David P wrote in to request a look at this piece by David Graeber. It is here:
David Graeber On Sectoral Imbalances And Public And Private Debt
David P wrote in to request a look at this piece by David Graeber. It is here:
David Graeber On Sectoral Imbalances And Public And Private Debt
I know nothing about economics (other than what Tim is teaching us) but isn’t the private deficit (or debt, he seems to mix the two terms willy-nilly when even I know there is a clear difference between them) due to investment. So that is a good thing, it means the private sector is working hard. Debt or deficit in a government is a bad thing because it means its not balancing its books and splurging money.
Can I ask a dumb question?
Where does consumption fit into these accounting identities?
cjcjc, this is talking purely about flows of money, ie. physical cash. “Consumption” in the sense of your question is simply passing of money from one person to another, within the private sector, so the amount of “indebtedness” held by the private sector doesn’t change.
I’m afraid I can’t think about this for too long because these people’s idiocy starts to annoy me too much. I’m sure the aforementioned Brad DeLong would do a better job of clearing this up anyway.
He seems to be ignorant of the difference between base money and all other types of money. Here’s his logic:
1. Banknotes are IOUs (proof: “I promise to pay the bearer on demand the sum of five pounds”).
2. Money can also be created by the banking system via credit.
3. Therefore, all money (either #1 or #2 above) is debt.
Nowhere does he mention the difference between M0 and M4.