Arguments Against Government Surpluses

A government surplus represents the removal of funds from the private economy with uncompensated public sector productive value creation. It is a policy recommended by those that champion “austerity economics” – however logically, this pattern is liable for encouraging systemic weaknesses and therefore future economic crisis.

It should be noted that although this blog post critiques austerity government policies, it does not argue for uncontrolled government spending. Rather, the ultimate implication is that “a” level of government deficit is not a bad thing because it helps enables economic growth (or at least does not actively damage the ability to achieve for economic growth). But if this is not politically feasible, at least target balanced government books – because at least this is not actively harming the ability for economic growth and encouraging economic crisis.

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It’s Not The What, It’s The How: Central Banks And Their Ever Expanding Balance Sheets

The balance sheets of central banks have massively expanded since the Global Financial Crisis in an attempt to help stimulate demand.

Between 2008-2015 the Fed’s balance sheet grew from $858 billion to $4.3 trillion. Relative to the US economy, this was a massive expansion from 6% of GDP to 25.4% of GDP. Similarly the Bank of England’s (BoE) balance sheet grew from 5.9% of GDP to 22.5% of GDP. However the biggest expansion was in Japan – where the balance sheet grew from 22.1% of GDP pre-crisis to 30% of GDP mid-2012, and then exploded to 65.4% of GDP in 2015 in the Abenomics climate. It is now a huge 320441.8 billion JPY.

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