Our Gold Guy
No Result
View All Result
Saturday, December 9, 2023
  • Home
  • Finance
  • Business
  • Economy
  • Politics
  • Contact Us
Our Gold Guy
  • Home
  • Finance
  • Business
  • Economy
  • Politics
  • Contact Us
No Result
View All Result
Our Gold Guy
No Result
View All Result
Home Economy

Why Deficits Matter

by Alexander William Salter
January 11, 2022
in Economy
Why Deficits Matter

The US is experiencing the strongest price pressures in 40 years. Financial and economic commentators are searching frantically for the culprit. Many on the right blame massive budget deficits. Are government budget deficits responsible for inflation?

The logic is simple: when governments run deficits, they inject purchasing power into the economy. This stimulates total spending on goods and services, what economists call “aggregate demand.” When aggregate demand rises, production and prices go up. The result is more stuff selling at higher prices.


Many Americans are taking some of their money out of banks and “woke” retirement accounts and moving to physical precious metals. Contact Ira and he’ll show you how easy it is to move cash, investments, or retirement into PHYSICAL precious metals without the gimmicks or runaround.


But there’s a problem here. If you blame fiscal policy for rising prices, you also have to credit it for increased output. You can’t have one without the other. Since conservatives sometimes argue both sides—deficits aren’t responsible for the economic recovery, but are responsible for rising inflation—we need to clear up this misunderstanding.

Over at National Review, Douglas Carr summarizes the conventional wisdom on deficits and inflation: “The correlation between government deficits and inflation has been zero since the mid 1990’s.” But then he attributes inflation to deficits in our post-Covid, inventory-constrained environment. To make sense of this in the workhorse model of applied macroeconomics, we’d say production bottlenecks and inventory drains resulted in significant short-run supply inelasticities. That’s econ-jargon for acknowledging output and prices go up following aggregate demand stimulus, with the caveat that the effect on output is minimal while the effect on prices is significant.

I certainly believe supply-side problems contribute to ongoing inflation. But those supply difficulties matter independently of deficits. The hard-won knowledge of the economics profession is that fiscal policy isn’t very effective at boosting output and prices. We don’t need to make an exception in this case. Government budget deficits are good at shuffling resources around, changing the composition of aggregate demand. They’re not so good at raising aggregate demand as a whole. That’s why supply inelasticities don’t explain why deficits are causing inflation. You still need to make an argument for why aggregate demand expands in the first place to confront those inelasticities. Instead, it makes more sense to explain current inflation by some combination of monetary policy and supply chain problems. How you analyze the particulars of the situation determines the weight you place on each.

If the macroeconomic effects of deficits aren’t very big, do we need to worry about them? While deficits are largely a red herring when it comes to stabilization policy, they matter a great deal for political-economic viability. When the government appropriates a larger share of the economy’s output, it diverts resources from the for-profit sector to the not-for-profit sector. Since the incentives are much stronger for stewardship in the for-profit sector, we should worry about public sector waste, whatever the effects on the national income statistics.

Our Gold Guy Biden Economy

Furthermore, deficits create political conflict. Government spending creates an immediate group of beneficiaries. In contrast, who bears the costs doesn’t get sorted out until later. At some point in the future, taxes will have to increase or spending will have to decrease to pay for today’s borrowing. But the rough-and-tumble melee of partisan politics will determine who ultimately bears the cost of today’s borrowing. The larger the debt, the greater the political stakes. And high-stakes politics makes for an unstable country full of cranky, suspicious citizens.

If we want to argue deficits matter more conventionally, we’ll have to do some more theoretical heavy lifting. The usual aggregate demand stories we tell don’t cut it.

Image by Oleg Gamulinskiy from Pixabay. Article cross-posted from AIER.

The Biden Regime and Globalists Don’t Want You Owning Precious Metals

Look around. Things aren’t the way they should be. Between Pandemic Panic Theater, Ukraine, food shortages, and a push for Central Bank Digital Currencies, everything you’ve spent your life building and protecting is in jeopardy.

Precious metals are historically the most reliable and safest hedge against economic turmoil. With the Biden regime and globalists enhancing the chaos, it’s important for patriotic Americans to take control of their financial future.

Ira Bershatsky offers consultations to those who want to invest in precious metals. During these consultations, he will match your current financial situation with the best physical precious metal purchases whether you want to rollover your IRA or have coins discreetly shipped to your home. You will not talk to a telemarketer or sales rep. You will talk to a true expert in precious metals with decades of experience helping people protect and advance their wealth.

Fill out the form here and we will schedule a precious metals consultation with Our Gold Guy, Ira.

Schedule a Precious Metals Consultation Today:

Tags: AIERDeficitsEconomyTop Story
Deflation

Grinding Down Into Deflation: The National Debt Disaster No One Is Talking About

December 8, 2023
Green Energy Subsidies

The Crippling Economic Costs of Green Energy Subsidies

December 8, 2023
Gold Central Banks

The Summer of Central Bank Gold Buying Extends Into the Fall

December 7, 2023
Silver

Silver Looks Like a Real Bargain Right Now

December 5, 2023
Experts Predict Bidenomics Will Produce Another Great Depression in 2024

Poll: 60% Of Americans Are Living Paycheck to Paycheck as We Approach Christmas Season. Best Economy Ever, Jack!

December 4, 2023
Biden’s DOJ Fines Tennessee Christian Trucking Company $700,000 for Requiring Workers to Disclose Legal Status

Biden’s DOJ Fines Tennessee Christian Trucking Company $700,000 for Requiring Workers to Disclose Legal Status

December 4, 2023
Sticker Shock

“A Constant State of Sticker Shock” – Here Is Proof That Inflation in the U.S. Is Wildly Out of Control

December 4, 2023
Bidenomics

Here’s Where Americans Are Feeling the Greatest Pain Under Bidenomics

December 2, 2023
Gold and Silver

Are Gold and Silver at the Beginning of a Surge?

December 2, 2023
Gold Dollar

Powell Comments Send Everything Soaring, Gold Hits All Time High, Dollar Plummets as Market Prices in Rate Cuts

December 1, 2023

Recent News

Deflation

Grinding Down Into Deflation: The National Debt Disaster No One Is Talking About

December 8, 2023

Search

No Result
View All Result

Site Navigation

  • Home
  • Contact Us
  • Finance
  • Business
  • Economy
  • Politics

About Our Gold Guy

This site is dedicated to helping Americans learn more about the economy, business, and politics. Our nation is in turmoil on all three fronts. We want to make a difference.

© 2021 NOQ Report

No Result
View All Result
  • Contact Us
  • Finance
  • Business
  • Economy
  • Politics
  • Contact Us

© 2021 NOQ Report

Session expired

Please log in again. The login page will open in a new tab. After logging in you can close it and return to this page.

>