Most economists and journalists who write about the economy haven't actually realised what I'm about to say, but knowing this may actually make a profound difference to how you view the World and front page newspaper stories.
You may imagine bonds to be pieces of paper with fancy writing and a bunch of numbers on them. A bit like toffee-nosed IOU's. They're nothing like that.
- They're just numbers in savings accounts
- The accounts are held on a computer
- The computer belongs to the government sector
In the US, the accounts are on a computer which is held at the Fed. In Australia, the accounts are registry entries on a system called Austraclear which is managed by the Australian Office of Financial Management (AOFM).
Congratulations!
So, the next time you read a newspaper article that's been written by someone who's getting their knickers in a twist about how much your country owes to China, you now know that they're telling the World that they're terrified about the fact that the Chinese have savings.
One you understand what the National Debt actually is, you'll be infuriated by the ignorance of journalists, economists and politicians every time you read a newspaper.
We deserve better!