2 ms·

Most governments have been running deficits since forever, not since the last recession, after all, if there is economic grow, new money have to be created, and

Most governments have been running deficits since forever, not since the last recession, after all, if there is economic grow, new money have to be created, and all money is originated in government spending. But that's just a reality of how the economy works, that doesn't mean necessarily that Keynesian policies are followed (beyond the automatic stabilizers that are certainly Keynesian in design). Keynesian policies would be to try to offset a fall in aggregated demand by increasing fiscal spending, and that have been taboo since the 80's

postingawayonhn 7y ago
> Most governments have been running deficits since forever I don't think that's a fair assessment. The US has certainly been running deficits for a long time but the deficits of the last 10 year have been much larger (as a percentage of GDP) [1]. Some other countries [the exception not the rule] have been more prudent with their finances. In my part of the world New Zealand has been running a surplus since 2015 and prior to COVID-19 starting Australia was due to have a small surplus this year for the first time since the GFC. > Keynesian policies would be to try to offset a fall in aggregated demand by increasing fiscal spending I guess you can argue that spending hasn't been Keynesian enough. [1] https://tradingeconomics.com/united-states/government-budget https://tradingeconomics.com/united-states/government-budget
- RobertoG 7y ago
  >>"Some other countries [the exception not the rule] have been more prudent with their finances" I'm going to dispute that this have something to do with "prudence". If an economy grows (bigger GDP), that means that more money is spent in the economy. That money have to come from somewhere otherwise there will be not grow (1). New Zealand have a positive commercial balance, that's where the money is coming from. Obviously, not all the countries can be net exporters at the same time. If the USA government were running a surplus instead of a deficit, they will not be being more prudent, but less. Running that surplus would mean that the GDP doesn't grow or that the private debt increase (after all, money has to come from somewhere). Private debt is a lot more dangerous that public debt. On the other hand, if New Zealand government, with a positive commercial balance, has an economy a full utilization (I don't know if that is the case) and run a deficit, they will create inflationary pressures on the economy. (1) - http://bilbo.economicoutlook.net/blog/?p=21287 http://bilbo.economicoutlook.net/blog/?p=21287

postingawayonhn 7y ago

> Most governments have been running deficits since forever I don't think that's a fair assessment. The US has certainly been running deficits for a long time but the deficits of the last 10 year have been much larger (as a percentage of GDP) [1]. Some other countries [the exception not the rule] have been more prudent with their finances. In my part of the world New Zealand has been running a surplus since 2015 and prior to COVID-19 starting Australia was due to have a small surplus this year for the first time since the GFC. > Keynesian policies would be to try to offset a fall in aggregated demand by increasing fiscal spending I guess you can argue that spending hasn't been Keynesian enough. [1] https://tradingeconomics.com/united-states/government-budget https://tradingeconomics.com/united-states/government-budget

RobertoG 7y ago
>>"Some other countries [the exception not the rule] have been more prudent with their finances" I'm going to dispute that this have something to do with "prudence". If an economy grows (bigger GDP), that means that more money is spent in the economy. That money have to come from somewhere otherwise there will be not grow (1). New Zealand have a positive commercial balance, that's where the money is coming from. Obviously, not all the countries can be net exporters at the same time. If the USA government were running a surplus instead of a deficit, they will not be being more prudent, but less. Running that surplus would mean that the GDP doesn't grow or that the private debt increase (after all, money has to come from somewhere). Private debt is a lot more dangerous that public debt. On the other hand, if New Zealand government, with a positive commercial balance, has an economy a full utilization (I don't know if that is the case) and run a deficit, they will create inflationary pressures on the economy. (1) - http://bilbo.economicoutlook.net/blog/?p=21287 http://bilbo.economicoutlook.net/blog/?p=21287