The deficit. The monster that creates more moral hyperbole than animal abuse. For every debt there is a debtor and a creditor. The government needs creditors in order to be a debtor. The creditors debtors liabilities are the creditors assets and the debtors creditors assets are the debtors liabilities. Sectoral Analysis developed by Wynne Godley (2 September 1926 – 13 May 2010) GDP = Gross Domestic Product C = Consumption G = Government spending S = Savings I = Investments T = Taxes M = Imports X = Exports Sources of GDP can be expressed as: GDP = C + G + I + X Uses of GDP can be expressed as: GDP = C + T + S + M The following mathematical operations are straight forward. Subtracting: 0 = (G – T) + (I – S) + (X – M) Let exports and imports be equal to 0. This does not effect the argument. So, (S – I) = (G – T) If the government runs a deficit, then taxes are less than G, government spending, and the right side of the equation is positive. In order for savings, S, to be positive, G must be in deficit. In other words, there can be no private savings unless the government is deficit spending or imports are greater than exports. But consider that net exporting is trading real goods and services in the present for financial instruments that have some expected, but not guaranteed value when exchanged for real goods and services in the future. To summarize: Get rid of the deficit, get rid of savings.
Posted on: Fri, 31 Oct 2014 12:35:59 +0000
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