Dadoalex
Gold Member
- Jan 11, 2021
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"virtually" the same means not the same.It's virtually the same thing as borrowing money. It's an IOU. Right now, China and Japan owns over $2 trillion of those IOU's.
That's because it's not the same.
One is cash, the other is bonds.
Example: I hand you a $100 bond and tell you to spend it. You can't till you turn it to cash by selling it. But the person you sell it to isn't going to give you $100. He's going to give you whatever the NPV of $100 at maturity. Maybe as little as $30 depending on current rates and maturity. $32T in debt is not $32T in cash.
Example: I hand you $100 in cash and instruct you to buy a $100 bond with a 30 year maturity at 7.5%. Are you going to hand the seller $100? I hope not because the NPV is like $11.42. Again, $32 in debt is not $32T in cash.