I am reading this great book, Economics in ONE LESSON, by Henry Hazlitt. The irony is Economics class in College was the hardest course for me, well maybe Statistics was a little more challenging but that was because, all you had to do was “REJECT or FAIL TO REJECT,” that’s it…Inside Joke for those who went to Montana State University….OK, so my blog is about MARCO and MIRCO economics, and the question is.
IS THERE A DIFFERENCE? Is there a difference between Justin’s small business accounting practices and financial stability compared to the State of Florida, or the United States of America, or a large organization like General Motors Company? The answer may be shocking. It is NO. There is no difference in the accounting practices of a small company, compared to a state run finances, or a large organization like General Motors. Only the extent of Dollars available, is vastly different. Last time I checked General Motors Balance sheet was a little large than mine.
You’re probably thinking I am crazy. You contend there is a huge difference between my little bank account and the bank account that the State of Florida works out of or the bank account General Motors has…True, my bank account over the course of my life, will never be on the scale of those big entities/companies. That is agreeable. The discussion isn’t over the size of the account. The discussion is more specific. Can I live off of debt forever? NO. Can a State like Florida Live off of Debt Forever? Again same answer; NO. Lastly can any successful company run a greater debt than earnings, long term? NOPE. Of course history has taught us this in the case of General Motors when compared to Ford Motor company who didn’t have huge debt piling up on their balance sheets. General Motors had an unprecedented financial bail out from the American Tax Payer under the concept they were ‘too big to fail.” Ford Motor company did not need such help.
The basic Financial Equation applies to both Micro and Macro Economics.
Assets – liabilities = Net Worth
If you are a looking to purchase real estate as an investment I would love to talk. I have been successfully buying real estate for going on 8 years. During the real estate boom I was buying a lot more real estate, however that proved to be unsuccessful. If you are looking to make a better return on your money than the Stock or Bond market is offering give me a call. I am sure I can find you an investment that fits your needs.
The best part of Henry Hazlitt’s book, Economics in One Less, is that you can download a free copy of it, from Misses Institute. Here is the link for the Book: https://mises.org/library/economics-one-lesson