A little tutoring on sectoral analysis

The Sage is fond of telling us about sectoral analysis. If people wish to save and business, foreigners and households do not wish to borrow then government has to borrow. For the four sectors must, in their borrowing, equal the savings of the populace.

in aggregate businesses are repaying loans now……At the same time savings….They are still running at way above pandemic levels……People are only just borrowing again, and at much lower than pre-pandemic levels.

Now the thing about identities is that they are indeed identities. But they don’t show causality.

All of the above is entirely consistent with the explanation that government is borrowing so much that private sector borrowing is being crowded out. We’ll not expect to hear that explanation from the Sage though, will we?

2 thoughts on “A little tutoring on sectoral analysis”

  1. He also seems to ignore the creation of debt by fractional reserve banking? It’s that creation that balances it isn’t it?

    And wasn’t all that corporate debt evil a couple of years ago?

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