Thursday, May 21, 2009
Geithner Pledges to Cut Deficit Amid Rating Concern
“It’s very important that this Congress and this president put in place policies that will bring those deficits down to a sustainable level over the medium term..."
This comment displays Geithner's lack of understanding of our monetary system.
Deficits add to private sector savings by an equivalent amount. That is definitional.
So, when Geithner says, it's "important to bring deficits down to a sustainable level," it's the same as saying private sector savings must be brought down by that very same amount.
Under a floating FX, non-convertible currency system, only the government can be a net supplier of savings. Whatever's on one side of the ledger is exactly what's on the other side, just with a different sign (positive or negative). If the government "net saves" then the private sector sees a concomittant decrease in savings, by definition.
He doesn't understand this. The Administration doesn't understand this. They are pandering to a populace that totally doesn't understand this. In the end, the nation and its citizens will suffer because of a belief system that is horribly flawed.
Belief systems are like infections in the body. If not eradicated they can spread and kill the individual.