Charles Brown said:
Would it be possible to give bit more of the logic of why a budget surplus
saps savings from the private sector ?
Alex' comment:
In a broadly aggregated economy (say, public vs private sector, omitting,
for simplicity the external sector), one institution running a surplus
requires the other institution running a deficit.
In other words, public sector surpluses mean 'net acquisitions of financial
assets' vis-à-vis the private sector. That means that the private sector is
releasing financial wealth.
Lets include all three sectors, and draw the basic accounting identity as:
NET ACQUISITION OF FINANCIAL ASSETS OF THE PRIVATE SECTOR =
CURRENT ACCOUNT SURPLUS + PUBLIC SECTOR BORROWING REQUIREMENTS
Wynne Godley would say ( "Seven Unsustainable Processes..."; 1999, pp.8):
"The intuition that underlies this rearrangement of the numbers is that
public deficits and balance of payments surpluses create income and
financial assets for the private sector, whereas budget surpluses and
balance of payments deficits withdraw income and destroy financial assets".
If I may, I would then like to link this appreciation with what Jim Devine
said last week, suggesting that there is little chance of a policy
implementation in order to revert the ongoing recession. On the one hand
there is little hope for a reversion of the fiscal stance, and on the other
hand, the 'global slowdown' would not be helpful in reverting the US balance
of payments deficit.
I think Jim is basically right. The policy options which "might" now help,
are either not part of the 'political culture', or are not feasible. I guess
that something in these directions would be in place, only if marginally
(the Bush tax plan is an example). But will not be sufficient. So, we should
perhaps regret that these policy options were not implemented sooner, when
the 'fiscal effort' needed to be more manageable/ acceptable, and when the
BoP needed correction from a not-so-low level...
Alex
-----Original Message-----
From: [EMAIL PROTECTED]
[mailto:[EMAIL PROTECTED]]On Behalf Of Charles Brown
Sent: Sunday, August 26, 2001 12:13 PM
To: [EMAIL PROTECTED]
Subject: [PEN-L:16358] Jane D'Arista on Doug Henwood's Show
>>> [EMAIL PROTECTED] 08/24/01 08:39PM >>>
So, the National Review is officially Keynesian/Kaleckian.
"As the budget surpluses began to expand dramatically in late 1999
and into 2000, the stock market appeared to be reversing the record
up-trend of the 1980s and '90s. One possible reason for the
reversal: the growing budget surplus was sapping the savings of the
private sector. Consumers were able to maintain their spending only
through expanding debt to record levels."
(((((((
CB: Would it be possible to give bit more of the logic of why a budget
surplus saps savings from the private sector ?
