In the attempt to understand what the cartalists (Mosler) are trying to say, I've appended a stylized diagram depicting the macro economy from the creditary perspective. T1 represents the period of credit expansion; T2 the period of steady state; and T3 the period of contraction. Disbursements pertain to those of firms in the aggregate considered as a sector in respect to consumers. Government is included in the sector considered as a special type of firm.
Please note that during the period of expansion cash disbursement exceeds receipts at every point in time. The differential represents accumulation to cash balances throughout the economy. Since government keeps its books on a cash flow basis, it records continuing *deficits*. Since private firms keep their books on an accrual basis, they record continuing profit in the form of credits to their equity accounts. So in translation to a common language--assuming a normally functioning economy--government *deficits* are equivalent or analogous to what the private sector calls *profit*. The government deficit does not *cause* the private sector profit. But rather, both government deficits and private sector profit are accommodated by the general availability of bank credit. So what Mosler said below in a letter to Mr. Bartley of the Wall Street Journal cannot be correct: **>First, from 1st year macro: govt. surplus = non govt deficit and vice versa, of course. This is the accounting identity for all national income accounting. Much like balancing your check book. The left side must sum to the right or an accounting error has been made. Therefore, when govt. runs a surplus of, say, 250 billion, non govt net financial savings drops by the same amount, to the penny.<** -- The attached diagram is archived at: http://www.geocities.com/socredus/cash-flow3.jpg The full text of Mosler's letter quoted above is archived at: http://www.geocities.com/socredus/mosler-02-02.txt > ____________________________________________________________ Get advanced SPAM filtering on Webmail or POP Mail ... Get Lycos Mail! http://login.mail.lycos.com/r/referral?aid=27005 --^---------------------------------------------------------------- This email was sent to: [EMAIL PROTECTED] EASY UNSUBSCRIBE click here: http://topica.com/u/?a84IaC.bcVIgP.YXJjaGl2 Or send an email to: [EMAIL PROTECTED] TOPICA - Start your own email discussion group. FREE! http://www.topica.com/partner/tag02/create/index2.html --^----------------------------------------------------------------
<<cash-flow3.jpg>>
