ProfSteveKeen

The conventional wisdom is that excessive government debt, and large government deficits, are the roots of all economic evil. When you see the financial dynamics of the economy in an integrated way, the conventional wisdom is conventional stupidity. The mainstream textbook view that a government deficit is negative public saving, reduces total saving, crowds out private investment, and slows economic growth, is the exact opposite of the accounting truth. Using double-entry bookkeeping, I show a government deficit is a CRITICAL step in creating fiat-based money, and it actually increases the money available to the private sector, not reducing it as textbooks argue. Government bonds do not take money from the public, as textbooks assert, and of the three ways in which they could be sold–to the central bank, to private banks, or the non-bank private sector–the current system is the worst choice.

France has run a budget deficit for 51 straight years. In 2001, its government debt sat at 62% of GDP the lowest it had been since the euro was created. Today it’s 118%, almost double the ceiling Europe set for itself. Every headline tells the same story: the country spent too much, the bill is due, and the students in the streets are the symptom. Steve Keen the economist who predicted the 2008 crash before it happened says that story is backwards. He has studied debt for decades, and the number he says nobody in Brussels will name is the one that actually matters: French private debt sits nearly 100% of GDP higher than the public debt politicians fight over, and since the euro began, it has grown twice as fast.

Chapter 20 in my forthcoming book “How Economists Will Destroy Capitalism”

Chapter 19 in my forthcoming book “How Economists Will Destroy Capitalism”

Chapter 18 in my forthcoming book “How Economists Will Destroy Capitalism”

Chapter 17 in my forthcoming book “How Economists Will Destroy Capitalism”