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.

3 comments:

googleheim said...

OK

GEITNER WANT'S TO REDUCE THE DEBT / DEFICIT >

1. MEANS HE WANTS TO APPEASE THE DEFICIT HAWKS AND CHICKENS

2. THIS WOULD IRK MIKE SINCE IT WOULD REDUCE SAVINGS >
AND THUS REDUCE THE PUBLIC'S ABILITY TO PAY OFF THEIR OWN DEBTS WHICH WOULD MEAN LESS COMMERCE, LESS BANK REVENUE, LESS MARKET ACTIVITY

3. THIS WOULD ATTEMPT TO STRENGTHEN THE DOLLAR - REDUCE DEFICIT & DEBT WOULD TRY TO MITIGATE THE DOLLAR'S FALL.

THIS HERE MIKE'S POST EXEMPFLIES WHAT I MEANT BY A LINKAGE BETWEEN CREDITS TO THE BANKS TO THE PEOPLE ...

mortgageangel said...

O I C... so this is what you
MEANT BY A LINKAGE BETWEEN CREDITS TO THE BANKS TO THE PEOPLE ... :-D

mortgageangel said...

and I'd like to add one more thing, GOOG, NICE POST. thank you!