Monday, August 1, 2011
Why Government Must Grow
The growth of government debt is the only way to offset the growth of private-sector debt. This is why government must grow.
If you don't want such a big government, then you need to support limits on the accumulation of private-sector debt.
It's that simple.
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2 comments:
The growth of government debt is the only way to offset the growth of private-sector debt.
This is only true under certain circumstances.
The other way is to run a positive trade balance.
Hence, your conclusions are inaccurate.
The problem is not debt, per se, but to uses to which it is being put. Frex: The rentier class is taking advantage of historically low interest rates to finance commodity speculation, to everyone else's detriment. The price of oil is thus artificially inflated by somewhere between 30% and 60%. This is a huge contributor to all of our problems.
Meanwhile is is extremely tough for a small business person to get a loan.
The problem is asset misallocation. Debt is far from irrelevant, but it is the wrong focus.
Cheers!
JzB
Oh look at that: my graph *is* related to the sectoral balances approach. Nice.
So, remind me to update my thinking, at the first hint of our trade number going positive...
The problem you describe (after "not debt, per se") sounds to me like the problem we've had since the financial crisis. Tough to get a loan, etc. Do you see this problem in the more remote past? How far back do you identify it? I think the problems of the last few years happened after something broke. What interests me is the problem that caused the breakage.
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