Michael on August 8th, 2007
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You: Is the fact that the United States government borrows so much a bad thing?

That is a very sophisticated question that goes way beyond personal finance.

You: Impressed?

Well, I am glad you’re reading up more on more finances. Whatever the topic, you can’t know too much. But this is a personal finance blog, so we’ll focus on that aspect of your question:

There might be some good news for you that the U.S. government borrows so much.

You: How so?

Some of that national debt might be owed to you.

You: Really?

Absolutely. If, for example, you own a U.S. savings bond, part of the United States government’s debt is actually owed to you.

You: And I so much wanted a remote control car at the time.

Me too! But now you finally see the foresight of your elder relatives.

You: Not yet, still waiting on that one.

Fair enough. Bonds are investments representing debt owed by another entity. In the case of Series EE bonds, the borrower is the U.S. government. Other bonds feature a state or a corporation as the borrower.

If you are a bond owner, you typically collect payment in two forms:

  • periodic interest payments, and
  • the principal at the end of the bond’s term.

In the case of Series EE bonds, however, you get all the interest when you decide to cash in the bond.

You: That’s weird.

I agree, but it’s why bonds you own for a very long time might be worth even more than the amount listed on them.

You: Kind of like how a Barry Bonds rookie baseball card is worth much more than what it originally sold for?

I suppose so. Aggravating too. I can’t believe I sold my Darryl Strawberry and Don Mattingly rookie cards for less than a nickel each at a local garage sale.

You: You did that?

Yes. It was one of my first “investment” decisions. Didn’t go so well. Then again, I was 12 years old or so.

You: So what do you think about last night? Asterisk?

I am not going there, but you can.

Gary: Ethics are very important.

Oy.

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