Hello Jimmy,



I am not an economist either. And carpenters can be pretty formidable people given their knowledge of construction materials, math, designs, planning, finance, costs and benefits, etc.



You ask the right questions.



There are few entities on this earth that do not count liabilities among their assets. Most of us carry debts and many other liabilities. That is not the worrying part. The part for concern is the value of our assets. Do one possess assets exceeding those aggregate liabilities. Most will say yes. Some no.



Does a government possess financial and material resources? Certainly. With Taxation, the combined financial and material resources of every entity within the nation. Without Taxation and with borrowing, the same. This is what backs the nation's financial debts.



Now if an entity can borrow and invest, creating assets that exceed liabilities, should it do so? The answer is obvious, and just as obvious if it cannot.



So if a nation can borrow from itself, its citizens, and create assets that exceed the acquired liabilities, should it do so? Yes.



Banks do it all the time. They borrow from one and invest or loan money to another, living on the margins. They never pay off their lenders. They just borrow more money for supplying more loans, creating assets that exceed liabilities.



And it will be the same for a nation. Borrow from one and invest in some project, creating assets that exceed liabilities and enriching the nation and its people. An investment in clean drinking water will take out many water borne diseases that drive up medical costs and reduce the working days of a labourer.



The piece above merely shows that the cost of borrowing for a nation is in effect nil. The debt obligations issued by a nation create a liability that is equally matched with a created asset, held by a resident US lender.



Its like a bank adding to both sides of its balance sheet. The addition of an asset offsets or nullifies the addition of equal extent of a liability. Or in other words, are you better off if you borrow $1 from your mother? You owe what you now possess, so your circumstances are unchanged.



The question for the Government now centers on what we get for our money expended in public projects? With Taxation, there is no justification because government can take your money and do pretty much as it pleases. With borrowing, the government will have to approach the citizen and provide a proper analysis.



The amounts borrowed will be so large, that no one person or entity could ever exert noticeable control over a nation. It will be a far different story from the present one.



Why would the government help the poor? Why do they help them now? Unfortunately, the poor have many problems. That is why they can't make a go of it on their own. The state say gives a family $12000 per year. What is the amount of an annuity that will yield $12000 per year?



Whatever the value, it is the true liability to the nation of a family in need of assistance. Why not offer the household a loan to enable a person to go to school for training for a far better job? With the job obtained, the family can pay back the loan.



Is that not a fit place to live in?



You speak of a subvention to a circus troop. Wonderful thing. How much more money would be available for such things if the government execs actually cleaned up the construction and road clearing contracts that always go to the favoured, for a high price and a hell of a kickback no doubt?



When the state has to borrow, that kind of corruption will quickly come to an end.



GM



