Monday , December 16 2019
Home / Mike Norman Economics / Richard Murphey – The UK government is not like a household – and does not have a household type budget. That’s because it, quite literally, makes the money the rest of us use. So let’s stop pretending it has a credit card

Richard Murphey – The UK government is not like a household – and does not have a household type budget. That’s because it, quite literally, makes the money the rest of us use. So let’s stop pretending it has a credit card

Summary:
An excellent way to explain it. When the goverment spends, that spending is someones income and that someone pays some tax so the government immediately gets some of their money back. And then that someone spends most of their money which becomes other peoples income. And these other people also pay tax, so the government gets another fraction back. And these other people also spend which becomes the income of even more people who also give a fraction back to the goverment. And so on. If everyone spends then the government gets all its money back. Whereas when you or I spend we do not get anything back. That is a big difference. The only way the goverment can be in deficit is if the people decide to save. The goverment debt is simply the peoples savings. If at any point the people go out

Topics:
Mike Norman considers the following as important:

This could be interesting, too:

Mike Norman writes Artist vs. Economist?

Mike Norman writes Yes, Banks Create Money Out Of Thin Air — Brian Romanchuk

Lars Pålsson Syll writes Friskoleeländet — socialdemokratins största svek någonsin

Lars Pålsson Syll writes Zürich — das große Schweigen

An excellent way to explain it.

When the goverment spends, that spending is someones income and that someone pays some tax so the government immediately gets some of their money back. And then that someone spends most of their money which becomes other peoples income. And these other people also pay tax, so the government gets another fraction back. And these other people also spend which becomes the income of even more people who also give a fraction back to the goverment. And so on. If everyone spends then the government gets all its money back. Whereas when you or I spend we do not get anything back. That is a big difference. The only way the goverment can be in deficit is if the people decide to save. The goverment debt is simply the peoples savings. If at any point the people go out and spend their savings, then the goverment debt will be cleared. 

By Prof Charles Adams of Durham University

Richard Murphey - The UK government is not like a household – and does not have a household type budget. That’s because it, quite literally, makes the money the rest of us use. So let’s stop pretending it has a credit card

Mike Norman
Mike Norman is an economist and veteran trader whose career has spanned over 30 years on Wall Street. He is a former member and trader on the CME, NYMEX, COMEX and NYFE and he managed money for one of the largest hedge funds and ran a prop trading desk for Credit Suisse.

Leave a Reply

Your email address will not be published. Required fields are marked *