A candid Bernanke would tell Congress that there was nothing intrinsically “good” or “bad” about a federal budget deficit or surplus for a nation with a sovereign currency that borrows in its own currency and allows its value to float freely. A candid Bernanke would tell Congress that if the U.S. runs a budget “surplus” and our foreign balance were zero then our domestic private sector would have to be in “deficit.” In the modern U.S. context, if you believe that the phrase “federal budget surplus” is a favorable phrase indicative of financial health and moral superiority you must also believe that a “domestic private sector deficit” is a good thing indicative of financial health and moral superiority. The words “deficit” and “surplus” have clear, powerful connotations in everyday life. Deficits are bad and surpluses are good. When we are discussing fiscal policy, however, one sector’s deficit is another’s surplus and context is everything. A candid Bernanke would make this point bluntly to Congress and Wessel and even more bluntly to the European Union’s and IMF’s leaders. neweconomicperspectives.org/2013/07/what-if-bernanke-had-the-character-to-be-candid.html#more-5811
Posted on: Tue, 16 Jul 2013 02:13:30 +0000
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