Season 1 · Episode 323
Private or public – getting the balance right
When governments build up a deficit it adds money to the private sector. When they reduce the deficit, they shrink the supply of money in the private sector.
Debunking Economics - the podcast · Steve Keen & Phil Dobbie
November 2, 202238m 44s
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Show Notes
Last week on the Debunking Economics podcast Phil and Steve talked about the likely imposition of Austerity 2.0 around the world, in particular in the UK. Steve said there’s really no need for it. This week he explains more about how cuts in the government deficit starves the private sector of cash, which will guarantee a recession, or worse. Listen in for an easy-to-follow explanation of how a government deficit increases money in circulation and how reducing that deficit shrinks the money supply. They talk about Wynne Godley’s explanation of sectoral balances, and how the interplay between government spending and private sector money is how the economy works now. The complicating factor, is foreign spending. What happens when government money finds itself overseas?
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