In this Renegade Short, Professor Steve Keen explains why the government isn’t supposed to balance it’s accounts like a household.
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Of course Keen is not right at all. His basic assumptions are very short sighted, very short on all of the facts and therfore wrong since a government may be taking the 50 billion pounds out of the private economy by running a 5o billion surplus however that money does not disappear. It goes to pay off existing debt that governemnt has accrued by having any previous deficits and thereby reduces the amount of interest on that debt. That interest (in the form of government bond interest ) always has to be paid by the taxpayer every year. The other incorrect information is that the burden of all government debt becomes private debt over time since there is nobody other than private persons to pay debt since they are the only ones who produce the work that cretes the value in every pound that is spent. Without the work that produces the goods and services the pound would buy nothing.
His qualifiers are that government money does not come with the obligation to pay back the spent fiat money. But that is also wrong since it is short on the facts that people (taxpayers) must continue to pay the interest on that government debt unless government reduces the debt by then running a surplus.
His assertion that government deficit money is somehow painless (no obligation to pay back) is also misleading since that newly created fiat money to pay for the deficit is spent by government to take goods and services (resources) from the private economy that private people and private business must compete against in the price , demand /, supply mechanism.
The answer to what should be done is government should run a balance over time to maintain stability of the currency and financial stability in the economy. After all he is talking about central governments not state governments who must balance their budgets over time since they cannot by law print money because that would cause the chaos that ensues with central governments printing deficit money
This is a good riposte. The argument centres around balancing the demands for private money and using public money to solve private debt?
1. Bringing in more debt obligations guarantee a flow of tax money to bondholders. His argument only holds if Central Banks fully monetise the government spending.
2. But Steve Keen missed the most important theme that is well stated in MMT. Government spending and taxing is a covered slavery system. The people are forced by the government to deliver labour, and here the whole things blow apart. Western countries can not provide the right amount of qualified labour anymore because of the demographic reality. The Netherlands, Germany and Sweden are at full capacity, and elderly people are forced to work until their age of 72 in these countries. We will see the coming decennia the biggest outflow in the history of Western and East Asian workforces. It simply never ever happened! And somehow economist do not see a problem?
3. The tuitions fee he talks about creates a class of ill-educated people with little-added value at the expense of somebodies else labour.