Tuesday, 15 October 2013

"National debt” should be renamed “national savings”.

The above idea is gaining popularity. E.g. see:
1. The end of Isabella Kaminska’s Financial Times article.
2.  Search for the phrase “National Savings” in the comments here.   (If you have problems, note that some search systems are case sensitive, plus using or not using inverted commas can make a difference.)
3. I suggested a change of name last April in the comments here.

There are two reasons for the change.
First, to regard the national debt as a form of debt in the conventional sense of the word “debt” is ludicrously over-simple. Regarding the national debt as a form of saving is slightly less misleading.
Second, 95% of the population (unfortunately including many so called “professional” economists) are fooled by words, including the word “debt”. Put another way, there is an old saying: “control the language, you control what people think”.
I.e. people often find it too much like hard work to look behind a word and work out the real nature of what the word refers to (or they haven’t got time to look behind words).
As to the word “debt”, the inuendos are negative: bailiff, bankruptcy, etc. And (taking the extreme case) it’s those negative overtones that are currently inducing Republicans to impose totally unnecessary job cuts in the US because of fears about the “debt ceiling”.
So to get people thinking in a more realistic way, it’s often a waste of time using reason: far better is simply to change the phrase “national debt” to “national savings”: the innuendo behind the latter phrase is better.

Proof that people are fooled by words.
I actually did a little survey / questionnaire about a year ago asking people if they thought an increase in the “national debt” all else equal was desirable. I also asked them whether they though an increase in deposits at the UK’s “National Savings and Investments” was desirable all else equal. (NS&I is a sort of government run bank).
Now those are trick questions because anything deposited at NS&I is invested in government debt. I.e. increasing the UK’s national debt by £X is the same as increasing deposits at NS&I by £X.
But of course the response to those two questions was completely different: twice as many respondents (about 60%) thought an increase in NS&I deposits was desirable as compared to the proportion who thought an increase in the national debt was desirable (about 30%).  

I'm not blaming anyone for being tricked by the above questionnaire: to get to grips with what the "national debt" really is takes a lot of reading and thought. And those with no interest in economics or who haven't studied the subject haven't get time to "get to grips" with the latter point.

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