.
The truth is somebody else has the asset but we all have the debt.