I saw in George Ure’s column today that he had an idea very similar to one I expressed years ago to our common friend, Rick Ackerman.
In my opinion, it’s not quite right to think of the whole US as a bond, but it’s completely correct to think of our Dollar and our debt the way you might think of investments, based on the ability to generate the revenues.
The way I see it is that countries issue equity. That “stock” is their currency. When they issue bonds, what they are really issuing is mandatory convertible bonds, where the bonds are converted into stock at maturity, and when they pay periodic interest payments, the payments are “in kind” shares of stock.
I equate the Dollar to equity in the United States because it represents a claim on the whole country’s ability to produce goods and services and extract tax on those goods and services. That’s why the Dollar goes up when we have a strong economy, down when we’re in a recession and why it goes down when we cut taxes (as in the past decade) or up when we raise taxes (as in the 1993-2000 period) enough to pay off debt.
Obviously there are other parts to the puzzle, including the relative exchange rates for other countries’ “stock,” and for commodities or manufactured goods that are exported and/or imported.
Still, it works for me as a framework to look at currencies, and at sovereign debt.