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That's not what he means by afford. I think the rest of the quote makes it clear that affordability is a statement about whether the thing can be delivered in r

That's not what he means by afford. I think the rest of the quote makes it clear that affordability is a statement about whether the thing can be delivered in real terms. There's no financial abstraction happening here. Exports and imports always balance, it's just that financial assets are an export product that foreigners may wish to hold. If they do, then great, because you can swap financial assets for real stuff. This is not unique to the US; plenty of countries run like this. Of course you should acknowledge that the situation might change, but there's nothing to indicate that's happening. It's not like there's a ready supply of customers waiting to buy all the stuff the Chinese rely on selling for their domestic employment. Edit: it's worth noting that the decisions here are largely made by the private sector. The government runs a deficit or a surplus because it has to to balance the sectoral flows [1]. If the private sector wishes to save and import, then if the government wish to not starve the economy of money, they necessarily have to run a deficit. [1] https://en.m.wikipedia.org/wiki/Sectoral_balances https://en.m.wikipedia.org/wiki/Sectoral_balances

mindslight 2y ago
I don't really know what point you're trying to make beyond reframing the situation into different terms where different things are assumed constant, and then not actually examining what happens when those things are not constant. I tried to meet you there with the terminology of the Keynes quote and you argued definitions rather than address the translated point. In the general framework you're pushing, if the government does not run a deficit by being a place to park money, then that money remains in the economy regardless - private savings is generally in terms of loans to banks which then propagate the money elsewhere, not simply holding vast quantities of Federal Reserve Notes. (And frankly FRNs should really be considered part of the debt/deficit too)
- hgomersall 2y ago
  I'm a bit puzzled what you're saying about private savings. You can certainly consider deposits/savings as loans to a bank, is that what you mean? I think the point I trying to make to is that deficits should not be anything to worry about - they are just a balancing item that reflects normal monetary operations as desired by the population. As long as the country remains capable of producing useful stuff, everything is going to be fine, since that's what _actually_ matters.
  - mindslight 2y ago
    > I'm a bit puzzled what you're saying about private savings. You can certainly consider deposits/savings as loans to a bank, is that what you mean? Yes, in a previous comment you said this: > If the private sector wishes to save and import, then if the government wish to not starve the economy of money, they necessarily have to run a deficit My point is that the private sector saving does not itself starve the economy of money. Savings is generally done into banks, which then choose where to invest that money onwards. What makes it possible to starve the economy of money from this is precisely that the government takes loans from a private sector looking to save - either through banks that buy Treasuries, or even Treasuries bought directly - which forms [part of what is currently considered] the deficit. > I think the point I trying to make to is that deficits should not be anything to worry about - they are just a balancing item that reflects normal monetary operations as desired by the population My original argument had an even stronger implicit point - being able to run a deficit without the consequence of significant price inflation is an extremely beneficial situation. It implies an ever growing value of the ecosystem of that currency, sustaining the new money. We can certainly debate how that value should be realized and what it should be spent on. But pulling back from the world stands to destroy that value creation.
    - hgomersall 2y ago
      Ah, I see. The problem is that banks can't really invest their reserve holdings because they need them to balance the deposit. The best they can do is shuffle it around the vertical circuit, that is, they can buy government bonds. They could also take a deposit at another bank (indeed, the whole system can run on that basis without reserves), but that would be strictly on less beneficial terms than a deposit at the central bank (because the corresponding bank would need to balance the deposit made to _it_). The mainstream idea is that swapping a fixed price floating interest financial asset (reserves) for a floating price fixed interest financial asset (bonds) somehow locks it up, but that's just wishful thinking. I'm not sure if in your final point your implying something about the quantity theory of money, which is something I reject (flows being the important measure). Perhaps you can clarify what you mean by destroying the value creation? Is this a statement about closed economies being less valuable than open ones?

mindslight 2y ago

I don't really know what point you're trying to make beyond reframing the situation into different terms where different things are assumed constant, and then not actually examining what happens when those things are not constant. I tried to meet you there with the terminology of the Keynes quote and you argued definitions rather than address the translated point. In the general framework you're pushing, if the government does not run a deficit by being a place to park money, then that money remains in the economy regardless - private savings is generally in terms of loans to banks which then propagate the money elsewhere, not simply holding vast quantities of Federal Reserve Notes. (And frankly FRNs should really be considered part of the debt/deficit too)

hgomersall 2y ago
I'm a bit puzzled what you're saying about private savings. You can certainly consider deposits/savings as loans to a bank, is that what you mean? I think the point I trying to make to is that deficits should not be anything to worry about - they are just a balancing item that reflects normal monetary operations as desired by the population. As long as the country remains capable of producing useful stuff, everything is going to be fine, since that's what _actually_ matters.
- mindslight 2y ago
  > I'm a bit puzzled what you're saying about private savings. You can certainly consider deposits/savings as loans to a bank, is that what you mean? Yes, in a previous comment you said this: > If the private sector wishes to save and import, then if the government wish to not starve the economy of money, they necessarily have to run a deficit My point is that the private sector saving does not itself starve the economy of money. Savings is generally done into banks, which then choose where to invest that money onwards. What makes it possible to starve the economy of money from this is precisely that the government takes loans from a private sector looking to save - either through banks that buy Treasuries, or even Treasuries bought directly - which forms [part of what is currently considered] the deficit. > I think the point I trying to make to is that deficits should not be anything to worry about - they are just a balancing item that reflects normal monetary operations as desired by the population My original argument had an even stronger implicit point - being able to run a deficit without the consequence of significant price inflation is an extremely beneficial situation. It implies an ever growing value of the ecosystem of that currency, sustaining the new money. We can certainly debate how that value should be realized and what it should be spent on. But pulling back from the world stands to destroy that value creation.
  - hgomersall 2y ago
    Ah, I see. The problem is that banks can't really invest their reserve holdings because they need them to balance the deposit. The best they can do is shuffle it around the vertical circuit, that is, they can buy government bonds. They could also take a deposit at another bank (indeed, the whole system can run on that basis without reserves), but that would be strictly on less beneficial terms than a deposit at the central bank (because the corresponding bank would need to balance the deposit made to _it_). The mainstream idea is that swapping a fixed price floating interest financial asset (reserves) for a floating price fixed interest financial asset (bonds) somehow locks it up, but that's just wishful thinking. I'm not sure if in your final point your implying something about the quantity theory of money, which is something I reject (flows being the important measure). Perhaps you can clarify what you mean by destroying the value creation? Is this a statement about closed economies being less valuable than open ones?