Monday, April 2, 2012

Arithmetic is not Economics

If you subtract a big number from a smaller number, the answer is less than zero. If you spend more money than you take in, you have a deficit.

That is the arithmetic of our problem, not the economics of it.

Here's the economics: If you use credit for money, you have a deficit. If our policies restrict the quantity of money and encourage credit use, it will be impossible for us to avoid using credit, impossible to avoid having deficits, and impossible to avoid accumulating debt.

And that is exactly what our policies do. They restrict the quantity of money, and they encourage credit use.

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