How Federal Deficits Add to Private Savings
Executive Summary
- Federal spending is often decried as taking money from the public.
- Federal spending increases savings in private hands.
Introduction
The following quotation asserts that deficits add to the savings of taxpayers.
“Simply put, government deficits ADD to our savings (to the penny). This is an accounting fact, not theory or philosophy. There is no dispute. It is basic national income accounting. For example, if the government deficit last year was $1 trillion, it means that the net increase in savings of financial assets for everyone else combined was exactly, to the penny, $1 trillion. (For those who took some economics courses, you might remember that net savings of financial assets is held as some combination of actual cash, Treasury securities, and member bank deposits at the Federal Reserve.) This is Economics 101 and first year money banking. It is beyond dispute. It’s an accounting identity. Yet it’s misrepresented continuously, and at the highest levels of political authority. They are just plain wrong.”
Source: Mosler Economics
This is a very difficult thing to accept as it is so counterintuitive and made more so by the constant stream of false information from private banking interests.