[CPLX]

People always compare government finance with business finance or household finances. It's an analogy everyone seems to just love.

Problem is government finances work completely differently in ways that are so fundamental as to make the analogies completely useless.

It would take more than an HN comment to enumerate every subtlety of why that's the case, but if you were to start you could probably begin with the fact that a government can print money and extract any resource it wants from any entity it wants to at any time at the barrel of a gun, and you and your CEO friend can't.

[natmaka]

A government can print money, however the very value of it will decrease because there will be more money for the same amount of products to buy, and inflation will quickly offset the effect of this newly printed money. Moreover many citizens, especially those who have savings, hate inflation and will fight against such a trend. Taxes and various other "resource extraction" also are limited because more and more citizens will fight against such measures, up to deliberately reducing their income or living the country.

A business can in a way "print money" and "extract resources" by raising its prices. In many trades their customers will remain customers because switching would be more expensive. But there is also an obvious limit there: the amount of prospects will decline and at a given point more and more customers will depart.

[aidenn0]

> ...that a government can print money and extract any resource it wants from any entity it wants to at any time at the barrel of a gun, and you and your CEO friend can't.

This is just factually false. The French government can't extract any resource it wants from California. The US government cannot extract any resource it wants from China.

The ultimate limit of what a government can extract value from is the land it owns, whatever fraction it can extract from its residents without starting a revolution, and whatever land and residents it can conquer of its neighbors.

That's why I suggested debt financing to fund infrastructure makes sense; infrastructure investments can increase the wealth of the residents, which is the ultimate limiting factor in the future revenues.

[CPLX]

Yes that’s correct, governments and sovereign states cover specific regions. I’m fairly confident all that information was contained already in the word government.

[aidenn0]

And a business covers specific private properties. The difference in power and size is quantitative, not qualitative.

[CPLX]

That's just utterly false. The ability to print currency and the maintenance of a monopoly on the legal use of violence are extremely qualitative differences between the powers of businesses and sovereign states.

It's like comparing apples and oranges. Or accounts receivable departments and nuclear weapons.

[aidenn0]

I don't see the difference between issuing more stock and printing more money. Of course you can do it, but the value of what you get goes down.

As far as a monopoly on the legal use of violence goes:

1. I don't see how this makes a big difference in the question of financial solvency. Sure you can use violence to acquire more property (and the threat of violence to renegotiate terms with your creditors), but the amount of property you can acquire this way is bounded, so from an accounting point of view, the ability to do so is merely just another asset. Obviously it makes a big difference in terms of morals, externalities, &c. but at the end of the day, you either have or do not have enough resources to service your debt.

2. From the point of view of the victim, it doesn't really matter if the violence used against them is legal or not, only the extent of their injuries. From the point of view of the aggressor, it doesn't matter if the violence they wield is legal or not, it just matters if they think the consequences will be less than the gain.

[count]

Literal millennia of warfare says otherwise. Traditionally it's one of the key roles of the state!

[aidenn0]

I'm not sure how millennia of warfare contradicts "...whatever land and residents it can conquer of its neighbors."