How you owe China, B

Myths we all believe in – “how you owe China B” and “how do I got to balance my checkbook and you don’t?”

Everyone seems to “like” this video on Facebook. My response: I “don’t like” because this perpetuates economic myths that we all know don’t sound right, but can’t quite put our finger on it. For example, how is it that the US is broke? Or that China funds our spending? We still out manufacturer the Chinese despite having a quarter of their population – and they’re the powerhouse???? They sell us cheap goods – and in return they get US dollars. Doesn’t that mean we fund them????

The idea that we owe China is because they have collected trillions in US dollars via their trade surplus with us, and they turn around and invest those dollars in treasuries. For some bizarre reason we call that “debt”. But is it debt? How is that us owing them when we gave them the money in the first place? It is more akin to you putting your cash into a savings account at your bank. Is the bank in big trouble now because they are in debt to you? The more of your cash you give them, the more they are going broke and likely to fail?????

Next on the myth busting bus – that the US has to “balance your checkbook B”.  The US can not and should not balance its budget.  Without deficits there would be no money in the economy.  Think about that for one second before you throw this comment out with the bathwater……. on day #1 of the US printing dollars – the very first greenbacks.  There were no US dollars in existence.  So they decide on the US dollar and for anyone to start transacting in it they had to get money into the economy.  How?  Well, maybe pay someone to build some roads, pay for a military or schools and libraries, or all of the above.  Now if you want to balance the budget – you just tax all of that money right back out.  And your balanced budget results in ZERO money in the economy.   Yes there can be malinvestment, waste, fraud and too much government spending.  But there HAS to be a debt.  And it should not be called debt because it isn’t debt.

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