Exactly. And that's the point. You wouldn't lend your wife money just so she can spend it today, with the promise that she'll pay it back in a few years, because you know you're one shared economic unit and you should make spending decisions together, because you'll eventually have to pay it back together.
If you invest in Treasuries, you are relying on someone outside your household to pay it back when it comes due. That might be me (higher taxes as an income earner). That might be some insurance company who buys the replacement T-Bill when yours comes due. But ultimately, you're relying on "someone else" to pay it back.
In this case, the federal government loaned the money to the federal government and now the federal government has to pay back the federal government. And the only way to do that is with new taxes or new debt. Which materially negatively affect Americans, who are the people who fund the federal government. We're all in the same household on this one.
This is the key distinction and, as an accountant, I should have thought of this explanation earlier.
@Cincydawg when you get annual reports from the companies you own stock in the Financial Statements (FS) are usually "Consolidated Financial Statements" because most of the large companies are conglomerations of multiple subsidiaries.
We accountants do combining worksheets but it is NOT as simple as adding up the lines. Some things are, but inter-subsidiary transactions are eliminated from the consolidated FS because when viewing the whole thing, there is no transaction there.
Example:
Back when GE owned a whole bunch of stuff lets say that GE Finance had $120 Million in cash and GE Aerospace had $10 Million in cash. When GE's accountants created the Consolidated Financial Statements for GE, they would list that as $130 Million in cash because the two just get added together. Now lets say that GE Aerospace needs money so GE Finance loans $100 Million to GE Aerospace. Now:
GE Finance
- $20 Million in Cash
- $100 Million in Loan Receivable Asset (the $100 Million that they loaned to GE Aerospace)
GE Aerospace
- $110 Million in Cash
- $100 Million in Loan Payable Liability (the $100 Million that they borrowed by GE Finance)
GE's Consolidated Financial Statements would show:
- $130 Million in Cash
- NOTHING for the loan because when you view GE as a complete unit (including GE Finance and GE Aerospace) there is NO loan receivable nor payable.
Much simpler example:
If Brad's wife pays $150/mo for electric but the electric bill is only $100/mo, at the end of the year she has overpaid by $600 so Brad owes $600 to Brad's wife. For simplicity lets say that the two of them have no other assets and no other liabilities. If I did individual FS for the two of them:
- Brad's wife has a $600 asset of "Brad Bonds" and a net worth of $600.
- Brad has a $600 liability of Brad Bonds and a net worth of -$600.
Then if I did a combined FS for Brad AND his wife it would be a blank sheet of paper. They have NOTHING and owe NOTHING.
It is the same thing here. The Federal Government is ONE entity made up of a whole bunch of components but when you create a consolidated FS, it is only ONE entity. The T-bills held by the various trust funds are neither assets nor liabilities. They get eliminated because they are inter-subsidiary.
I hope that makes more sense.
