Wednesday, May 7, 2014

"Non-Financial Sector" = Productive Sector

From 3 April:

The point is not that there's just as much financial income as there is financial cost. The point is that there's no production, nor any consumption, associated with either financial income or financial cost.

Every dollar of credit that was used for production or for consumption could instead have been spent out of income. There need be no loss of production or of consumption by this different economics. There is only less need for finance.

It all comes down to management of money. Government has to make its money such that people want to use and accumulate it. But government must prevent people from accumulating so much of it that they undermine the government's management of its money.

You'll often see people say the government must prevent people from spending so much money that the result is inflation. My focus is not so much on the using as on the accumulating -- on the failure to use.

The balance between use and accumulation is key.

// Related post: Disastrous, cumulative and far-reaching repercussions of saving

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