This is a lecture by Bill Mitchell given at the University of Helsinki on Friday, October 9, 2015. He discusses the Eurozone crisis and austerity. Some more background is here.
The dream of export led growth for every country in the world is impossible. Outside of selling to aliens, if such policies were adopted by every country in the world, it will be a race downward to poverty with every country cutting budgets, cutting wages, losing foreign investment until everyone is worse off.
The analysis by the presenter of the lecture, Bill Mitchell at 5.27 is incorrect. It is not a logical requirement that a government surplus requires an equal sum of indebtedness of the private sector. A government revenue surplus is re-circulated to the private sector by bond repayments. If a government collects more than it spends then the balance of the revenue is re-paid to the private sector by bond principal and interest payments.
Dinero, I think we must distinguish between primary surplus/déficit and actual surplus/déficit. A primary surplus may exist before payments to bondholders but it may yet become a déficit after payments to bondholders. I believe we usually speak of surpluses and déficits in the latter not former sense.
"A budget surplus occurs when tax revenue is greater than government spending. Therefore, the government can use the surplus revenue to pay off the national debt."
end quote.
Therefore a government surplus does not require an equal sum of indebtedness of the private sector.
If a government collects more than it spends, the surplus is paid to the private sector in bond principle and interest payments. Therefore a government surplus does not require an equal sum of indebtedness of the private sector.
The dream of export led growth for every country in the world is impossible. Outside of selling to aliens, if such policies were adopted by every country in the world, it will be a race downward to poverty with every country cutting budgets, cutting wages, losing foreign investment until everyone is worse off.
ReplyDeleteThe analysis by the presenter of the lecture, Bill Mitchell at 5.27 is incorrect. It is not a logical requirement that a government surplus requires an equal sum of indebtedness of the private sector. A government revenue surplus is re-circulated to the private sector by bond repayments. If a government collects more than it spends then the balance of the revenue is re-paid to the private sector by bond principal and interest payments.
ReplyDeleteDinero, I think we must distinguish between primary surplus/déficit and actual surplus/déficit. A primary surplus may exist before payments to bondholders but it may yet become a déficit after payments to bondholders. I believe we usually speak of surpluses and déficits in the latter not former sense.
ReplyDeleteThat is not so, for example from here -
ReplyDeletehttp://www.economicshelp.org/blog/glossary/budget-surplus/
"A budget surplus occurs when tax revenue is greater than government spending. Therefore, the government can use the surplus revenue to pay off the national debt."
end quote.
Therefore a government surplus does not require an equal sum of indebtedness of the private sector.
Dinero has shown one thing: he does not understand macro accounting. Thank you for your input Dinero. Now try taking a class in macro accounting.
DeleteIf a government collects more than it spends, the surplus is paid to the private sector in bond principle and interest payments. Therefore a government surplus does not require an equal sum of indebtedness of the private sector.
Delete