U.S. Net Worth far exceeds Indebtedness

One of the most common ways in which financial institutions assess credit worthiness is by measuring a client’s net worth. In other words they add up all of their assets including guaranteed future incomes streams discounted to their current present value and compare this total to their liabilities which they then subtract from the first total to establish the net worth of the client. Now strictly speaking this ought not to apply to countries in the same way since countries that issue their own currency and have a central bank in their basement are very different from individuals. But let’s leave that huge difference aside for the moment.

Can we establish the net worth of the U.S. after performing a similar excercise to the one described above. In fact we can arrive at a roughly approximate statistic and the U.S. Office of Management of the Budget has done this on a regular basis for many years. Frances Cavenaugh in his excellent work The Truth about the National debt:5 myths and One Reality (Harvard Business School Press , 1996) includes a table on National Wealth drawn from the Office of management of the budget,Analytical Perspectives, Budget of the U.S. government, fiscal Year 1997 , p.24. which shows that the national wealth of the U.S. was 16.7 trillion dollars in 1960, 25.7 trillion in 1970, 40.2 trillion in 1980, 50.7 trillion in 1990 54.1 trillion in 1995. I have updated this data and calculated the net wealth of the U.S. after deducting net  foreign claims on U.S. was 125.5 trillion in 2008. If we then deduct from this figure the total U.S. government debt in 2011 of 9.3 trillion less the foreign held portion we arrive at a figure that approximates net worth.

It is at least 118 trillion dollars. So the exaggerated concerns over the U.S. being on the verge of bankruptcy ought to be rethought. Furthermore as Cavenaugh points out(see chapter 2, Myth number One:The Debt burden on future generations) and I have argued for several decades in my various works on debt and deficit finance the notion of a debt burden somehow being transferred to future generations is a myth. Future generations do inherit the debt but they also inherit the assets built up by previous generations including the national wealth. So in reality future American generations inherit a net asset rather than a net burden.

Cavenaugh incidentally was for a number of years, senior economist responsible for debt management policy advice in the U.S. treasury and first executive director and CEO of the Federal retirement thrift Investment board.

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About haroldchorneyeconomist

I am Professor of political economy at Concordia university in Montréal, Québec, Canada. I received my B.A.Hons (econ.&poli sci) from the University of Manitoba. I also completed my M.A. degree in economics there. Went on to spend two years at the London School of Economics as a Ph.D. student in economics and then completed my Ph.D. in political economy at the University of Toronto. Was named a John W.Dafoe fellow, a CMHC fellow and a Canada Council fellow. I also was named a Woodrow Wilson fellow in 1968 after completing my first class honours undergraduate degree. Worked as an economist in the area of education, labour economics and as the senior economist with the Manitoba Housing and Renewal Corporation for the Government of Manitoba from 1972 to 1978. I also have worked as an economic consultant for MDT socio-economic consultants and have been consulted on urban planning, health policy, linguistic duality and public sector finance questions by the governments of Manitoba, Saskatchewan,the cities of Regina and Saskatoon, Ontario and the Federal government of Canada. I have also been consulted by senior leaders of the British Labour party, MPs from the Progressive Conservative party, the Liberal party and the New Democrats on economic policy questions. Members of the Government of France under the Presidency of Francois Mitterand discussed my work on public sector deficits. I have also run for elected office at the municipal level. I first began to write about quantitative easing as a useful policy option during the early 1980s.
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2 Responses to U.S. Net Worth far exceeds Indebtedness

  1. sigmasmith says:

    so what’s the ‘bottom line’ then? I mean I can’t argue with what your saying, we know they have two sets of books (to say the least) ie. the CAFR funds, etc… but what is their game? Does this ‘dog & pony’ show mean they are just scheming like the ‘Grinch’ to exploit even more suckers? At 118 Trillion net worth, why even carry debt ??? and only 10 trillion debt? what happened to the derivative market?, medicare, social security….? we need a bigger picture still… what’s the game plan? besides crashing the economy and stealing everyone’s property?

  2. Pingback: The Non-Issue of the National Debt | nickdeis

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