I’m just reposting exactly what Cullen Roche over at www.pragcap.com wrote (The Pragmatic Capitalist) as it’s perfect as is.
Maybe you’ve seen this image going around the internet? I saw it on Facebook the other day and then again today on Twitter. It shows the US government budget and compares it to a household:
Read more at http://pragcap.com/when-silly-analogies-go-viral#AOmRrqbDOvDg4VJp.99
Now, ask yourself the following questions:
- Has your household been alive for 237 years?
- Does your household have the ability to print US dollars?
- Does your household have the ability to sell debt denominated in the same money you print?
- Does your household have the ability to tax other people to generate revenues?
If you answered no to all of the following questions then you should also realize that the analogy above is a complete misrepresentation of the way our monetary system functions.