IntroductionIntro music - Money by Von Korf
What is a deficit?1m03s
- Related blog post
- Difference between government spending and tax revenue
- Deficit is synonymous with government borrowing
- Deficit tends to be considered a 'bad thing'
- UK and US governments in deficit >80% of time since WWII
- "Books not balanced" annually or over "business cycle"
- Large net, cumulative deficit - the government debt
- Are deficits really bad or something else going on?
Spending and saving12m15s
- Equivalence of spending and income
- Stock of money and velocity of money
- Trade off between unemployment and inflation
- Savings are a leakage of spending from economy
- Banks do not recycle savings
What government debt is24m46s
- Government recycles savings when it "borrows"
- Financial industry (e.g. banks, pension funds) "save" in government debt
- Debt of currency-issuing governments have zero default risk
- What if the public don't want to save?
- What if the government doesn't want to run a deficit?
- Deficit dependent on tax revenue which varies with economic conditions
- Deficit as a measure of private sector savings desires
- Government debt is the net savings of the private sector
- UK has a trade deficit
- Trade deficit is a leakage of demand abroad
- Government recycles money earned by exporting nations by swapping for government debt
- ~25% of UK government debt is held by foreigners
Can the government pay off its debt?50m19s
- Public and financial industry want government debt
- Importance of central bank