If you owe the bank $100 that's your problem. If you owe the bank $100 million, that's the bank's problem.
- J. Paul Getty
I was recently listening to “Holding the Line” which had an excellent episode concerning cyber security for its 20th episode. I highly recommend that one. We’ve some institutionalized structural issues while we’re falling for the logic of “we failed, try harder” as opposed to smarter. Going backwards, I found myself listening to episode 19 and ran smack into debt chickenhawks. If you want economic instruction in this, I suggest reading Paul Krugman. I find fault in the security concerns here. I just don’t see the existence of a security concern in this. That is what I write to here.
Before I get into my specific four points as to how national debt, specifically US debt, play in the relationship of national security, I’m dropping a couple reminders:
- Household debt is a very poor analogy to national debt. This is especially true with those that control their own currencies.
- Even as bad as the household analogy is, we forget households engage in large deficits too. This means they carry debt. Consider the mortgage, consider the auto loan, consider college loans. It ain’t just credit cards. Even the most responsible of us carry debt from time to time.
Something we should consider in both the private and the national circumstances, debt is investment. The flip side of me owing you a debt is that you invested in me. Risk is on the investor. Those making loans try to mitigate risk with contracts creating collateral, but ultimately risk is on the investor.
Regarding national security. The argument is that other nations (states really) own our debt. To that I must ask, so what? When they invest in our government, they do it as private entities. They have no special rights or considerations. Now consider:
1. We control our own currency. That means if one were able to call in the debt, we can print the dollars. The worst that can happen here is an inflation risk, though in order for that to happen, they’d have to turn around and pump the newly printed dollars right back into our economy. This is also of less concern as there is no mechanism to call the debt. Debts are structured to specific timelines.
2. There’s no sheriff. There’s no collateral. They can’t force a collection.
3. We’re the financial reserve currency of the world. To mess with us will hurt oneself. Economies are too interconnected.
4. While household debt may be destabilizing to individuals, debt is highly stabilizing for the US government. Ask yourself how much US debt China holds. (This applies to others too though the debt hawks view the Chinese state as the place of concern.) Assume they decide to go to war with us. What do you suppose happens to that debt? We erase it. Gone. That’s one of the first steps in a counter declaration of war. To go to war with us is to lose your investment in us.