The Misconception of US Debt: Debunking the 'Owed' Myth and the True Nature of International Finance
Many people believe that if all countries gave back what they owe the United States, the nation would still be in debt. This article will explore this misconception and provide a clear understanding of the true nature of US debt and international finance.
The Reality of US Debt
When we talk about the United States being in debt, it is important to understand that there aren't practically any countries that owe the US money. Most aid that is provided is given away rather than loaned. This is in stark contrast to the common belief that there is a massive obligation resting on other nations.
The True Composition of US Debt
The public debt or net liabilities of the US government, denominated in US dollars, is essentially the assets of the private sector or non-government sector. When the government spends money into existence, it moves from private sector checking accounts to Reserve accounts at the Federal Reserve, and eventually to savings accounts or Treasury securities.
These Treasury securities are liabilities of the Treasury, essentially representing a promise to pay back the money at a later date. When the money is transferred back into checking accounts after the Treasury bonds reach maturity, the term 'national debt' is no longer used. This process is all within the private sector and represents our financial assets, including retirement funds, savings accounts, and corporate savings.
The Unrealized Potential for a Fairer System
It is interesting to note that the use of the US dollar as the international trade currency means that the rest of the world effectively lends money to the USA, giving a massive loan. If this were to be replaced by a more equitable system, the United States would face significant financial challenges.
It is crucial to recognize that the understanding of international trade and finance held by figures like Donald Trump is not sound, even at the most elementary level. There is a misunderstanding of the balance of power and the role of currency in global economics.
Reflection on Our Financial Assets
Supporters of eliminating and destroying all our financial savings might argue that changing data entry numbers on a government computer system is a worthy goal. However, it is difficult to believe that such a viewpoint is shared by many who deeply understand the value of stable financial systems and the importance of savings for future generations.
Conclusion
The concept of the US being in debt because of what other countries owe us is a deeply rooted misconception. By understanding the true nature of the US debt, its impact on the private sector, and the global financial landscape, we can make more informed decisions about our financial systems and future economic policies.