Thursday, May 3, 2012

Sectoral Balances

Phew! After a tough April I am back in action! I hope to be blogging more regularly now, and I have a lot of ideas I am excited to share with all of you.

One area I will continue posting about is the still common misunderstandings surrounding government debt. At the heart of it is a misunderstanding of money. If we can understand money, then we can better understand government debt. I hope to make this more clear in the coming weeks, but for now I thought this video might prove to be helpful.

It was made by undergraduates at Lewis and Clark college in Portland, Oregon. The video explains sectoral balances using accounting identities and principles. It shows why the government cannot go bankrupt like a household or business can and subsequently that sound, responsible government finance means something different than sound, responsible household finance.


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