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There are stories like this floating in the internet.

Apple is now more liquid than the United States government, the Financial Post reports.

As the government struggles to resolve the debt ceiling debate, the operating balance in Washington is at US$73.768 billion and falling.

Meanwhile, Apple has US$75.876 billion – and that number isn’t going anywhere but up as the company continues to break records and make its competitors look bad.

Does Apple really have more money than the U.S. government?

Is the story misleading?

Community
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Vinoth Kumar C M
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2 Answers2

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This is just a case of total misunderstanding of terms.

Original claim was that Apple has more cash, than operating balance of US federal government. Operating balance means revenues minus liabilities.

Of course, the numbers aren’t directly comparable; the government’s number represents how much financial headroom it has before bumping up against an arbitrary debt ceiling, while Apple’s cash reserve represents the pile of money the Cupertino

Operating balance is something completely different than reserves. As for reserves, current assets of Federal Reserve are worth $2,907,837 million, which is almost 40 times more than Apple's reserves.

vartec
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    So yes since Apple has actual reserves and the government just has room to get deeper in debt, Apple has more money the the US Govenment. – Chad Jul 29 '11 at 19:24
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    So they aren't comparing apples with apples? – Andrew Grimm Jul 30 '11 at 02:31
  • So what's Apple's operating balance? :) – user5341 Jul 30 '11 at 10:45
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    @DVK: $14bn - see http://www.google.com/finance?q=NASDAQ:AAPL&fstype=ii – vartec Jul 31 '11 at 07:55
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    So, to be clear, the US has 2,907,837,000,000 in cash/reserves, and Apple has a paltry 75,876,000,000 in cash/reserves. Correct? – Chris Vesper Aug 01 '11 at 12:44
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    @Chris well sort of. See that money is the money that the government has collected from its employees for their retirement and is supposed to be used to fund US Governement retirement checks... So they are dipping into that to pay for their spending. Im sure this wont go sideways like the Social Security trust fund dipping did. Its not like history repeats itself. And you can do the same thing over and over and get different results. – Chad Aug 01 '11 at 12:52
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    The assets of the Federal Reserve are something different entirely. Spending that money would be like not buying health insurance so that you can afford your lattes. Oh wait, Americans already do that. – Russell Steen Aug 01 '11 at 20:06
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I'm afraid the US government and AAPL are very different things.

Apple does not have its own currency, nor powers to raise taxes, so its capacity to effect change on its environment is largely determined by its cash pile. It is now, like Porsche, essentially a hedge fund with a retail arm (Braeburn Capital, AAPL's fund, for the story read this article on zerohedge. Also the story of Porsche's billions on BBC News)

The US government, by contrast, has rather more resources at its disposal. The balance is negative (as with probably every country) in that it has $10tn debt and $3tn reserves. But that doesn't entirely matter; the markets will continue to buy Treasury bonds by choice, and if they stopped the government could start forcing them to hold bonds. The US government has other resources; the US economy and the taxes it can raise, military resource, positive international relations, and importantly its strong history of not defaulting on debts.

Unlike a retail company, a government would be chastised for running a positive balance; why are you taxing everyone so much if you don't need the money? Only absolute monarchies and dictatorships extract more money from the populous than they need. The caveat here is that recently AAPL did return some of its cash pile, at the prompting of some of its investors.

Comparing the cash reserves is also fallacious in that the US government (by which I include Congress) can print more money if it needs it, as long as the effect isn't strongly inflationary, whereas AAPL cannot.

Really the US government is more like the property management company of a rich gated community. It doesn't matter that the property management company has a relatively small reserve; if resource were needed for security or maintenance, the community would come up with it. The US apparently has a net worth of about $123tn, whereas Apple has total equity of $123bn, so 1/1000th of the value.

Phil H
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