Looking at balance sheets from a macroeconomic perspective, it is of course important not to look at the different sectors in isolation. Assets and liabilities of households, banks and government have to be analyzed as interdependent parts in a cumulative process where one sector’s surplus is counterbalanced by another sector’s deficit.
To Wynne Godley – and those of us who have absorbed at least a rudiment of MMT – this was self-evident. A sectoral balance approach is a necessary ingredient in understanding financial crises – and that’s also one of the reasons why the Fiscal Cliffers are so wrong.Lars P. Syll's Blog
Wynne Godley and the Fiscal Cliff
Lars P. Syll | Professor, Malmo University