Not to mention unless you print money everyone can't save money at the same time - so the "saving is good / debt is bad" intuition from the household analogy can't hold up mathematically.

In reality, savings and debt are basically two sides of the same coin - one is a promise for future consumption, and the other is a promise to forgo future consumption that balances it out.

One of my favorite simple models is sectoral balances - you can divide US dollar holders into domestic and foreign categories, and then divide up the domestic category into the private sector and the government (leaving 3 categories total).

If you don't print money, the net saving should all add up to zero. If the government is running a surplus, that means the combination of the private and foreign sector is going into debt. If there's a trade deficit, then the combo of the private sector and government are going into debt. Etc.

People can still be against government deficits with such a model, but it's not because everyone should save up at the same time (they literally can't). It's because they want the private sector to go into more debt, and are worried about government debt "crowding out" private sector debt. And more private sector debt isn't always a bad thing - in practice it might mean more housing, factories, and other sorts of investments that debt finances.

^This is correct, demonstrably.

Unlike at the micro level, at the macro level your spending is my income.

That alone changes (almost every) received microeconomic intuition.

This is the exact framing that's worked to get things across to friends that have gotten confused by some fear mongering propaganda using the personal finance metaphor. It naturally leads into explaining how potential deflation needs to be address in a way very from being thrifty personally.

> "The United States can pay any debt it has because we can always print money to do that. So there is zero probability of default." Alan Greenspan

While this is partially true:

1. Sovereign nations absolutely can and do default. See, Russia in the 1990s and the LTCM fiasco.

2. Even though they do not have to default and can always print money to pay their debts, doing so causes inflation. How much inflation it causes is proportional to how much money is printed.

Now, the dynamics of inflation are pretty complicated, so in certain circumstances you can get away with it for a while. But it is not the case that the government can print money indefinitely with zero consequences.

Sovereign nations can default if the debt is nominated in a different currency (which was the case of Russia, but is not the case for US)

No, they can default even when it is denominated in their own currency, which is what Russia did.

https://en.wikipedia.org/wiki/1998_Russian_financial_crisis

Most countries just choose not to do this. They weren't forced to default. They could have chosen to monetize their debt. They just didn't choose to do that.

A sovereign could choose to default even if they somehow had a net surplus. Because, you know, sovereign literally means you can do whatever you want up to some more powerful foreign sovereign invading, because you have a local monopoly on violence.

Point 2 is extremely debatable, especially if you're a reserve currency. The balance of payments also matters.

It's really not debatable at all. What is debatable is how much printing it takes. It is not debatable that there exists an amount of printing that will cause inflation.

It very much depends where the money ends up and what it's doing. See the past 13 years in the US and western world generally.

If your piece of paper is backed by the US air force, I will buy it, no matter how much you print of it.

Sure. But the rate you will buy it at will change.

And the line between “acceptable consequences” and “catastrophic consequences” is basically unknowable, so it’s not a bad idea to err on the side of caution.

> so it’s not a bad idea to err on the side of caution

Over time it's gotten harder for me to figure out what the side of caution even is. If they are too aggressive in stimulating the economy, they risk inflation. If they are not aggressive enough they risk a persistently weak economy, escalating political dysfunction, and (if history is a guide) eventual collapse of the status quo and usually even-more-inflationary policies.

It doesn't seem like there is a safe path anywhere - errors on either side seem like they could be potentially catastrophic.

This assumes that the us has an unlimited ability to monetize its debt. If this is not true than there could be a hard landing for federal borrowing. This was briefly tested in the 1970s when the carter administration issued debt in foreign currency.

The fed could find itself in the position of fighting a structural imbalance such that for every dollar lent to the government the deficit increases by 1.X dollars. This would be the case under rampant corruption, rampant inflation, or an economy collapsing.

More history on the Carter administration's actions if anyone's curious. I'd never heard of this before:

https://en.wikipedia.org/wiki/Carter_bonds https://www.treasury.gov/resource-center/international/ESF/P...

>> "The United States can pay any debt it has because we can always print money to do that. So there is zero probability of default." Alan Greenspan

That has negative consequences that are papered over by making simplistic statements like that. The debt is still bad and going to result in bad things happening, and no platitudes from the Fed are going to change that.

I mean no platitude necessary, by your logic if debt is bad then no debt is good. But last time that was the case it caused the longest depression in American history. How does that add up?