Monday 20 June 2011

Trouble ahead for Sweden? It’s aiming for a balanced budget.



Looks like Sweden is aiming for a balanced budget (hat tip to Marc Robinson).

As I’ve pointed out more than once on this blog, any country which aims for inflation of around 2% will need to run a significant deficit just to prevent its monetary base and national debt declining relative to GDP at 2% a year. If it doesn’t have that deficit, private sector saving desires may not be met, which may mean paradox of thrift unemployment.

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2 comments:

  1. It does have an export surplus if the stats are to be believed. So the external sector can easily fund the domestic private sector if they decide to run a balanced government budget.

    In fact balance may not be enough. They might need to run a surplus.

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  2. Well, afaik that export surplus isn't that large at all. Or? And also, they are trying to run a surplus of 2%. That's the stated goal of their treasury. It's all the hype there right now.

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