We saw in part 2 that to establish a currency, government needs to do three things: 1. Define a unit of account (e.g. dollar). 2. Impose taxes that can only be paid in that unit of account. 3. Spend or…
From inception of a monetary economy with a government-issued currency, it is clear that government spending must come before tax payments or purchases of government debt. The order of requirements is basically: (i) government defines its monetary unit of account;…
Money can be thought of as an IOU (“I owe you”), denominated in a nation’s money of account. The issuer of an IOU can buy goods or services from anybody who is willing to accept the IOU as payment.
It was mentioned (in part 2) that a currency-issuing government issues its currency in the act of spending. An implication of this is that a currency-issuing government does not need income in order to spend. We have also noted (in…
We understand that, as a rule, total spending must equal total income (this was explained in part 4 of the series). But this raises a question. Is it spending that determines income or, instead, income that determines spending?
In part 7, we arrived at a fundamental National Accounting identity: GDP = Total Output = Total Income = Total Spending This identity suggests various ways of measuring GDP.
A prominent flow measure for the economy as a whole is Gross Domestic Product (GDP). This is a measure of the total output produced within the domestic economy over a year.
Marx’s ‘law of the tendential fall in the rate of profit’ holds that there is a tendency, during a phase of capitalist accumulation, for the ‘organic composition of capital’ (constant capital c divided by variable capital v) to rise. Other…
There is a lot of misinformation spread by politicians and much of the media on the topic of fiscal policy, particularly when it comes to the role and impact of government deficits. When the level of economic activity collapsed in…
Many people, upon hearing “fiscal policy” mentioned in relation to “financial sustainability”, might imagine that it is the government’s financial sustainability that needs to be placed under scrutiny. Given the mass media’s proclivity for pumping out superstition and myth, especially…
