In this Renegade Short, Professor Steve Keen explains why the government isn’t supposed to balance it’s accounts like a household.
Renegade Inc
Renegade Inc. is a new mainstream media platform which creates and broadcasts content aimed at those who think differently.Its mission is to inform, illuminate and inspire, focusing initially on three sectors: entrepreneurship, self-learning and the arts.
Latest posts by Renegade Inc (see all)
- Creating Freedom - August 17, 2017
- Labour 2.0 - August 7, 2017
- Can We Avoid Another Financial Crisis? - July 31, 2017
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