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The private sector can be illustrated by the unlabeled White area above the colored areas...its vanishing.
Our national debt is now > than annual GDP, so we owe more than we make, so the private sector's output has been totally consumed by gov't debt.
I can no longer see how to the deficit and debt are not components of the economy....major components.
Gov't spending is counted as part of GDP now, even though it only spends what it takes from the private sector, & produces nothing...gov't produces no wealth.
So if Gov't spending is counted as part of GDP, then the gov'ts deficits, & debt must also be part of the economy to have a proper balance sheet...no?
Can we have a strong economy, while being $31T in debt, & have endless annual gov't deficits?
Our income statement can look strong, but the balance sheet is a disaster. Is the economy the income statement, the balance sheet, or both?
How can we include gov't spending in the GDP equation, w/o also taking its accumulated debt? If GDP measures our economic output, and gov't spending is included, then the idea of our economy must also include all accumlated govt debt.
Last edited by beach43ofus; 01-01-2023 at 07:51 PM..
That is how I feel. I know the GDP and Deficits and Debt are just measures of the economy, but they seems to have swallowed so much economic activity, they have become the economy.
I really dont understand how the Fed justifies adding gov't spending into GDP. Its doesnt create anything new. it just takes money from America's left pocket, and puts it back into the left pocket...its a movement of money/activity, but not growth. It creates transactions, but not any new added wealth.
Think of the deficit as runaway credit card debt and the govt is struggling to make the minimum payment due each month.
The cash giveaways were crazy but the real bombshell is the spike in interest rates, they essentially doubled their own debt interest rates and now can't keep up!
I saw a great video a few years ago regarding the debt, it showed that if you took all the billionaires money for govt use, then all the biggest corporations money, then all the pro-athletes money ...........it would run the govt for literally 100 days. The military, the debt service and of course social services are draining the pot faster than the dwindling American workers can replenish it!
Debt is the money supply, money, called dollars in the USA, being the instrument to satisfy debt, both private and public.
Government is one among many private businesses.
Just for the fun of it, the difference between mafia and government is that government operates in the name of legality.
I think what you are really asking is whether “government†in the USA by now is a restricted group of people monopolizing, or heavily dominating, the most valuable resources and the income that they generate to the exclusion of two-thirds or more of the population.
One-third to one-half is acceptable.
The US is probably close to one-half by now, so borderline acceptable.
Debt does not participate in normal economic activity. Debt payments might impact it but pretty clearly most sovereign governments raise more debt to cover debt servicing so its not creating an impact.
As much as people want to go ballistic in debating over MMT, this is pretty much what at its core MMT states. Debt and its growth are just numbers in the system. They don't impact supply and demand in the economy. Private debt may slightly alter consumer behavior but in very marginal ways. The only way any of this changes is if there was a real actual threat of a default for any sovereign debt. When even Greece managed to get out of its big lie and cover-up, the bond markets see defaults on all but emerging market debts as extremely unlikely.
Government over spending, like we've seen with President Potato, drives inflation, which then results in reactive policies by the Fed Reserve to raise interests in an attempt to destroy demand.
So the debt is tied to the dysfunctional relationship we have now between a spend happy admin and the Fed Res forced to do aisle 3 clean up.
Debt does not participate in normal economic activity. Debt payments might impact it but pretty clearly most sovereign governments raise more debt to cover debt servicing so its not creating an impact.
As much as people want to go ballistic in debating over MMT, this is pretty much what at its core MMT states. Debt and its growth are just numbers in the system. They don't impact supply and demand in the economy. Private debt may slightly alter consumer behavior but in very marginal ways. The only way any of this changes is if there was a real actual threat of a default for any sovereign debt. When even Greece managed to get out of its big lie and cover-up, the bond markets see defaults on all but emerging market debts as extremely unlikely.
That is how I feel. I know the GDP and Deficits and Debt are just measures of the economy, but they seems to have swallowed so much economic activity, they have become the economy.
I really dont understand how the Fed justifies adding gov't spending into GDP. Its doesnt create anything new. it just takes money from America's left pocket, and puts it back into the left pocket...its a movement of money/activity, but not growth. It creates transactions, but not any new added wealth.
New Gov't debt can create things new. New Gov't debt can create new or more transactions/demands, which can then help create new or more products or services.
The most obvious might be the sudden and urgent needs of the military in WW2. Maybe less obvious would be like Trump's CARES supporting hospitals during the Pandemic.
And this debt/money does not have to come from the taxpayers left pocket. It can be newly created Fed money.
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