"Mommy, is our country so poor?"
"Because our country didn't make any investments"
"Why?"
"Because they didn't accumulate any debt that amounted to future returns"
"But wouldn't I have to pay off the debt?"
"Yes honey. But you'd be a lot richer and much more able to"
"Mommy, why didn’t they care about future generations?”
”They did honey, just not enough to think about it for more than 5 seconds.”
A country's debt never needs to be paid off. Debt is investment for future returns, as the future returns come in old debt is paid off and new debt is accumulated, so total debt continues indefinitely. This is the normal pattern of growth. Debt can get out of hand. It can be mal-invested. But there is no point at which the debt needs to be paid off and we’re back at 0. The use of the word “debt” rather than the word “credit” is misleading since they’re both synonyms. There is no difference between saying We’re in so much debt to China and We have so much credit with China. The ability to continue accumulating so much debt indicates high expectations that the future will be great and we’ll be able to pay it off.
Deep Dark Secrets of Economics -- Simple. Clear. But never changes anyone’s mind.
