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Debt: More Than Something We 'Owe To Ourselves'

Paul Krugman points out that debt is something that we "owe to ourselves". He's emphasizing the idea that today's debt doesn't necessarily represent something that puts a burden on future generations. And he's right to a certain degree, but there's more to the story than he explains because when debt is used in the wrong way it can most certainly be a burden in the future.

At face value, the net worth of the entire financial asset world is zero. In fact, net worth = nonfinancial assets. Balance sheets balance so at face value the aggregate financial world has no financial asset net worth. Of course, we don't value financial assets at face value. We value them at market value. And when you add market value into the equation then the economy has a massively positive net worth because the market values of many financial assets are well above… Read More …