If You Don't Understand Government Debt,You Don't Understand Money
ProfSteveKeen
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The conventional wisdom is that excessive government debt, and large government deficits, are the roots of all economic evil.
When you see the financial dynamics of the economy in an integrated way, the conventional wisdom is conventional stupidity.
The mainstream textbook view that a government deficit is negative public saving, reduces total saving, crowds out private investment, and slows economic growth, is the exact opposite of the accounting truth.
Using double-entry bookkeeping, I show a government deficit is a CRITICAL step in creating fiat-based money, and it actually increases the money available to the private sector, not reducing it as textbooks argue.
Government bonds do not take money from the public, as textbooks assert, and of the three ways in which they could be sold–to the central bank, to private banks, or the non-bank private sector–the current system is the worst choice.
I use simulations in Ravel to compare these three bond-sale arrangements using the same government deficit. I conclude that government debt and deficits need to be understood as part of the broader financial system rather than through a household-debt analogy, and from this perspective, they are not a “bug” of the system, they are a feature
0:00 - Government Debt, Deficits, and Money
4:42 - The Textbook View of Government Deficits
9:30 - How Government Deficits Create Private-Sector Money
11:44 - Government Bonds and Money Creation
15:29 - Comparing Three Government Bond Models
20 Comments
I live in the UK. Since 2016 reckless 99% increase in money supply. Via QE Funded £1.4tn of govt debt. Output growth barely 1% p.a. Inflation, over 40% CPI and 60% RPI. Facts who needs them right!!
https://youtu.be/bBwsHKbb0Lw?si=7-4Ji1lmnWNzjdbw
In some ways its a better view of Government investment in the future..
Cheers
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If You Don't Understand Government Debt,You Don't Understand Money
ProfSteveKeen
48,967 views
Business enquiries: Leah McIver leah@krugercowne.com
Signup to my online Rebel Economics course at: https://www.skool.com/stevekeen/about
Follow me on Patreon (Patreon: profstevekeen) or Substack (https://profstevekeen.substack.com/)
Get Ravel from https://marketing.ravelation.net/.
The conventional wisdom is that excessive government debt, and large government deficits, are the roots of all economic evil.
When you see the financial dynamics of the economy in an integrated way, the conventional wisdom is conventional stupidity.
The mainstream textbook view that a government deficit is negative public saving, reduces total saving, crowds out private investment, and slows economic growth, is the exact opposite of the accounting truth.
Using double-entry bookkeeping, I show a government deficit is a CRITICAL step in creating fiat-based money, and it actually increases the money available to the private sector, not reducing it as textbooks argue.
Government bonds do not take money from the public, as textbooks assert, and of the three ways in which they could be sold–to the central bank, to private banks, or the non-bank private sector–the current system is the worst choice.
I use simulations in Ravel to compare these three bond-sale arrangements using the same government deficit. I conclude that government debt and deficits need to be understood as part of the broader financial system rather than through a household-debt analogy, and from this perspective, they are not a “bug” of the system, they are a feature
0:00 - Government Debt, Deficits, and Money
4:42 - The Textbook View of Government Deficits
9:30 - How Government Deficits Create Private-Sector Money
11:44 - Government Bonds and Money Creation
15:29 - Comparing Three Government Bond Models