LoCarb

Oh dear, Key says the government will have a 10 billion surplus by 2020 (some hope!).

So the government will collect 10 billion more in taxes than it spends into the economy.

Great. This is why recessions follow surpluses.


Stephanie Kelton has shown for the US, going right back to the early 19th century, on each occasion the US government has run a surplus (not often), there follows a recession straight after.

Why? Because the effect of a surplus is to remove money from the private sector (see sectoral balances).

Bill Clinton's surpluses in the 90's caused a spike in US bank borrowing by the public. It was the only way individuals could keep their heads above water. Banks love this of course as it gives a huge boost to their profits.

As we know, Key is a banker and increasing bank profits is right up his street.


Second dopey leader this week was Andrew Little of the Labour Party who warned us of the 68 billion government's accumulated "debt".

Andrew, it's not a debt, it's national savings. The government created & spent into the economy 68 billion more than it took back in taxes.

The 68 billion becomes the savings of the private sector (you and me).


Most governments around the world should run almost continual deficits (as NZ has done since inception) because we need a steady increase in the money supply to match growth. Simple really.

Justcol

Isn't there a political forum somewhere where on't t'internet






any news on Cucumber prices settling yet ??

LoCarb

It's economics not politics.


I thought you'd left the house?

Welcome back just the same

Justcol

Tomato / Tomato


Thought I'd keep turning up occasionally like a bad smell to annoy people

LoCarb

Sorry to be a bore to the non-interested, but here is L. Randall Wray, Professor of Economics at University of Missouri, explaining in more detail what I wrote about above.

The Growing Government Deficit Actually Means Savings For The Private Sector | Business Insider

LoCarb

Piece today by Richard Murphy:

"Government and politics matter. We need politicians who really believe that, but they are in short supply"

"The first of these false assumptions is that the government is like a
household and consequently plays a part like that of any other participant
in the economy. This is just wrong. The government is wholly unlike any
other participant in the economy. It makes the rules by which the game is
played. It creates the money that underpins all transactions. Its debt is
not now and has not ever been a problem since it was created in the
seventeenth century. Instead its promise to pay that the debt in question
represents underpins much of the security of the pensions and banking
systems, which would effectively cease to function if that debt was
repaid, all of which makes it debt unlike any other. And the government
can, of course, unlike the rest of us write laws to back up its own claims
to be paid. All if which means that the first pillar on which the new
political consensus must be built is that the role of the government in
the economy is essential, pivotal and absolutely unavoidable. But that has
not been said by politicians and so the alternative – that it is right to
let people sink or swim – has flourished in the vacuum that has been
created."




Tax Research UK » Government and politics matter. We need politicians who really believe that, but they are in short supply.