The money that a given entity has, as in regards to cash, or electronic deposits, or used for material goods, or paychecks received, is an asset. The money that is owed for those same material goods, as well as student loans, or credit card debt, or a mortgage, is a liability. Those that have assets that are greater than their liabilities have a positive net worth, and those of which their liabilities are greater than their assets, have a negative net worth. It might come as a surprised to some people, that the biggest debtor in the United States, is the national government, which though it does indeed have massive assets, also has tremendous deficits and liabilities; in addition to the fact that since the coin of the realm is sanctioned by that same government, this thus makes the money that we as individuals have access to or own, a definite liability of that same government, since it is our government that backstops the coin of the realm.
So then, in consideration that money is both an asset as well as a liability, there does come that point, in which those that have their assets in money or currency, recognized that their money is essentially backed only by the full faith and credit of its national government – no more and no less. In other words, those that have cash and cash-like instruments, may not be cognizant of such, but basically they are creditors, of which it is their government that is the debtor to them. Those then, that believe that America is a country of both long standing and strong stability, perhaps don’t waste much time thinking about the value of that money, because they believe that the currency of America will always have tangible and real value, though undoubtedly subject to erosion of that value via inflation.
Yet, the thing that we can say for an absolute certainty, is that nations do rise and nations do fall, and those that bet their bottom dollar that the currency that they so utilize will therefore always have value, when such is not backed by anything like gold specie, or something akin to that, are probably going to be quite regretful when something important that they count on to have real value, is suddenly, without notice, reduced to something considerably less. After all, those that have substantial liabilities, of which, they can’t conceive of being able to pay back those liabilities in a manner in which they won’t suffer, unduly, are going to want to see that those same liabilities are thus severely discounted, and if that same entity is also the nation with all of the guns and ammunition and is willing to use such, then a deal is going to be structured, which will favor only those in the know, and will punish all those that are not in the know.
Remember this well, the United States officially abandoned the gold standard under the Nixon administration in 1973, and since that time the value of that very same dollar has eroded around 85% over that subsequent time period. In short, slowly but surely, those that have assets in dollars, have seen their assets in real terms, decay substantially; whereas, those with liabilities designated in dollars, have been paying their liabilities with cheaper dollars. Indeed, the die has been cast, and clearly this national government has little or no interest in ever paying back its national debt in anything even approximating the value of a dollar, today.