(Readers: Please note the blog about the 5th revolution in the US is constructed as a story. While not all chapters are linked, I think the story will be more meaningful by starting at the beginning.)

Want a PDF version for Entries #1-10 and 11-20 formatted for tablets and e-books?  Click links for download.  America’s 5th Revolution Volume I (Entries 1-10)  America’s 5th Revolution Volume II (Entries 11-20)

Scene: Same coffee shop. Jordan sees Greenie third day in a row.

Greenie: “Jordan, over here.”

010414_1635_16TeachingS2.jpgJordan: “Greenie – three days in a row. What will people think?”

Greenie: “People in this town actually think? Here’s your coffee. And no more meetings after today. At least for awhile.”

Jordan: “This is good service – coffee every day. What’s up?”

Greenie: “One more question about issues in economics that are counterintuitive – not really common sense.”

Jordan: “And that is…?”

Greenie: “A lot of people keep saying the government has too much debt. And they might be right. But I never hear these people talk about what the government owns.”

Jordan: “Greenie, you are very perceptive. Yes, the government has debt. The government also has assets – land, buildings, equipment. Lots of assets.”

Greenie: “Why doesn’t anyone talk about the value of what the government owns?”

Jordan: “Couple of reasons. One is talking about government assets would weaken the case against too much government debt. Another issue is the government does not really put a value on all that it owns.”

AccountingGreenie: “Really? You mean there is no what do you call it…balance sheet…for government property?”

Jordan: “No balance sheet. There is a list of what the government owns but no value is assigned to it.”

Greenie: “So an asset is only assigned a number, not a value. There is no value put on all the roads, bridges, building, parks, oil leases, military equipment, scientific equipment and all that other stuff?

Jordan: “No value assigned.”

Greenie: “That seems really stupid. When private companies buy something they assign a value. When you try to get a mortgage they assign a value to the house.”

Jordan: “It is a political problem. Not having a value assigned allows people opposed to any kind of government debt to emphasize the debt and not the value of what funds are used to buy.”

Greenie: “Companies take on debt all the time in order to buy more assets. Why shouldn’t the government recognize assets?”

Jordan: “Your point is well taken. Tax payers do not know the value of government holdings. All taxpayers hear about is a certain building cost say $50 million. That building might be worth $75 million.

Greenie: “If a company owned the building, everyone would cheer and say it was a smart investment. Many of those same people chastise the government for spending $50 million, even though the building is worth $75 million. By the way, why doesn’t the government value assets?”

Jordan: “Part history. Government never had a need to put a value on assets. Part tax law. Private investors can depreciate buildings and equipment over time, which reduces taxes. Government pays no taxes so no need to assign a value.”

Greenie: “What about lenders? Aren’t most loans backed by some type of collateral? Someone still holds the mortgage to my condo. The finance company’s name was on the title of my car until I paid it off.”

Jordan: “One big difference between lending to individuals or companies and lending to the government. The government can always print more money to pay off the loan. Individuals and companies cannot. So the lender needs some type collateral as a guarantee.”

Greenie: “OK, I’ll buy that is a big difference. But if government recognized the value of assets, seems like the tone of the conversation about the amount of debt might change.”

Jordan: “If the Federal government were a company, the balance sheet of the government might show a surplus of assets over liabilities – you know debt. That would definitely change the story about debt.”

Failure to CommunicateGreenie: “Reminds me of a line of a classic movie, ‘Cool Hand Luke.’ ‘What we have is a failure to communicate.'”

Jordan: “Great example and spot on. I think you need to include in your education program the implications of government not valuing assets. People need to understand parts of economics are not common sense.”

Greenie: “I will. Right now we have three parts of economics that seem counterintuitive. One is why in economic downturns…or upturns…the Federal government should behave differently than companies or individuals. Two is why backing the money supply with precious metal is no guarantee of value. Three is government has assets for which no value is assigned. Whew! That’s a mouthful.”

Jordan: “Might be a mouthful but should be a great educational program. When do you think you’ll be ready?”

Greenie: “Jordan, I need some time to make this easy to understand for everyone. A couple of weeks at least. I’ll let you know.”

Jordan: “Great. And I’ll buy coffee next time.”

Greenie: “Wow. Mr. Generosity himself. Don’t go overboard. But thanks. See you Jordan.”