May
23
Right now governments really should have a deficit
And I'll tell you why...
The allegory constantly used by governments and the media is on of a household, and the recession is like the breadwinners losing their jobs. Obviously anyone sensible would cut back, yeah?
But, countries are nothing like households, and that allegory just doesn't work.
I'm not arguing that they shouldn't cut back at all, but I think a healthy government should be running some degree of deficit during a recession.
Here are my assumptions:
1. There will ALWAYS be boom and bust
We can't stop the cycle of boom and bust, it's been going for hundreds of years and will continue for hundreds more. Maybe one day, but no financial theory to date has come close to a way around them.
With that assumption we should plan for them: busts will happen.
The allegory constantly used by governments and the media is on of a household, and the recession is like the breadwinners losing their jobs. Obviously anyone sensible would cut back, yeah?
But, countries are nothing like households, and that allegory just doesn't work.
I'm not arguing that they shouldn't cut back at all, but I think a healthy government should be running some degree of deficit during a recession.
Here are my assumptions:
1. There will ALWAYS be boom and bust
We can't stop the cycle of boom and bust, it's been going for hundreds of years and will continue for hundreds more. Maybe one day, but no financial theory to date has come close to a way around them.
With that assumption we should plan for them: busts will happen.
