The Story:
Imagine a long lost uncle, Sammy, comes knocking at your door looking for a loan. Of course you want to help, but you aren't foolish enough to give your money away blindly. Sammy tells you not to worry as he has a very nice annual income of $250,323. So you think, "well, with income like that, there is no way that Uncle Sammy won't be able to pay me back". But, being the due diligent person that you are, you ask Sammy to share his balance sheet with you. Uncle Sammy is a bit hesitant, but obliges. As you look over his balance sheet, a different story emerges. Maybe loaning money to Sammy is not such a good idea after all! Let's take a closer look at that balance sheet:
Annual Income: $250,323 - Exactly what Uncle Sammy stated.
Annual Spending: $354,142 - Wait a minute! Uncle Sammy spends $103,819 more than what he brings in every year! This is not looking too good!
Credit Card Debt: $$1,669,843!!! - What the heck! Crazy Uncle Sammy has racked-up more than a million dollars in credit card debt!
After reviewing Sammy's balance sheet, you inform him that there is NO WAY THAT YOU ARE GOING TO LEND HIM ANY MONEY!
The moral of the story is:
Loaning money to our government in the form of bonds is a very bad idea. You wouldn't, and shouldn't help Crazy Uncle Sammy with a loan. Keep in mind this sample balance sheet deals in hundreds of thousands of dollars. Uncle Sammy's balance sheet is like the U.S. Federal Government balance sheet... Simply adjust to TRILLIONS OF DOLLARS.
