He Still Has His Shovel

Paul Krugman clarifies his somewhat obscure reference to the balance between foreign held US debt and American-held foreign assets. It turns out he was pointing out that while foreigners own some US government debt, we should not worry because Americans own investments in foreign holdings. Private corporations, that is, own subsidiaries in foreign countries, and that offsets our government debt held by foreign governments.

Could anything more clearly illustrate that we have become an oligarchy?

Government debt is a liability offset by corporate assets. In reality, of course, that's like saying that Bank of America is broke, but don't worry about it because Wells Fargo has money. That's factually useful only if Wells Fargo buys Bank of America, and Krugman's latest is useful only if corporate America buys the American government. Oh, wait...

In the normal course of things, you have a secured debt in your house because, while you owe money on it, you own the house which is worth more money than you owe. Today's economy has thrown that whole principle in the crapper, of course, and "secured debt" doesn't mean what it used to mean, but still...

In Krugman's new theory I could have a secured loan by borrowing money without owning anything, but by assuring the bank that my friend's house was worth more than I was borrowing. I could write up a balance sheet that showed all of my credit card debt, and then list a house owned by the guy I graduated from high school with as an asset, and the bank would throw money at me.

He then goes on to say that our government is paying less interest to those foreign holders of our debt than private corporations are realizing in income from their foreign assets, and that neatly proves that your idea about the government being "in hock to foreigners" is wrong. How, exactly, it proves that he does not say.

Sam owes money to Fung Yoo. David owns property. David is earning more income from his property than Sam is paying in interest. That reduces the amount of Sam's debt to Fung Yoo? We may need some butterfly nets and white coats.