Curious chart. If:

  1. Every nation on the planet is in debt, and
  2. for the most part, they are in debt to each other, then….
  3. shouldn’t there be a counterbalancing creditor? :-)

Let’s take Japan, who on a per capita basis, is in MUCH worse shape, per capita/as a % of GDP, than the US is. About 25% of its tax revenue goes to interest on the national debt; in the US, it’s about 6%. They have a shrinking population, while the US’ is still growing.

Japan’s bonds are not in as high demand as US bonds. So, who buys them? Well, the Bank of Japan does; the BOJ is essentially their Federal Reserve.

So, the government issues debt that they must issue to maintain their nation, and the government bank buys that debt, to the tune of 70% of all that’s issued. The government bank buys that debt with money that they print up when they need it.

And yet…..during the meltdown, the Yen was one of the strongest currencies, and considered a safe haven to park money in. Betting against the above arrangement, where the BOJ just prints up the money to buy the debt, which SHOULD make any sane person want to short the BOJ (which is publically traded, btw) is called the “widowmaker’s trade” in Japan, because despite the fact that it is so obviously fraudulent by any reasonable standards, it works.

I am not “there” yet, where “there” is defined as Rand Paul’s views on the Fed and the US debt. But I am getting “there”, meaning that I’m starting to view all this “national debt of this country or that” as all bullshit. That national debts really DON’T matter, as long as there is a national productive capacity that backs them.

To expand on that: a note (USD, Canadian D, Euro, Yen, whatever) is a proxy for VALUE. Before fiat money, that note represented a specific, redeemable unit of value that could be retrieved, if the holder so desired, in precious metal.

When we went to fiat money, the note was still a proxy for value, but instead of being redeemable in gold trinkets, the value it was a proxy for became the net fiscal condition of the nation issuing it; the net fiscal condition of the nation being a semi-nebulous measurement where the national debt of the nation is balanced out against its productive capacity and therefore the ability of its citizenry to pay the taxes needed to keep the entire Ponzi scheme afloat.

Now, this doesn’t work for small developing countries, of course; they have to go borrow money from banks like anyone else. But if you’re in one of the countries on that chart that a 63-year old person like me can read the names without her glasses, you play an entirely different ball game. You can be a country that is highly taxed, has a shrinking, aging population, sells it’s debt to itself (essentially) and prints up the gobs of money to do so, AND pays 25% of its tax revenues in debt service and STILL be considered one of the financial paragons of the world, because you are large and you have offsetting productive capacity.

So, you asked:

It’ll be interesting to see in what shape America is in after Trump is done.

My take? Better than before. Because at the same time we are increasing debt, we are increasing productive capacity, and it’s obvious that the world values productive capacity more than it cares about debt.

The US is now the world’s bank. And nobody wants their bank to go out of business.

Written by

Data Driven Econophile. Muslim, USA born. Been “woke” 2x: 1st, when I realized the world isn’t fair; 2nd, when I realized the “woke” people are full of shit.

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