Friday, 28 March 2014
National debt should be called “private sector savings”.
At last – a letter in the Financial Times spells out what advocates of Modern Monetary Theory have been saying for years, namely that government debts might as well be called “private sector savings”.
I also advocated the change of name here a year or two ago.
I particularly like this passage from the letter: “A frequent question is: “Look at the size of the debt – how on earth are they going to finance it?” One could just as easily ask: “Look at all those savings in Japan – where on earth are they going to invest that?”
The letter also advocates what it calls “sectoral flow of funds analysis”: another tool that MMTers are keen on.
In fact money deposited at the UK’s “National Savings and Investments”, which is a sort of publicly owned savings bank, is all invested in government debt. Now if you ask people if a rise in sums deposited at NSI is beneficial, all else equal, they tend to answer “yes”. I know, because I’ve asked several people.
But if you ask them whether a rise in government debt is beneficial, all else equal, they almost invariably say “no”.