Re: Latest Rant from Warren Mosler

From: William F Hummel (wfhummel_at_comcast.net)
Date: 12/13/04 

Date: Mon, 13 Dec 2004 08:54:25 -0800

On 12 Dec 2004 16:02:28 -0800, william_b_ryan@hotmail.com wrote:

>[Mosler] In fact, the first macro equation we learn -
>and the one that the government accountants must
>balance to or find their math error - is as follows:
>
>Government Deficit = Non Government Surplus
>----------------------------
>[Reply] Simply not true. Whether or not the
>government runs a deficit is irrelevant to whether or
>not the non-government sector runs a surplus. It
>reflects a profound lack of understanding the basic
>concepts of double entry accounting. During normal
>times both the government and non-government business
>sectors run deficits in terms of cash flow in respect
>to final consumers, if the economy is expanding.
>Mosler achieves this preposterous premise to his
>argument by conflating the central bank with the
>government rather than the non-government sector
>through consolidating their respective balance
>sheets. You might note that "government" in the
>Mosler scheme excludes state, municipal and local
>governments.

Ryan sees red every time Mosler's name appears. You can safely ignore
his outbursts.

Mosler has merely quoted a well-known identity in macroeconomics.
Another form of the identity is:

     (G +Tr -Ta) = (Sp - I) + (Im - Ex)

The left side is the government deficit.
The right side is the non-government surplus in two components:
   The first component is the domestic private sector surplus. The
second component is the foreign sector surplus.

G = govt spending on goods and services
Tr = govt transfer payments
Ta = tax revenues
Sp = private sector saving
I = private sector investment
Im = imports
Ex = exports