The Wall Street Waltz: 90 Visual Perspectives, Illustrated Lessons From Financial Cycles and Trends, Revised and Updated Edition

Chart 74

Debt, the Federal Government, and Heroin Addicts

When I wrote this book in 1987, I thought we could handle our debt because we'd been at that level before and everything turned out fine—so the debt level couldn't be too much! Wrong way to look at it. Not only is our current debt level fine, we're actually under-indebted. More debt would be better—maybe three times more debt of all types! More important—less debt would be bad.

Americans have a near-religious aversion to debt. Yet, we generally don't mind upstanding companies like GE borrowing. And, each of you know you can responsibly handle debt. We don't worry about ourselves—we worry about other idiots. Irresponsible morons, recklessly charging up debt, like out-of-control heroin addicts. But more than heroin addicts, we fear the stupid government's debt. In your heart, you know the federal government is about the stupidest spender there is—100 times worse than a heroin addict.

Personally, I hate everything about the federal government. But, I don't mind their debt because of the multiplier effect. In America, newly-lent money changes hands an average of six times in its first year. The first spend might be stupid, but the next five spends average out the efficiency. You borrow to buy a car. The dealer pays employees and replenishes stock. His employees buy groceries and tube socks. The grocery store pays more employees. On and on. The same with the drug addict—except his first spend is probably stupider than yours—and ...