Should Governments Run Surpluses?-Professor Steve Keen http://youtu.be/D0iFiUfDqSw?t=1m49s Link to the written article: http://www.businessspectator.com.au/article/2014/5/2/economy/should-governments-run-budget-surpluses
Im not too good at synopnisising so I put a link to his article for you to read - I hope that will surfice
9 Countries in the black, including 4 large oil producers. Norway and Sweden leading European countries with a surplus. Is Australia on the way to join them? Regards Errol 43
OK... Synopsis. our current system (measured in GDP) requires constant growth through money creation. This occurs in both the Public Sector (Govt) and the Private sector (Banks). 13mins shows some modelling... If the Govt runs a constant 1% Surplus, year after year, GDP will tank because it has the effect off extracting money from the economy. Private banks over lend and while the public balance sheet looks good, the private sector is drowning in debt. 14:30mins Running a small permenant Govt defcit stabilises debt and GDP because enough cash is being created by public and private sectors to fuel the economy.
I have heard this before and it makes sense with the current fiat and economic model we are running with. Not a lot of people realize that we have to have constant growth for our current economic model to work other wise it starts breaking down and hence the panic we saw from the FED the ramp up in money creation in order to starve off contraction. The obvious problem is fiat currency can be created out of nothing whereas the hard commodities that are brought with this fiat currency are finite and disappearing fast. I don't know how long they can kick the can down the road but what I do know is that eventually the model has to be changed in order to get away from this constant reliance on growth. There is a good book I read some time ago called "Growth Fetish", http://clivehamilton.com/books/growth-fetish/ very interesting read and very applicable to what we are seeing happening around us.
Budget in surplus? Just as important as any family budget, or company budget, I expect. The after effects of running a budget surplus is what the 'saver' does with it I think. Waste it or invest it perhaps? OC
But if the government runs a surplus this year, that reduces their interest payments next year. Then next years taxes can be reduced a corresponding amount, and that money can be invested by the private sector. Also, the money the government pays back goes to the lenders. They now have more money to lend in the private sector. The increased supply would also put small downward pressure on interest rates, meaning cheaper (and therefore more/larger) loans to the private sector. I think a lot of the problem with looking at this, is assuming more GDP must be better - GDP isn't necessarily a good measure. Natural disasters drive up GDP, as huge amounts of work are required to re-build. But this increased production just goes into restoring what was there before, and racks up debt. And even if you're a government and never have to pay back the debt, the interest will continue to suck money out of the economy, that could have been used to increase real production.
Yeah I too was a little startled by how quickly those 'log' bars were flying past the longer he left it running.